SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”)
today reported net investment income of $22.5 million, or
$0.41 per share, for the fourth quarter of 2022. For the fiscal
year ended December 31, 2022, the Company reported net investment
income of $76.4 million, or $1.48 per share.
At December 31, 2022, net asset value (NAV) was
$18.33 per share, compared to $18.37 for the quarter ended
September 30, 2022.
On February 28, 2023, the Company’s Board of
Directors (the “Board”) declared a monthly distribution of
$0.136667 per share payable on April 4, 2023 to
stockholders of record as of March 23, 2023. The specific tax
characteristics of the distribution will be reported to
stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At December 31, 2022:
Comprehensive Investment Portfolio*
fair value: $2.9 billionNumber of unique issuers: approximately
800Net assets: $999.7 millionNet asset value per share: $18.33Net
debt-to-equity**: 1.08x
Comprehensive Investment Portfolio Activity*** for the
Quarter Ended December 31, 2022:
Investments made during the quarter:
$430.2 millionInvestments prepaid and sold during the quarter:
$409.0 million
Comprehensive Investment Portfolio Activity*** for the
Year Ended December 31, 2022:
Investments made during the year:
$1.3 billionInvestments prepaid and sold during the year: $971.9
million
Operating Results for the Quarter Ended December 31,
2022:
Net investment income: $22.5
millionNet investment income per share: $0.41 Net realized and
unrealized loss: $3.5 million Net increase in net assets from
operations: $19.0 millionEarnings per share: $0.35
Operating Results for the Year Ended December 31,
2022:
Net investment income: $76.4
millionNet investment income per share: $1.48Net realized and
unrealized loss: $58.0 million Net increase in net assets from
operations: $18.3 millionEarnings per share: $0.35
* The Comprehensive Investment Portfolio for the
quarter and year ended December 31, 2022 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 (“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 loan to KBH.
** Please see Liquidity and Capital Resources
below.
*** Comprehensive Portfolio Activity for the
quarter and year ended December 31, 2022 includes gross
originations of the Commercial Finance Portfolio Companies.
“In 2022, SLR Investment Corp. had record
originations of $1.3 billion of investments with over 90% of net
originations in our specialty finance investment strategies,” said
Michael Gross, Co-CEO of SLR Investment Corp. “At year end,
approximately 78% of SLRC’s comprehensive portfolio is allocated to
asset-based lending and specialty finance investments that have
borrowing bases and full covenant structures supporting the senior
secured loans. We believe this asset mix positions us defensively
for an economic downturn while enabling us to be opportunistic in
allocating capital in 2023 across our strategies.”
“The continuing market uncertainties and
volatility have resulted in improved pricing for middle market
loans with wider spreads, higher yields and better structures than
we have seen in a number of years,” said Bruce Spohler, Co-CEO of
SLR Investment Corp. “We continue to be confident in the
performance of our investments within each of our asset classes as
well as the prospects for additional portfolio growth in what we
believe will be an attractive vintage for all our business
segments.”
Conference Call and Webcast
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on, Wednesday,
March 1, 2023. All interested parties may participate in the
conference call by dialing (800) 225-9448 approximately 5-10
minutes prior to the call, international callers should dial (203)
518-9708. Participants should reference SLR Investment Corp. and
Conference ID: SLRC4Q22. A telephone replay will be available until
March 15, 2023 and can be accessed by dialing (800) 839-2434.
International callers should dial (402) 220-7211. 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.
Comprehensive Investment Portfolio
Portfolio Activity
During the three months ended December 31, 2022,
SLRC had total originations of $430.2 million and repayments of
$409.0 million across the Company’s four investment strategies:
For the Quarter Ended December 31, 2022 |
($mm) |
|
|
|
|
|
|
Asset Class |
Sponsor Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive Investment Portfolio
Activity |
Originations |
$57.9 |
$140.6 |
$166.6 |
$65.1 |
$430.2 |
Repayments /Amortization |
$117.6 |
$70.9 |
$130.5 |
$90.0 |
$409.0 |
Net PortfolioActivity |
$(59.7) |
$69.7 |
$36.1 |
$(24.9) |
$ 21.2 |
During the year ended December 31, 2022, SLRC
had total originations of $1.3 billion and repayments of $971.9
million.
