SLR Investment Corp. Announces Quarter Ended March 31, 2022 Financial Results
SLR Investment Corp. (NASDAQ: SLRC) reported a net investment income of $13.5 million or $0.32 per share for Q1 2022, reflecting a decline from $15.5 million or $0.37 per share in Q1 2021. Following the merger with SLR Senior Investment Corp. (SUNS) on April 1, 2022, the company shifted its distribution frequency to monthly, declaring a monthly distribution of $0.136667 per share. The company also announced a $50 million share repurchase program aimed at enhancing shareholder value. As of March 31, 2022, the net asset value was $19.56 per share.
- Executed a merger with SUNS, expanding portfolio and investment opportunities.
- Declared a monthly distribution of $0.136667 per share, enhancing shareholder returns.
- Authorized a $50 million share repurchase program, indicating confidence in market position.
- Net investment income decreased to $13.5 million from $15.5 million year-over-year.
- Net realized and unrealized losses totaled $12 million, indicating potential portfolio weaknesses.
Acquisition of SUNS Expected to Accelerate Portfolio and NII Growth
Declares Monthly Distribution of
Announces
NEW YORK, May 03, 2022 (GLOBE NEWSWIRE) -- SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”), today reported net investment income of
At March 31, 2022, net asset value (NAV) was
Beginning in April 2022, after the closing of the merger with SUNS, SLRC adjusted the timing of its distributions from quarterly to monthly. The Company paid a monthly distribution of
Since the merger with SUNS closed on April 1, 2022, except for certain pro forma information set forth in this press release, SLRC will report financial and operating results of the combined company starting with the second quarter of 2022.
HIGHLIGHTS:
At March 31, 2022:
Comprehensive Investment Portfolio* fair value:
Number of portfolio companies: >600
Net assets:
Net asset value per share:
Net debt-to-equity: 0.98x
Available capital**: approximately
Comprehensive Investment Portfolio Activity*** for the Quarter Ended March 31, 2022:
Investments made during the quarter:
Investments prepaid and sold during the quarter:
Operating Results for the Quarter Ended March 31, 2022:
Net investment income:
Net investment income per share:
Net realized and unrealized loss:
Net increase in net assets from operations:
Earnings per share:
* The Comprehensive Investment Portfolio for the quarter ended March 31, 2022 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 below.
*** Comprehensive Portfolio Activity for the quarter ended March 31, 2022 includes gross originations through SLR-CS, SLR-EF and KBH.
“Post quarter end, SLRC completed its merger with SUNS. Given the expected benefits of the combination, shareholders of both companies overwhelmingly voted in favor of the transaction,” said Michael Gross, Co-CEO of SLR Investment Corp. “Commencing in Q2, SLR Capital Partners, LLC voluntarily agreed to a permanent 25 basis points reduction to SLRC’s base management fee. SLRC’s board of directors has also approved the Company’s adoption of a
“Since Q3 2021, SLRC has issued
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday, May 4, 2022. 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 5479948 when prompted. A telephone replay will be available until May 18, 2022 and can be accessed by dialing (855) 859-2056 and using the passcode 5479948. 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 March 31, 2022, SLRC had total originations of
The investment activity of our Comprehensive Investment Portfolio for the quarter ended March 31, 2022 was as follows:
Comprehensive Investment Portfolio Activity (1) – Q1 2022 (in millions) | ||||||||||||
| Asset Class | Cash Flow Loans | Asset-based Loans / SLR-CS(2) | Equipment Financings / SLR-EF(3) | Life Science Loans | Corporate Leasing(4) | Total Portfolio Activity | ||||||
| Originations | ||||||||||||
| Repayments / Amortization | ||||||||||||
| Net Portfolio Activity | ($48.8) | $27.8 | ($24.9) | $19.9 | ($4.7) | ($30.7) | ||||||
(1) Total Portfolio Activity includes gross originations/repayments across each business unit.
(2) Includes SLR-CS’s full portfolio and asset-based loans on the Company’s balance sheet.
(3) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet.
(4) Includes gross origination and repayment activity for KBH’s portfolio.
