Stellus Capital Investment Corp (SCM) 2022 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to the Stellus Capital Investment Corporation's conference call to report financial results for its fourth fiscal quarter ended December 31, 2022. (Operator Instructions) This conference is being recorded today, March 1, 2023.

早上好，女士們先生們，感謝你們的支持。此時，我歡迎大家參加 Stellus Capital Investment Corporation 的電話會議，報告截至 2022 年 12 月 31 日的第四財季財務業績。（操作員說明）本次會議於今天（2023 年 3 月 1 日）進行錄製。

It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin the conference.

現在我很高興將電話轉給 Stellus Capital Investment Corporation 首席執行官 Robert Ladd 先生。拉德先生，您可以開始會議了。

Thank you, Ali, and good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter and year ended December 31, 2022. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements as well as an overview of our financial information.

謝謝阿里，大家早上好，感謝您加入通話。歡迎參加我們截至 2022 年 12 月 31 日的季度和年度的電話會議。今天早上與我一起的是我們的首席財務官托德·赫金森 (Todd Huskinson)，他將介紹有關前瞻性陳述的重要信息以及我們的財務信息概述。

Thank you, Rob. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited.

謝謝你，羅布。我想提醒大家，今天的通話正在進行錄音。請注意，本次電話會議屬於 Stellus Capital Investment Corporation 的財產，嚴禁以任何形式未經授權廣播本次電話會議。

Audio replay of the call will be available by using the telephone number and PIN provided in our press release announcing this call. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information.

使用我們在宣布本次通話的新聞稿中提供的電話號碼和 PIN 碼即可重播本次通話的音頻。我還想提請您注意我們新聞稿中有關前瞻性信息的慣例安全港披露。

Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the Public Investors link or call us at (713) 292-5400.

今天的電話會議還可能包括前瞻性陳述和預測，我們要求您參考我們最近向 SEC 提交的文件，了解可能導致實際結果與這些預測存在重大差異的重要因素。除非法律要求，我們不會更新我們的前瞻性陳述。要獲取我們最新的 SEC 備案文件副本，請訪問我們的網站 www.stelluscapital.com 的公共投資者鏈接或致電 (713) 292-5400 聯繫我們。

At this time, I'd like to turn the call back over to our Chief Executive Officer, Rob Ladd.

現在，我想將電話轉回給我們的首席執行官 Rob Ladd。

Thank you, Todd. We'll begin by discussing our operating results followed by a review of the portfolio, including asset quality and then the outlook. Todd will cover our operating results now.

謝謝你，托德。我們將首先討論我們的經營業績，然後審查投資組合，包括資產質量，然後是前景。托德現在將報導我們的經營業績。

Thank you, Rob. As interest rates have continued to rise in recent quarters, we continue to benefit from our favorable asset liability mix in which 97% of our loans are floating and only 32% of our liabilities are floating. As a result, we had solid results in the fourth quarter and for fiscal year 2022.

謝謝你，羅布。由於近幾個季度利率持續上升，我們繼續受益於有利的資產負債組合，其中 97% 的貸款為浮動貸款，而只有 32% 的負債為浮動負債。因此，我們在第四季度和 2022 財年取得了穩健的業績。

First, I'll cover our annual results. For fiscal year 2022, we more than covered the dividend of $1.30 per share with realized income of $1.65 per share which included $3.7 million of net realized gains or $0.19 per share.

首先，我將介紹我們的年度業績。 2022 財年，我們支付了每股 1.30 美元的股息，每股已實現收入 1.65 美元，其中包括 370 萬美元的已實現淨收益或每股 0.19 美元。

Core net investment income was $1.38 per share and GAAP net investment income was $1.46 per share. As a reminder, core net investment income excludes the reversal of $2.8 million of capital gains incentive fees accrued on realized and unrealized gains, which are not included in net investment income and $1.2 million of estimated income taxes. Net asset value decreased by $9.3 million, primarily -- or $0.59 per share year-over-year, primarily due to portfolio company specific issues, offset by realized earnings in excess of our dividends.