For the Year Ended December 31, 2022 |
($mm) |
|
|
|
|
|
|
Asset Class |
Sponsor
Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive InvestmentPortfolio
Activity |
Originations |
$234.7 |
$408.8 |
$476.9 |
$152.3 |
|
$1,272.7 |
Repayments /Amortization |
$213.3 |
$152.8 |
$449.0 |
$156.8 |
|
$971.9 |
Net PortfolioActivity |
$21.4 |
$256.0 |
$27.9 |
$(4.5) |
|
$ 300.8 |
(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.
Portfolio Composition
SLRC’s Comprehensive Investment Portfolio composition by asset
class at December 31, 2022 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) |
$643.2 |
21.8% |
|
11.2% |
|
Asset-Based Loans(2) |
$1,037.0 |
35.2% |
|
14.1% |
|
Equipment Financings(3) |
$941.0 |
31.9% |
|
10.7% |
|
Life Science Loans |
$322.5 |
10.9% |
|
12.5% |
|
Total Senior Secured Investments |
$2,943.7 |
99.8% |
|
12.2% |
|
Equity
and Equity-like Securities |
$4.9 |
0.2% |
|
|
Total Comprehensive Investment Portfolio |
$2,948.6 |
100.0% |
|
|
Floating Rate Investments(4) |
$1,945.0 |
66.0% |
|
|
First Lien Senior Secured Loans |
$2,907.2 |
98.6% |
|
|
Second Lien Senior Secured Cash Flow Loans |
$6.5 |
0.2% |
|
|
Second Lien Senior Secured Asset-Based Loans |
$29.9 |
1.0% |
|
|
(1) Includes cash flow loans held in the SLR Senior Lending
Program LLC (“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 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 December 31, 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 December 31,
2022 against the portfolio as of December 31, 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 approximately 800 unique issuers operating in
over 120 industries, with an average exposure of $3.7 million or
0.1% per issuer.
At December 31, 2022, 99.8% of the Company’s
Comprehensive Investment Portfolio was invested in senior secured
loans of which 98.6% is held in first lien senior secured loans.
Second lien ABL exposure is 1.0% and second lien cash flow exposure
is 0.2% of the Comprehensive Investment Portfolio at December 31,
2022.
SLR Investment Corp.
Portfolio
Asset Quality
As of December 31, 2022, 99.7% of SLRC’s
portfolio was performing on a fair value basis.
The Company puts its largest emphasis on risk
control and credit performance. On a quarterly basis, or more
frequently if deemed necessary, the Company formally rates each
portfolio investment on a scale of one to four, with one
representing the least amount of risk.
As of December 31, 2022, the composition of our portfolio, on a
risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$434.0 |
20.8% |
2 |
$1,617.6 |
77.5% |
3 |
$28.4 |
1.4% |
4 |
$6.7 |
0.3% |
SLR Investment Corp.’s Results of Operations for the
Fiscal Year Ended December 31, 2022 compared to the Fiscal Year
Ended December 31, 2021.
Investment Income
For the fiscal years ended December 31, 2022 and 2021, gross
investment income totaled $177.5 million and $139.4 million,
respectively.
Investment Income Contribution by Asset
Class(1)($mm) |
For the YearEnded: |
SponsorFinance |
Asset-basedLending |
EquipmentFinance |
Life ScienceFinance |
Total($mm) |
12/31/2022 |
$54.7 |
$48.2 |
$35.6 |
$39.0 |
$177.5 |
% Contribution |
30.8% |
27.1% |
20.1% |
22.0% |
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, and excludes
investment income contribution by asset class from SLR Senior
Investment Corp. in Q1 2022.
Expenses
SLRC’s net expenses totaled $101.1 million and
$78.4 million, respectively, for the fiscal years ended December
31, 2022 and 2021. The increase in expenses from 2021 to 2022 was
primarily due to higher interest expense associated with an
increase in borrowings to fund new investments as well as the
increase in reference rates.
Net Investment Income
SLRC’s net investment income totaled $76.4 million and $60.9
million, or $1.48 and $1.44, per average share, respectively, for
the fiscal years ended December 31, 2022 and 2021.