Portfolio Composition
SLRC's Comprehensive Investment Portfolio composition by business unit at March 31, 2022 was as follows:
| Comprehensive Investment Portfolio Composition (at fair value) | Amount | Weighted Average Asset Yield(5) | ||||
| ($mm) | % | |||||
| Cash Flow Senior Secured Loans | ||||||
| Asset-Based Senior Secured Loans / SLR-CS(1) | ||||||
| Equipment Senior Secured Financings / SLR-EF(2) | ||||||
| Life Science Senior Secured Loans | ||||||
| Corporate Leasing / KBH(3) | ||||||
| Total Senior Secured Loans | $2,026.9 | 99.4% | ||||
| Equity and Equity-like Securities | ||||||
| Total Comprehensive Investment Portfolio | $2,037.9 | 100.0% | ||||
| Floating Rate Investments(4) | ||||||
| First Lien Senior Secured Loans | ||||||
| Second Lien Senior Secured Cash Flow Loans | ||||||
| Second Lien Senior Secured Asset-Based Loans | ||||||
(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 and debt 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) The weighted average asset level yield for life science loans exclude the impact of success fees and/or warrants and are calculated on cost basis.
(7) Represents the annualized Q1 2022 dividend yield at cost on SLRC’s equity investment in KBH.
The Comprehensive Investment Portfolio is diversified across over 600 unique borrowers in over 80 industries and with an average exposure of
At March 31, 2022,
The weighted average yield at fair value of all income-producing investments in the Comprehensive Portfolio was
Pro Forma Portfolio Composition
The table below illustrates SLRC’s Comprehensive Investment Portfolio pro forma for the merger, including the estimated portfolio fair values of SUNS, as of March 31, 2022. The SUNS estimate is provided by the investment advisor and the fair values of the portfolio investments held by SUNS at March 31, 2022 were not reviewed or approved by the SUNS board of directors.
| Pro forma Comprehensive Investment Portfolio Composition (at fair value) | Amount | ||
| ($mm) | % | ||
| Cash Flow Senior Secured Loans | |||
| Asset-Based Senior Secured Loans / SLR-CS(1) | |||
| Equipment Senior Secured Financings / SLR-EF(2) | |||
| Life Science Senior Secured Loans | |||
| Corporate Leasing / KBH(3) | |||
| Traditional Asset-Based Senior Secured Loans(4) | |||
| Healthcare Asset-Based Senior Secured Loans(5) | |||
| Total Senior Secured Loans | $2,651.0 | 99.6% | |
| Equity and Equity-like Securities | |||
| Total Comprehensive Investment Portfolio | $2,662.3 | 100.0% | |
| Floating Rate Investments(6) | |||
| First Lien Senior Secured Loans | |||
| Second Lien Senior Secured Cash Flow Loans | |||
| Second Lien Senior Secured Asset-Based Loans | |||
(1) Includes SLR-CS’ full portfolio and asset-based and lender finance loans on the Company’s balance sheet and excludes the Company’s equity investment in SLR-CS.
(2) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet and excludes the Company’s equity and debt investments in SLR-EF.
(3) Includes KBH’s full portfolio and excludes the Company’s equity and debt investments in KBH.
(4) Includes the full portfolio of SLR Business Credit, all of which are 1st lien senior secured loans.
(5) Includes the full portfolio of SLR Healthcare ABL, all of which are 1st lien senior secured loans.
(6) Floating rate investments calculated as a percent of the Company’s income-producing Comprehensive Investment Portfolio. The majority of fixed rate loans are associated with SLR-EF and leases associated with KBH. Additionally, SLR-EF and KBH seek to match-fund their fixed rate assets with fixed rate liabilities.
SLR Investment Corp. Portfolio
Asset Quality
As of March 31, 2022, on a fair value basis
The Company puts its greatest emphasis on risk mitigation and credit performance. On a quarterly basis, or more frequently if deemed necessary, the Company formally rates each portfolio investment on a scale of one to four, with one representing the least amount of risk.
