WhiteHorse Finance, Inc. Announces Second Quarter 2024 Earnings Results and Declares Quarterly Distribution of $0.385 Per Share

Rhea-AI Summary

WhiteHorse Finance (Nasdaq: WHF) announced its Q2 2024 financial results and declared a quarterly distribution of $0.385 per share. Key highlights include:

- Total investment income: $23.482 million, down 7.8% from Q1
- Net investment income: $9.292 million ($0.400 per share), down 14.1% from Q1
- Net asset value per share: $13.45, down 0.4% from Q1
- Investment portfolio fair value: $660.0 million, down 5.4% from Q1
- Weighted average effective yield on debt investments: 11.7%

CEO Stuart Aronson noted that despite challenges, WhiteHorse generated core net investment income exceeding the regular dividend. The company is focusing on credits with positive free cash flow, cyclicality, and strong owners, maintaining rigorous underwriting standards in an aggressive lending market.

Positive

• Core net investment income exceeded regular dividend
• Quarterly distribution maintained at $0.385 per share
• High pipeline level due to sourcing model
• 11.7% weighted average effective yield on debt investments
• 79.2% of portfolio in first lien secured loans

Negative

• Total investment income decreased 7.8% quarter-over-quarter to $23.482 million
• Net investment income decreased 14.1% quarter-over-quarter to $9.292 million
• Net asset value per share decreased 0.4% to $13.45
• Investment portfolio fair value decreased 5.4% to $660.0 million
• Challenges with specific credits and elevated repayment activity

Insights

Financial Analyst

WhiteHorse Finance's Q2 2024 results show a mixed performance. The company's $23.48 million total investment income represents a 7.8% decrease from the previous quarter. Despite this, core net investment income of $9.29 million ($0.40 per share) still exceeds the declared distribution of $0.385 per share, maintaining the company's track record of dividend coverage.

The portfolio quality remains solid with a weighted average effective yield of 11.7% on income-producing debt investments. The company's cautious approach, focusing on credits with positive free cash flow and cyclicality, is prudent given the current market conditions. However, the slight decrease in NAV per share from $13.50 to $13.45 and the net unrealized depreciation of $1.36 million warrant attention.

Overall, WhiteHorse Finance demonstrates resilience in a challenging environment, but investors should monitor portfolio performance and market dynamics closely.

Market Research Analyst

The current lending market dynamics, as described by WhiteHorse Finance, present both challenges and opportunities. The company's observation of an aggressive lending market favoring borrowers suggests increased competition and potential pressure on yields. However, WhiteHorse's strategy of targeting areas with less competition could provide a competitive edge.

The company's high pipeline level is a positive indicator, potentially offsetting the impact of elevated repayment activity seen in Q2. The focus on deals with positive free cash flow, cyclicality and strong owners aligns with a risk-averse approach, which could be beneficial in maintaining portfolio quality amidst economic uncertainties.

Investors should note the company's ability to generate core net investment income above the dividend level, which provides a buffer against potential market volatility. However, the slight decrease in NAV and total investments suggests careful monitoring of portfolio performance is warranted in the coming quarters.

NEW YORK, Aug. 8, 2024 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (Nasdaq: WHF) today announced its financial results for the quarter ended June 30, 2024. In addition, the Company's board of directors has declared a distribution of $0.385 per share with respect to the quarter ended June 30, 2024. The distributions will be payable on October 2, 2024 to stockholders of record as of September 18, 2024. 

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer, commented, "Despite some challenges with specific credits and elevated repayment activity, I am pleased to report that WhiteHorse generated another quarter of core net investment income well in excess of our regular dividend.   We are generally seeing balanced activity across our portfolio in terms of credit performance and stability with markdowns partially offset by various net markups during the quarter. Based on current market terms and conditions, we are taking a cautious stance and are focused on credits with positive free cash flow, limited cyclicality, and strong owners.  This is consistent with the rigorous underwriting standards that we adhere to regardless of market conditions. The broader lending market remains aggressive, favoring borrowers, but we continue to see opportunities in areas of the market where these is less competition. Our pipeline level remains high due in part to our sourcing model, which allows us to source deals in areas of the market where there is less competition."

Summary Information as of June 30, 2024 and March 31, 2024 (unaudited):

			Three Months Ended			Three Months Ended			Change
($ in thousands except per share data)			June 30, 2024			March 31, 2024			$		%
Total investment income		$	23,482		$	25,475			(1,993)		(7.8)
Total expenses, including excise tax			14,190			14,660			(470)		(3.2)
Net investment income and core net investment income(1)			9,292			10,815			(1,523)		(14.1)
Net investment income and core net investment income(1) per share			0.400			0.465			(0.065)		(14.0)
Distributions per share			0.385			0.385			-		-
Net realized gains (losses)			(93)			(5,634)			5,541		(98.3)
Net unrealized appreciation (depreciation)			(1,360)			788			(2,148)		(272.6)
Net increase in net assets resulting from operations			7,839			5,969			1,870		31.3
($ in thousands except per share data)			As of June 30, 2024			As of March 31, 2024			$		%
Total investments, at fair value(2)		$	660,005		$	697,869			(37,864)		(5.4)
STRS JV total investments, at fair value			324,844			309,429			15,415		5.0
Net asset value per share			13.45			13.50			(0.05)		(0.4)