Net Realized and Unrealized Loss
Net realized and unrealized loss for the fiscal
years ended December 31, 2022 and 2021 totaled approximately $58.0
million and $1.4 million, respectively.
Net Increase in Net Assets Resulting from
Operations
For the fiscal years ended December 31, 2022 and
2021, SLRC had a net increase in net assets resulting from
operations of $18.3 million and $59.6 million, respectively. For
the fiscal years ended December 31, 2022 and 2021, earnings per
average share were $0.35 and $1.41, respectively.
Liquidity and Capital Resources
Unsecured Debt
At December 31, 2022, approximately 50% of the
Company’s funded debt was comprised of fixed rate unsecured
notes.
Credit Facilities and Available Capital
At December 31, 2022, the Company had $448
million drawn on the $850 million of capacity that the Company has
under its revolving credit facilities, $100 million of term loans,
and $545 million of unsecured notes.
Leverage
On December 31, 2022, the Company’s net
debt-to-equity was 1.08x, which is approximately in the middle of
its target leverage ratio of 0.9x – 1.25x.
Unfunded Commitments
At December 31, 2022, excluding commitments to
SLR-CS, SLR-EF, SLR-HC ABL, and SSLP over which the Company
controls such funding, the Company had unfunded commitments of
approximately $277.0 million.
Other Events
SLR Senior Lending Program LLC
On October 12, 2022, the Company entered into an
amended and restated limited liability company agreement with
Sunstone Senior Credit L.P. (the “Investor”) to create a joint
venture vehicle, SLR Senior Lending Program LLC (“SSLP”). SSLP is
expected to invest primarily in senior secured cash flow loans. The
Company and the Investor each have made equity commitments of $50
million, resulting in a total equity commitment of $100 million.
Investment decisions and all material decisions in respect of SSLP
must be approved by representatives of the Company and the
Investor.
On December 1, 2022, SSLP commenced operations.
On December 12, 2022, SSLP entered into a $100 million senior
secured revolving credit facility which is scheduled to mature on
December 12, 2027. As of December 31, 2022 the Company and the
Investor had contributed combined equity capital in the amount of
$19.0 million. At December 31, 2022, the Company’s and the
Investor’s remaining commitments to SSLP totaled $40.5 million and
$40.5 million, respectively.
Stock Repurchase Program
On May 3, 2022, the Company’s Board authorized a
program for the purpose of repurchasing up to $50 million of its
outstanding shares of common stock. Under the repurchase program,
the Company may, but is not obligated to, repurchase shares of its
outstanding common stock in the open market from time to time
provided that it complies with the Company’s code of ethics and the
guidelines specified in Rule 10b-18 of the 1934 Act, including
certain price, market volume and timing constraints. In addition,
any repurchases will be conducted in accordance with the 1940 Act.
Unless amended or extended by its Board, the Company expects the
repurchase program to be in place until the earlier of May 1, 2023
or until $50 million of its 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 beyond what is reported herein. During the fiscal year
ended December 31, 2022, the Company repurchased 217,271 shares at
an average price of approximately $13.98 per share, inclusive of
commissions. As of December 31, 2022, the total dollar amount of
shares repurchased was approximately $3.0 million.