核心淨投資收益為每股 1.38 美元，GAAP 淨投資收益為每股 1.46 美元。需要提醒的是，核心淨投資收入不包括已實現和未實現收益累計的 280 萬美元資本利得激勵費用的沖銷，這些費用不包括在淨投資收入和 120 萬美元的估計所得稅中。淨資產價值減少了 930 萬美元，主要是同比減少了 0.59 美元，主要是由於投資組合公司的具體問題，但已實現的收益超過了我們的股息。

Turning to the fourth quarter. Our total distributions of $0.34 per share were covered through core net investment income of $0.44 per share and GAAP net investment income of $0.50 per share. And with that, I'll turn the call back over to Rob.

轉向第四季度。我們每股 0.34 美元的總分配由每股 0.44 美元的核心淨投資收益和每股 0.50 美元的 GAAP 淨投資收益來支付。然後，我會將電話轉回給 Rob。

Okay. Thank you, Todd. I'd like to now cover the following areas: life-to-date review, portfolio and asset quality, dividends and then outlook. So life-to-date review. Since our IPO in November of 2012, we've invested approximately $2.2 billion in over 175 companies and have received approximately $1.4 billion of repayments while maintaining stable asset quality. We have paid over $207 million of dividends to our investors, which represents $13.35 per share to an investor in our IPO in November of 2012.

好的。謝謝你，托德。我現在想討論以下幾個方面：迄今為止的生活回顧、投資組合和資產質量、股息，然後是展望。所以對生活進行最新的回顧。自 2012 年 11 月首次公開募股以來，我們已向超過 175 家公司投資了約 22 億美元，並在保持穩定的資產質量的同時收到了約 14 億美元的還款。我們已向投資者支付了超過 2.07 億美元的股息，相當於 2012 年 11 月 IPO 中向投資者支付的股息為每股 13.35 美元。

Now turning to the portfolio. We ended the year with an investment portfolio at fair value of $845 million across 85 portfolio companies. This is up from $773 million across 73 companies as of December 31, 2021. During 2022, we invested $211 million in 22 new and 28 existing portfolio companies and received $90 million of repayments for net portfolio growth of $90.8 million for the year.

現在轉向投資組合。截至年底，我們對 85 家投資組合公司的投資組合公允價值為 8.45 億美元。截至 2021 年 12 月 31 日，73 家公司的投資額為 7.73 億美元。2022 年，我們向 22 家新投資組合公司和 28 家現有投資組合公司投資了 2.11 億美元，並收到了 9,000 萬美元的還款，全年投資組合淨增長為 9,080 萬美元。

With respect to the fourth quarter, we've invested $30 million in 4 new and 2 existing portfolio companies and have received repayments of $48 million. At December 31, 99% of our loans were secured and 97% were priced at floating rates. We continue to move toward first lien loans, which were 87% of our loan portfolio at year-end. This is up from 84% at the end of 2021. We are always focused on diversification.

第四季度，我們向 4 家新投資組合公司和 2 家現有投資組合公司投資了 3000 萬美元，並已收到 4800 萬美元的還款。截至 12 月 31 日，我們 99% 的貸款已獲得擔保，97% 的貸款按浮動利率定價。我們繼續轉向第一留置權貸款，截至年底，該貸款占我們貸款組合的 87%。這比 2021 年底的 84% 有所上升。我們始終專注於多元化。

The average loan per company is $10.8 million and the largest overall investment is $21.1 million, both expressed at fair value. And 83 of the 85 portfolio companies are backed by a private equity firm. Overall, our asset quality is stable at a 2 on our investment rating system or on plan. 17% of our portfolio is rated a 1 or ahead of plan, 17% of the portfolio is marked at an investment category of 3 or below plan. In total, we have 3 loans on nonaccrual, which comprised 2.3% of fair value of the total loan portfolio.