As of March 31, 2022, the composition of our portfolio, on a risk ratings basis, was as follows:
| Internal Investment Rating | Investments at Fair Value ($mm) | % of Total Portfolio | ||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
Investment Income Contribution by Business Unit
| Business Unit Contribution to Gross Investment Income (1) (in millions) | |||||||
| For the Quarter Ended: | Cash Flow Lending | Asset-based Lending / SLR-CS | Equipment Financing / SLR-EF | Life Science Lending | Corporate Leasing | Total | |
| 3/31/2022 | $33.0 | ||||||
| % Contribution | 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 March 31, 2022 compared to the Quarter Ended March 31, 2021.
Investment Income
For the fiscal quarters ended March 31, 2022 and 2021, gross investment income totaled
Expenses
Expenses totaled
Net Investment Income
The Company’s net investment income totaled
Non-GAAP Financial Measures
This press release contains certain financial measures that have not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). SLR Investment Corp. uses these non-GAAP financial measures internally in analyzing financial results and believes that the use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing results and trends and in comparing SLR Investment Corp.’s financial results with other business development companies.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with SLR Investment Corp.’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures has been provided in this press release, and investors are encouraged to review the reconciliation.
| Reconciliation of Non-GAAP Financial Measures | ||
| Quarter Ended March 31, 2022 | ||
| GAAP net investment income per share | ||
| Plus one-time merger related expenses per share | ||
| Adjusted net investment income per share | ||
Net Realized and Unrealized Gain (Loss)
Net realized and unrealized gains (losses) for the fiscal quarters ended March 31, 2022 and 2021 totaled (
Net Increase in Net Assets Resulting From Operations
For the quarters ended March 31, 2022 and 2021, the Company had a net increase in net assets resulting from operations of
Liquidity and Capital Resources
Unsecured Debt
On January 6, 2022, SLRC closed a private offering of
Credit Facilities and Available Capital
At March 31, 2022, the Company had
Leverage
On March 31, 2022, the Company’s net debt-to-equity was 0.98x. 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. Pro forma for the merger with SUNS, SLRC’s net leverage ratio at March 31, 2022 would be 0.90x.
Unfunded Commitments
At March 31, 2022, excluding commitments to SLR-CS and SLR-EF, the Company had unfunded commitments of
Recent Developments
Merger
On April 1, 2022, SLRC completed its previously announced acquisition of SUNS. In accordance with the terms of the merger agreement, at the effective time of the merger, each outstanding share of SUNS’ common stock was converted into the right to receive 0.7796 shares of our common stock (with SUNS’ stockholders receiving cash in lieu of fractional shares of our common stock). As a result of the merger, SLRC issued an aggregate of 12,511,825 shares of common stock to former SUNS stockholders.
Permanent Reduction in Base Management Fee
On April 1, 2022, in connection with the consummation of the merger with SUNS, SLRC entered into a letter agreement pursuant to which SLR Capital Partners, LLC, our investment adviser (“SLR Capital Partners”), voluntarily agreed to a permanent 25 basis point reduction of the annual base management fee rate payable by us to SLR Capital Partners pursuant to the investment advisory agreement by and between us and SLR Capital Partners, resulting in an annual base management fee rate payable by the Company to SLR Capital Partners of
Assumption of SUNS Credit Facility
On April 1, 2022, SLRC assumed SUNS’ revolving credit facility, effective as of the closing of the merger with SUNS. Currently, the commitment under SUNS’ revolving credit facility is
Assumption of SUNS Notes
On April 1, 2022, SLRC entered into an assumption agreement (the “Note Assumption Agreement”), effective as of the closing of the merger with SUNS. The Note Assumption Agreement relates to the Company’s assumption of
Timing of Distributions