Portfolio and Investment Activity

As of June 30, 2024, the fair value of WhiteHorse Finance's investment portfolio was $660.0 million, compared with $697.9 million as of March 31, 2024. The portfolio as of June 30, 2024 consisted of 125 positions across 72 companies with a weighted average effective yield of 11.7% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV (as defined below)) was $5.8 million with the overall portfolio comprised of approximately 79.2% first lien secured loans, 0.8% second lien secured loans, 0.2% unsecured loans, 3.5% equity and 16.3% in investments in STRS JV. Almost all loans were variable rate investments (primarily indexed to the Secured Overnight Financing Rate) with fixed rate securities representing only 1.2% of loans at fair value. Nearly all performing floating rate investments have interest rate floors.

During the three months ended June 30, 2024, WhiteHorse Finance made investments in seven new portfolio companies for a total of $47.4 million and added a total of $8.4 million to existing portfolio companies. Proceeds from sales and repayments totaled approximately $71.7 million for the three months ended June 30, 2024, driven by full repayments from Bulk Midco, LLC, Empire Office, Inc., Potpourri Group, Inc., and Team Car Care Holdings, LLC (Heartland Auto) and net repayments of $0.9 million on revolver commitments.

In addition to the transactions discussed above, during the three months ended June 30, 2024, WhiteHorse Finance transferred assets comprised of four new and four existing portfolio companies, totaling $22.0 million to STRS JV in exchange for cash proceeds.

Distributions

The Company's board of directors has declared a distribution of $0.385 per share with respect to the quarter ended June 30, 2024. The distribution will be payable on October 2, 2024 to stockholders of record as of September 18, 2024.

On May 8, 2024, the Company declared a distribution of $0.385 per share for the first quarter ended March 31, 2024, with distributions declared at or above $0.355 for the forty-seventh consecutive quarter since the Company's initial public offering. The distribution was paid on July 2, 2024 to stockholders of record as of June 18, 2024.

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 second quarter results for the period ended June 30, 2024, at 9:00 a.m. ET on Thursday, August 8, 2024. To access the teleconference, please dial 800-343-5172 (domestic) or +1 785-264-8342 (international) approximately 10 minutes before the teleconference's scheduled start time and reference ID #WHFQ224. Investors may also access the call on the investor relations portion of the Company's website 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 August 15, 2024. The teleconference replay can be accessed by dialing 800-925-9941 or +1 402-220-5395785-264-8342 for international callers. 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 $64 billion of capital under management⁽³⁾ 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) "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.
(2) Includes investments in WHF STRS Ohio Senior Loan Fund LLC ("STRS JV"), an unconsolidated joint venture, totaling $107.7 million, at fair value.
(3) Based on total capital raised 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 for the quarters ended June 30, 2024 and June 30, 2023.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended June 30, 2024 and June 30, 2023 (in thousands, except per share data):

 

		June 30, 2024								June 30, 2023
		Amount				Per Share				Amount				Per Share
						Amounts								Amounts
Net investment income		$	9,292			$	0.400			$	10,592			$	0.456
Net impact of costs associated with refinancing of indebtedness			-				-				-				-
Accrual for capital gains incentive fee			-				-				-				-
Net impact of excise tax expense related to net realized gains and losses			-				-				-				-
Core net investment income		$	9,292			$	0.400			$	10,592			$	0.456

Contacts

Stuart Aronson
WhiteHorse Finance, Inc.
212-506-0500
saronson@higwhitehorse.com 

or

Joyson Thomas
WhiteHorse Finance, Inc.
305-379-2322
jthomas@higwhitehorse.com 

or

Robert Brinberg
Rose & Company
212-257-5932
whitehorse@roseandco.com

 

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SOURCE WhiteHorse Finance, Inc.

FAQ

What was WhiteHorse Finance's (WHF) net investment income per share for Q2 2024?

WhiteHorse Finance's net investment income per share for Q2 2024 was $0.400, down 14% from $0.465 in Q1 2024.

What is the quarterly distribution declared by WhiteHorse Finance (WHF) for Q2 2024?

WhiteHorse Finance declared a quarterly distribution of $0.385 per share for Q2 2024, payable on October 2, 2024, to stockholders of record as of September 18, 2024.

How did WhiteHorse Finance's (WHF) investment portfolio change in Q2 2024?

WhiteHorse Finance's investment portfolio fair value decreased by 5.4% from $697.9 million in Q1 2024 to $660.0 million in Q2 2024.

What was the composition of WhiteHorse Finance's (WHF) investment portfolio as of June 30, 2024?

As of June 30, 2024, WhiteHorse Finance's portfolio consisted of 79.2% first lien secured loans, 0.8% second lien secured loans, 0.2% unsecured loans, 3.5% equity, and 16.3% investments in STRS JV.