每家公司的平均貸款為 1080 萬美元，最大的總投資為 2110 萬美元，均以公允價值表示。 85 家投資組合公司中有 83 家得到了私募股權公司的支持。總體而言，我們的資產質量在投資評級系統或計劃中穩定在 2 級。我們的投資組合中有 17% 被評為 1 級或提前於計劃，17% 的投資組合被評為 3 級或以下投資類別。我們總共有 3 筆非應計貸款，佔貸款組合公允價值的 2.3%。

Now turning to dividends. We've increased our regular dividend 43% from $0.28 per share per quarter in the first quarter of 2022 to now $0.40 per share per quarter beginning in the first quarter of 2023. This is payable, as you know, in monthly increments. This increase in our dividend reflects the greater earnings that we are generating in this higher interest rate environment in which our loan portfolio is over 97% floating and our liability structure is over 65% -- pardon me, over 65% fixed rate.

現在轉向股息。我們已將定期股息從 2022 年第一季度的每季度每股 0.28 美元增加到 2023 年第一季度開始的每季度每股 0.40 美元，增幅為 43%。如您所知，這是按月遞增的。我們股息的增加反映了我們在這種較高利率環境下產生的更大收益，在這種環境下，我們的貸款組合超過 97% 是浮動的，我們的負債結構超過 65%——請原諒，超過 65% 是固定利率。

As a reminder, part of our strategy has been to invest in the equity of our portfolio companies in a modest way in order to generate realized gains sufficient to offset losses over time. As our business has matured over the last 10-plus years, we've begun to see somewhat regular realized gains from our portfolio. And during 2022, we generated $3.7 million of net realized gains.

提醒一下，我們策略的一部分是以適度的方式投資於我們的投資組合公司的股權，以便產生足以抵消隨著時間的推移的損失的已實現收益。隨著我們的業務在過去十多年中不斷成熟，我們開始看到我們的投資組合定期實現收益。 2022 年，我們實現了 370 萬美元的淨實現收益。

And now turning to outlook. As a reminder, across our platform of Stellus Capital Management, our total assets under management is approximately $2.8 billion. This additional capital allows us to invest in larger transactions, remain active in the market when SCIC has limited capital and helps us build our portfolios in a diversified way.

現在轉向展望。提醒一下，在我們的 Stellus Capital Management 平台上，我們管理的總資產約為 28 億美元。這些額外資本使我們能夠投資更大的交易，在 SCIC 資本有限時保持市場活躍，並幫助我們以多元化的方式建立投資組合。

Since year-end, we funded $25.5 million at par in 2 new and 1 existing portfolio companies and have received no repayments. This brings our portfolio to approximately $870 million today, which is where we would expect it will finish the quarter at the end of March. Finally, repayments and equity realizations seem to be slowing, but we expect to be able to maintain our investment portfolio between $850 million and $900 million throughout the year of 2023.

自年底以來，我們向 2 家新投資組合公司和 1 家現有投資組合公司按面值投資了 2,550 萬美元，但尚未收到任何還款。這使我們的投資組合今天達到約 8.7 億美元，這是我們預計 3 月底完成該季度的投資組合。最後，償還和股權變現似乎正在放緩，但我們預計 2023 年全年能夠將投資組合維持在 8.5 億至 9 億美元之間。

And with that, we'll open it up for questions. Thank you. And Ali, would you please start the Q&A session?

接下來，我們將開放提問。謝謝。阿里，請您開始問答環節好嗎？

(Operator Instructions) Our first question is coming from Erik Zwick with Hovde Group.

（操作員說明）我們的第一個問題來自 Hovde Group 的 Erik Zwick。

First, I just wanted to kind of get your thoughts a little bit on the new dividend level at $0.40 a share. I'm just curious. Certainly, the interest rate environment continues to go up, and that will be likely additive to earnings but at some point, a couple of years out, could normalize. So just wondering if you could kind of frame your confidence in having the dividend at this level relative to the outlook for longer-term earnings at this point.

首先，我只是想了解一下您對每股 0.40 美元的新股息水平的一些想法。我只是好奇。當然，利率環境繼續上升，這可能會增加收益，但在幾年後的某個時候，可能會正常化。因此，我想知道您是否可以相對於目前的長期收益前景來確定您對處於這一水平的股息的信心。

Yes. Sure. So in setting the dividend for this year, certainly the first quarter, we expect for the year to earn more than that level of $1.60 or $0.40 a quarter. So we're keeping in mind that rates could certainly moderate in the future. And if you look at the forward curve, we should be able to maintain this level of dividend based on earnings for at least a couple of years, if not longer.