On April 1, 2022, SLRC adjusted the timing of its distributions from quarterly to monthly, effective as of the closing of the merger with SUNS. On April 4, 2022, the Board declared a monthly distribution of
Share Repurchase Program
On May 3, 2022, SLRC’s Board authorized the Company to adopt a program for the purpose of repurchasing up to
Financial Statements and Tables
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
| March 31, 2022 (unaudited) | December 31, 2021 | |||||
| Assets | ||||||
| Investments at fair value: | ||||||
| Companies less than | $ | 921,831 | $ | 964,379 | ||
| Companies more than | 704,642 | 706,203 | ||||
| Cash | 9,075 | 2,935 | ||||
| Cash equivalents (cost: | 579,829 | 320,000 | ||||
| Dividends receivable | 9,001 | 9,028 | ||||
| Interest receivable | 7,244 | 6,521 | ||||
| Receivable for investments sold | 735 | 1,378 | ||||
| Prepaid expenses and other assets | 927 | 567 | ||||
| Total assets. | $ | 2,233,284 | $ | 2,011,011 | ||
| Liabilities | ||||||
| Debt ( | $ | 808,858 | $ | 812,038 | ||
| Payable for investments and cash equivalents purchased | 579,870 | 320,041 | ||||
| Distributions payable | ‒ | 17,327 | ||||
| Management fee payable | 7,216 | 7,435 | ||||
| Performance-based incentive fee payable | ‒ | 1,864 | ||||
| Interest payable | 8,062 | 4,492 | ||||
| Administrative services expense payable | 520 | 2,689 | ||||
| Other liabilities and accrued expenses | 2,341 | 2,844 | ||||
| Total liabilities | $ | 1,406,867 | $ | 1,168,730 | ||
| Net Assets | ||||||
| Common stock, par value | $ | 423 | $ | 423 | ||
| Paid-in capital in excess of par | 936,999 | 936,999 | ||||
| Accumulated distributable net loss | (111,005 | ) | (95,141 | ) | ||
| Total net assets | $ | 826,417 | $ | 842,281 | ||
| Net Asset Value Per Share | $ | 19.56 | $ | 19.93 | ||
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
| Three months ended | ||||||
| March 31, 2022 | March 31, 2021 | |||||
| INVESTMENT INCOME: | ||||||
| Interest: | ||||||
| Companies less than | $ | 20,662 | $ | 20,832 | ||
| Companies more than | 2,561 | 2,885 | ||||
| Dividends: | ||||||
| Companies less than | ‒ | 133 | ||||
| Companies more than | 9,715 | 9,575 | ||||
| Other income: | ||||||
| Companies less than | 63 | 2,462 | ||||
| Companies more than | 5 | ‒ | ||||
| Total investment income | 33,006 | 35,887 | ||||
| EXPENSES: | ||||||
| Management fees.. | 7,216 | 6,810 | ||||
| Performance-based incentive fees | ‒ | 3,867 | ||||
| Interest and other credit facility expenses | 8,328 | 7,229 | ||||
| Administrative services expense | 1,183 | 1,360 | ||||
| Other general and administrative expenses | 2,801 | 1,155 | ||||
| Total expenses | 19,528 | 20,421 | ||||
| Net investment income | $ | 13,478 | $ | 15,466 | ||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: | ||||||
| Net realized gain (loss) on investments and cash equivalents (companies less than | $ | 30 | $ | (366) | ||
| Net change in unrealized gain (loss) on investments and cash equivalents: | ||||||
| Companies less than | (13,498) | 6,046 | ||||
| Companies more than | 1,453 | 364 | ||||
| Net change in unrealized gain (loss) on investments and cash equivalents | (12,045) | 6,410 | ||||
| Net realized and unrealized gain (loss) on investments and cash equivalents | (12,015) | 6,044 | ||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,463 | $ | 21,510 | ||
| EARNINGS PER SHARE | $ | 0.04 | $ | 0.51 | ||
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 SUNS and distribution projections; business prospects of SLRC and SUNS and the prospects of their portfolio companies; and the impact of the investments that SLRC and SUNS expect 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) the risk that shareholder litigation in connection with the Merger may result in significant costs of defense and liability; (iv) changes in the economy, financial markets and political environment; (v) risks associated with possible disruption in the operations of SLRC or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic; (vi) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (vii) conditions in SLRC’s operating areas, particularly with respect to business development companies or regulated investment companies; (viii) general considerations associated with the COVID-19 pandemic; and (ix) 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
FAQ
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