Subsequent Events
Distributions
On February 28, 2023, the Company’s Board of
Directors declared a monthly distribution of $0.136667 per share,
aggregating to $0.41 per share for the quarter ending March 31,
2023. 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)
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Assets |
|
|
|
|
|
|
Investments at fair value: |
|
|
Companies less than 5% owned (cost: $1,312,701 and $985,088,
respectively) |
$ |
1,289,082 |
|
$ |
964,379 |
|
Companies more than 25% owned (cost: $821,886 and $711,865,
respectively) |
|
797,594 |
|
|
706,203 |
|
Cash |
|
10,743 |
|
|
2,935 |
|
Cash equivalents (cost: $417,590
and $320,000, respectively) |
|
417,590 |
|
|
320,000 |
|
Dividends receivable |
|
11,192 |
|
|
9,028 |
|
Interest receivable |
|
9,706 |
|
|
6,521 |
|
Receivable for investments
sold |
|
1,124 |
|
|
1,378 |
|
Prepaid expenses and other
assets |
|
664 |
|
|
567 |
|
|
|
|
Total assets |
$ |
2,537,695 |
|
$ |
2,011,011 |
|
|
|
|
Liabilities |
|
|
Debt ($1,093,200 and $818,500
face amounts, respectively, reported net of unamortized debt
issuance costs of $7,202 and $6,462, respectively) |
$ |
1,085,998 |
|
$ |
812,038 |
|
Payable for investments and cash
equivalents purchased |
|
417,611 |
|
|
320,041 |
|
Distributions payable |
|
7,481 |
|
|
17,327 |
|
Management fee payable |
|
7,964 |
|
|
7,435 |
|
Performance-based incentive fee
payable |
|
5,422 |
|
|
1,864 |
|
Interest payable |
|
7,943 |
|
|
4,492 |
|
Administrative services
payable |
|
1,488 |
|
|
2,689 |
|
Other liabilities and accrued
expenses |
|
4,057 |
|
|
2,844 |
|
|
|
|
Total liabilities |
$ |
1,537,964 |
|
$ |
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 54,555,380 and 42,260,826 shares issued and
outstanding, respectively |
$ |
546 |
|
$ |
423 |
|
Paid-in capital in excess of
par |
|
1,162,569 |
|
|
936,999 |
|
Accumulated distributable net
loss |
|
(163,384 |
) |
|
(95,141 |
) |
|
|
|
Total net assets |
$ |
999,731 |
|
$ |
842,281 |
|
|
|
|
Net Asset Value Per
Share |
$ |
18.33 |
|
$ |
19.93 |
|
|
|
|
SLR INVESTMENT
CORP.CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except share
amounts)
|
|
|
|
Year ended December 31, |
|
|
2022 |
|
|
2021 |
|
INVESTMENT
INCOME: |
|
|
Interest: |
|
|
Companies less than 5% owned |
$ |
121,491 |
|
$ |
86,122 |
|
Companies more than 25% owned |
|
9,515 |
|
|
11,354 |
|
Dividends: |
|
|
Companies less than 5% owned |
|
— |
|
|
133 |
|
Companies more than 25% owned |
|
44,383 |
|
|
37,564 |
|
Other income: |
|
|
Companies less than 5% owned |
|
2,116 |
|
|
4,157 |
|
Companies more than 25% owned |
|
— |
|
|
24 |
|
|
|
|
Total investment income |
|
177,505 |
|
|
139,354 |
|
|
|
|
EXPENSES: |
|
|
Management fees |
|
29,982 |
|
|
28,277 |
|
Performance-based incentive
fees |
|
15,097 |
|
|
10,309 |
|
Interest and other credit
facility expenses |
|
46,087 |
|
|
29,876 |
|
Administrative services
expense |
|
5,401 |
|
|
5,575 |
|
Other general and administrative
expenses |
|
6,099 |
|
|
4,390 |
|
|
|
|
Total expenses |
|
102,666 |
|
|
78,427 |
|
|
|
|
Performance-based incentive fees
waived |
|
(1,527 |
) |
|
— |
|
|
|
|
Net expenses |
|
101,139 |
|
|
78,427 |
|
|
|
|
Net investment income |
$ |
76,366 |
|
$ |
60,927 |
|
|
|
|
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: |
|
|
Net realized gain (loss) on investments and cash equivalents
(companies less than 5% owned) |
$ |
(36,485 |
) |
$ |
26 |
|
|
|
|
Net change in unrealized gain
(loss) on investments and cash equivalents: |
|
|
Companies less than 5% owned |
|
(2,909 |
) |
|
(10,500 |
) |
Companies more than 25% owned |
|
(18,630 |
) |
|
9,113 |
|
|
|
|
Net change in unrealized loss on investments and
cash equivalents |
|
(21,539 |
) |
|
(1,387 |
) |
|
|
|
Net realized and unrealized loss on investments and cash
equivalents |
|
(58,024 |
) |
|
(1,361 |
) |
|
|
|
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS |
$ |
18,342 |
|
$ |
59,566 |
|
|
|
|
EARNINGS PER
SHARE |
$ |
0.35 |
|
$ |
1.41 |
|
|
|
|
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; 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 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 (including the current conflict between Russia and
Ukraine), 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(646) 308-8770
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