是的。當然。因此，在設定今年（當然是第一季度）的股息時，我們預計今年的利潤將超過 1.60 美元或每季度 0.40 美元的水平。因此，我們要記住，未來利率肯定會放緩。如果你看看遠期曲線，我們應該能夠在至少幾年甚至更長時間內維持這種基於收益的股息水平。

And switching gears to credit. As you pointed out, nonaccrual is still very, very minimal at this point. There's obviously a lot of concern that the economy may be dipping into a more kind of stressful environment, which could impact some lenders and some businesses. So just curious, one, are you seeing any signs of that the business activity weakening for any of your borrowers? And also are you experiencing any increase in amendment request at this point?

並轉向信貸。正如您所指出的，目前非應計利息仍然非常非常少。顯然，人們非常擔心經濟可能會陷入壓力更大的環境，這可能會影響一些貸方和一些企業。所以我很好奇，第一，您是否看到任何借款人的商業活動減弱的跡象？您目前是否遇到了修改請求增加的情況？

Yes. So in terms of any stress, not a material amount. I think what's been true for us historically is given our underwriting that if we have concerns, it's more company specific than kind of a broad-based impact. So I'd say that the portfolio has held up relatively well. We'll always have company-specific issues. And I'm sorry, the second part of your question?

是的。因此，就任何壓力而言，不是實質性的壓力。我認為，從歷史上看，我們的承保情況是這樣的，如果我們有擔憂，那更多的是針對公司的具體情況，而不是廣泛的影響。所以我想說，該投資組合的表現相對較好。我們總會遇到公司特定的問題。抱歉，你問題的第二部分？

Just if you've seen any increase in amendment requests from any portfolio companies.

如果您發現任何投資組合公司的修改請求有所增加。

We have not. Now one thing I'll share is that as rates continue to increase, you certainly reach a level where you could have some more stress on portfolio companies, but we think we've got a good ways to run before that will -- higher rates will be impactful.

我們還沒有。現在我要分享的一件事是，隨著利率繼續上升，你肯定會達到一個水平，你可能會給投資組合公司帶來更多壓力，但我們認為在此之前我們有一個很好的方法——更高的利率將會有影響力。

And then last 1 for me, and I'll step aside. Just curious if you could update me on the value of spillover income at this point? And how you think about that either as supporting that dividend or a potential for maybe a special dividend at some point?

然後最後 1 個給我，我會退到一邊。只是好奇您是否可以向我介紹目前溢出收入價值的最新情況？您如何看待這要么是支持股息，要么是在某個時候可能獲得特別股息？

Yes. So I'll turn that over to Todd.

是的。所以我會把它交給托德。

Yes. Sure, Erik. So our current spillover level from last year into this year is a little over $28 million. And our dividend at the current level in the current number of shares is about $31 million of dividends. So for this current year, our regular $1.60 a share will a little bit more than pay out the spillover and then will pay out a little bit of the current year earnings as well. All other things being equal and kind of what we would expect from this year's earnings going into the following year, if we continue with $1.60 dividend then there might need to be a special dividend at the end of that year just because we expect to out earn $1.60 dividend. But the way I think about it is, we want to earn our dividend from realized income, which we always have. And then we also have a substantial amount of spillover that's available to support that dividend as well.

是的。當然，埃里克。因此，我們目前從去年到今年的溢出水平略高於 2800 萬美元。而我們目前的股息水平以目前的股份數量計算，股息約為3100萬美元。因此，今年，我們的常規每股 1.60 美元將比支付溢出效應多一點，然後也將支付一點當年的收益。在所有其他條件相同的情況下，並且與我們對今年盈利的預期一致，如果我們繼續派發 1.60 美元的股息，那麼可能需要在當年年底派發特別股息，因為我們預計會超出盈利股息 1.60 美元。但我的想法是，我們希望從我們一直擁有的已實現收入中賺取股息。然後我們還有大量的溢出效應可以支持股息。

Maybe just to add to that. So as we look forward, there could be a need next year for a special dividend, but we're a good ways off from that.

也許只是為了補充這一點。因此，展望未來，明年可能需要派發特別股息，但距離實現這一點還有很長的路要走。

Our next question is coming from Robert Dodd with Raymond James.

我們的下一個問題來自羅伯特·多德和雷蒙德·詹姆斯。

Congrats on the quarter. And back to that point -- I mean, to your point, Todd and Rob, you've talked in the past about earning the dividend from realized income, and you can earn it from pure NII in the near term. You said, Rob, that I think equity gains are likely to slow this year. I mean in -- that's probably part of the cycle. Do you hypothetically expect them to be slow for the year? Or have you tapped -- is there an age vintage component in that in terms of like they're going to be slow for more than a year and then come back sometime down the road? Any color you can give on that? And then also, I'll lap it all up for you...

恭喜本季度。回到這一點——我的意思是，就你們的觀點而言，托德和羅布，你們過去曾談到過從已實現收入中賺取股息，並且你們可以在短期內從純NII 中賺取股息。羅布，你說我認為今年股市漲幅可能會放緩。我的意思是——這可能是周期的一部分。你假設他們今年會放緩嗎？或者你有沒有挖掘過——是否有一個古老的成分，比如它們會緩慢運行一年多，然後在某個時候又回來？你能給它什麼顏色嗎？然後我也會為你把這一切都包起來......

Sure. Yes. No, no, it's a good clarifying question, Robert. So this is just to share as we tried each quarter kind of the cadence of activity -- level of activity that we're experiencing and whereas in previous quarters, we could tell, and there were things on the horizon. And just at this point, there's nothing on the horizon.

當然。是的。不，不，這是一個很好的澄清問題，羅伯特。因此，這只是分享我們每個季度嘗試的活動節奏——我們正在經歷的活動水平，而在前幾個季度，我們可以看出，有些事情即將發生。就在此時，地平線上什麼也沒有。

But we've learned over time that will change. But it's not a vintage issue, I think it's just probably a state overall of the M&A market and just expect it to be slower. And I would couple that with what maybe more importantly is that repayment seemed to have slowed for the moment. But again, I wouldn't call this a long-term phenomenon, and it may could very well pick up as we get into the middle of the year.

但隨著時間的推移，我們了解到這種情況將會改變。但這不是一個古老的問題，我認為這可能只是併購市場的整體狀況，只是預計它會放緩。我想把這一點與也許更重要的是，目前還款速度似乎已經放緩。但同樣，我不會稱這是一個長期現象，隨著進入年中，這種現像很可能會加劇。

Got it. And on kind of just conceptually long term, what would you -- this is a qualitative than quantitative question probably, how much of your total realized earnings would you expect to come from NII versus realized gains on average (inaudible).

知道了。從概念上長期來看，您會做什麼——這可能是一個定性而不是定量的問題，您預計您的已實現總收益中有多少來自 NII 與平均已實現收益（聽不清）。

And sorry, Robert, on average and over what period of time?

抱歉，羅伯特，平均而言，在多長時間內？

Going forward, just long term, how much should we expect to roughly to come from NII versus the realized gains. Obviously, they both generate value, and they both contribute for dividend funding, but I'm just trying to...

展望未來，從長遠來看，我們應該預計 NII 與已實現收益的大致比例是多少。顯然，它們都產生價值，並且都為股息融資做出貢獻，但我只是想……

Sure. I'd say for the foreseeable future, again, based on the forward curve, which has now risen up [some more] that we would expect to have robust NII out into the future and not need realized gains to support the dividend, which I know is not exactly what you've asked, but just to clarify that.

當然。我想說，在可預見的未來，基於遠期曲線（​​現在已經上升[更多]），我們預計未來會有強勁的NII，而不需要實現的收益來支持股息，我認為知道並不完全是你所問的，只是為了澄清這一點。

And then with respect to realized gains, as a percentage, it probably could be something like 10-ish percent or so of our earnings. As a nominal percentage, it's typically 5% of the portfolio. But because of the magnitude of what it can generate could be outsized. But we would still expect it to be a modest percentage but overall meaningful. And then in a conservative way that we look at it is that it would cover realized potential losses and credit losses. But in any event, we would expect to be positive and put it in the 10% range, I think.

然後就已實現的收益而言，以百分比計算，它可能約為我們收入的 10% 左右。作為名義百分比，通常為投資組合的 5%。但由於它所能產生的能量可能是巨大的。但我們仍然預計這一比例不大，但總體而言是有意義的。然後，我們以保守的方式看待它，它將覆蓋已實現的潛在損失和信用損失。但無論如何，我認為我們都希望保持積極的態度，並將其控制在 10% 的範圍內。

Yes. Robert, I just might add that's historically been the case. We've effectively covered our dividends through NII throughout our history. I mean there have been times when the realized gains have come in handy. But for the most part, it's been coming from NII.

是的。羅伯特，我想補充一點，歷史上就是這樣。縱觀歷史，我們一直通過 NII 有效支付股息。我的意思是，有時實現的收益會派上用場。但大部分都來自 NII。

Understood. And to that point, I mean, over time, your realized gains have been greater than your realized losses, which goes to dividend funding on that front as well. So what are you seeing in the environment right now? I mean you said you expect the portfolio to be, what was it, $850 million to $900 million this year, kind of stable in the first quarter. Is this just -- is this year of rotation, a few repayments, a few additions? Or do you expect larger scale rotation in the second half? Or can you give us any color about how that -- how you think the year might play out in terms of activity level.

明白了。就這一點而言，我的意思是，隨著時間的推移，你的已實現收益大於已實現損失，這也用於這方面的股息融資。那麼您現在在環境中看到了什麼？我的意思是，您說您預計今年的投資組合將達到 8.5 億至 9 億美元，在第一季度保持穩定。這只是——今年是輪換、一些還款、一些補充嗎？或者您預計下半年會有更大規模的輪換？或者您能否告訴我們您認為這一年的活動水平會如何發展。

Sure, sure. So a few thoughts. One, because of our capital base, we kind of reach a top portfolio around $900 million or so. So we're operating within the range. We have liquidity right now to get us to that point. So that's about where we tap out. So I think in terms of activity that we're seeing and continue to see a number of opportunities throughout the country, that's why we'd be comfortable being in that range.

一定一定。所以有一些想法。第一，由於我們的資本基礎，我們達到了大約 9 億美元左右的頂級投資組合。所以我們是在這個範圍內運營的。我們現在擁有流動性來實現這一點。這就是我們挖掘的地方。因此，我認為就我們在全國范圍內看到並繼續看到的大量機會而言，這就是為什麼我們願意處於這個範圍內。

And then what of course is helpful that as we get repayments, we'll get the benefit of the fee acceleration. And so repayments are helpful to us as we stay in the range. In terms of activity, a little bit slower in the first quarter as a platform, certainly expect it to pick up in the second and then short of a significant recession in the country likely to be picking up more in the third and fourth quarters. The real point I wanted to make though is that it doesn't take a lot of activity for our investment portfolio to be full here.

當然，當我們獲得還款時，我們將獲得費用加速的好處，這當然是有幫助的。因此，當我們保持在這個範圍內時，還款對我們很有幫助。就活動而言，作為一個平台，第一季度的活動稍慢一些，當然預計第二季度會有所回升，然後在該國出現嚴重衰退的情況下，第三季度和第四季度可能會有所回升。但我真正想說的是，我們的投資組合併不需要進行太多的活動就可以充實起來。

Our next question is coming from Ryan Lynch with KBW.

我們的下一個問題來自 KBW 的 Ryan Lynch。

First one I had was just what percentage of your portfolio is sponsor backed versus nonsponsored?

我的第一個問題是，您的投資組合中有多少百分比是讚助商支持的，而不是非贊助的？

Yes. So the -- in terms of number of companies, as I said earlier, is at 83 out of 85. So 95% plus.

是的。因此，就公司數量而言，正如我之前所說，85 家公司中有 83 家。所以超過 95%。

Okay. Sorry, I missed that if you said that earlier.

好的。抱歉，如果你早些時候這麼說，我就錯過了。

No worries.

不用擔心。

Yes. The other question I had was, obviously, there was a very big jump in NII quarter-over-quarter, which was expected given you guys positioning for rising rates. I'm just curious as we turn the page and look at Q1, I'm trying to get a sense of should we expect a similar jump in NII from Q4 to Q1 or a lesser jump. Or there's a couple of different ways to also think about it, have you guys run what fourth quarter NII would have been if base rates at 12/31 were in fact that whole quarter and/or could you provide the average base rate that your portfolio had for the duration of the fourth quarter. There's a couple of different questions in there, but I'm just trying to get a sense of the potential growth in Q1. I think there's just a couple of different ways to think or look at it or disclose it.

是的。我的另一個問題是，顯然，NII 環比大幅躍升，考慮到你們對利率上升的定位，這是預料之中的。我只是很好奇，當我們翻過這一頁並查看第一季度時，我試圖了解我們是否應該期望 NII 從第四季度到第一季度出現類似的跳躍，或者跳躍幅度較小。或者還有幾種不同的方式來考慮這個問題，如果 12/31 的基本利率實際上是整個季度，你們是否可以計算第四季度的 NII 會是多少，和/或您能否提供您的投資組合的平均基本利率一直持續到第四季度。其中有幾個不同的問題，但我只是想了解第一季度的潛在增長。我認為只有幾種不同的方式來思考、看待或披露它。

Sure. So let me take a shot at it first and see if Todd wants to add. So the fourth quarter was a little bit unusual in that we had some fee acceleration. And then also, if you look at just NII, it was affected by, as Todd said earlier, the reversal of some capital gains incentive fee. So I'd say that we would expect in the first quarter to be less than the $0.50 of GAAP NII, but still a number that would exceed the dividend.

當然。所以讓我先嘗試一下，看看托德是否願意補充。因此，第四季度有點不尋常，因為我們的費用有所增加。而且，如果你只看 NII，正如托德之前所說，它受到了一些資本利得激勵費逆轉的影響。所以我想說，我們預計第一季度的 GAAP NII 會低於 0.50 美元，但仍然會超過股息。

And then in terms of core NII, likely we will be up over the quarter, reflecting the higher rate. So if it's helpful, yes, we expect kind of as all things being equal to have greater earnings in the first quarter frankly and in the second quarter more because rates have moved up again. And then in terms of rates to think about, we ended the fourth quarter where LIBOR was about 3.75. We ended the first quarter where LIBOR was closer to 4.75. And we're likely to enter the second quarter where LIBOR is over 5. So think of it as -- and then we have repricing during the quarter because some are on monthly pay and reprice monthly. But again, you kind of have to take out some quarter-over-quarter changes in other items. But I'll just start over again to say that we expect earnings to be higher, all things being equal in the first over the fourth and the second over the first.

然後就核心NII而言，本季度我們可能會有所上升，反映出更高的利率。因此，如果這有幫助的話，是的，我們預計在所有條件相同的情況下，坦率地說，第一季度的收益會更高，第二季度的收益也會更高，因為利率再次上升。然後就要考慮的利率而言，我們第四季度末的 LIBOR 約為 3.75。第一季度結束時，LIBOR 接近 4.75。我們很可能會進入第二季度，倫敦銀行同業拆借利率 (LIBOR) 會超過 5。因此，我們可以將其視為 - 然後我們會在本季度進行重新定價，因為有些是按月付款，並按月重新定價。但同樣，你必須剔除其他項目的一些季度環比變化。但我要重新開始說，我們預計收益會更高，在所有條件相同的情況下，第一個與第四個、第二個與第一個相同。

What was the level of accelerate -- so maybe what was the level of accelerated fees in the fourth quarter versus what you guys have timed. I know it's lumpy but sort of an average run rate that you guys would expect to experience.

加速的水平是多少——那麼也許第四季度的加速費用水平與你們所計時的相比是多少。我知道它是不穩定的，但有點像你們期望體驗到的平均運行率。

Todd will pull it up, but I want to say roughly $0.5 million or more in the fourth quarter than we're expecting in the first.

托德會將其拉高，但我想說的是，第四季度的收入大約比我們第一季度的預期多 50 萬美元或更多。

Yes, that's right.

恩，那就對了。

Okay. And then just my last question, and I know you talked about kind of portfolio growth expectations for Q1 as well as where you guys expect to operate kind of throughout 2023. But I was just curious as kind of a thought process. You guys are one of the more highly leveraged BDCs on a total leverage basis, not from a regulatory leverage but a total leverage basis. Rising base rates have really significantly benefited your portfolio and allowed significant growth in NII as well as your operating ROEs.

好的。然後是我的最後一個問題，我知道您談到了第一季度的投資組合增長預期，以及你們預計 2023 年全年的運營情況。但我只是好奇作為一種思考過程。從總槓桿率來看，你們是槓桿率較高的 BDC 之一，不是從監管槓桿來看，而是從總槓桿率來看。基本利率的上升確實使您的投資組合受益匪淺，並使NII 和運營ROE 顯著增長。

Has there been any consideration to lowering the total leverage level, which obviously would reduce ROEs. But since ROEs are so high today given rising base rates, you could still generate a very strong operating ROE. Has there been any consideration to using this higher base rate environment to reduce overall total leverage on the balance sheet?

有沒有考慮降低總槓桿水平，這顯然會降低ROE。但由於基準利率不斷上升，如今的股本回報率如此之高，因此您仍然可以產生非常強勁的運營股本回報率。是否考慮過利用這種較高的基本利率環境來降低資產負債表上的總體槓桿率？

So Ryan, we really haven't focused on it. And I think the reason is that if you think about the leverage that allows us to go from the low 1s to the low 2s. It's the SBIC debentures. And so those -- so this is, of course, our shareholders are benefiting from our 2 licenses with the SBA and the lower cost of funding that we've effectively been locking in now for some time.

所以瑞安，我們真的沒有關注它。我認為原因是，如果你考慮一下讓我們從低 1 上升到低 2 的槓桿。這是 SBIC 債券。當然，我們的股東正受益於我們獲得 SBA 的 2 個許可證以及我們已經有效鎖定了一段時間的較低融資成本。

So if it were non-SBA leverage that had different terms and different maturities, shorter maturities that would certainly be something to consider. But we think this is the right leverage. So think of it, as you say, is 1:1, excluding the debentures; a little over 2:1, including the debentures we think this is the right way to operate and really reward our shareholders for being with us so many years and now benefiting from this interest rate environment.

因此，如果非 SBA 槓桿具有不同的期限和不同的期限，那麼較短的期限肯定是值得考慮的。但我們認為這是正確的槓桿。所以想想，正如你所說，是1：1，不包括債券；略高於 2:1，包括債券，我們認為這是正確的運營方式，並真正回報我們的股東，因為他們與我們合作了這麼多年，現在從這種利率環境中受益。

Okay. Yes, I understand that. I was -- because I kind of think there's maybe 2 ways to think about it. One is we want to generate x minimum level of ROE and to the extent that we get significantly above that we can toggle back risk by decreasing leverage on the balance sheet and still generate a healthy ROE. The other one is we're going to put a certain amount of leverage on these assets that we think are appropriate and the ROE will toggle depending on various factors, including right now, base rates being -- have a influence. So it sounds like you're more in that latter camp.

好的。是的，我明白。我是——因為我認為可能有兩種方式來思考這個問題。一是我們希望產生 x 最低水平的股本回報率，並且在我們得到顯著高於該水平的情況下，我們可以通過降低資產負債表上的槓桿來扭轉風險，同時仍然產生健康的股本回報率。另一個是我們將對這些我們認為合適的資產施加一定程度的槓桿，淨資產收益率將根據各種因素進行切換，包括目前的基本利率有影響。所以聽起來你更傾向於後者。

I think that's right. And then if you go back 2 years when we had a different rate environment, we thought this was the right leverage to operate at. So this wouldn't change our opinion. Now if we felt that macro factors were much riskier and we had great concerns about other matters, then we'd be prudent, Ryan, to look at reducing -- and in that case, the leverage we'd reduce would be our regular way leverage, like under a bank facility. But we currently operate that facility. It's borrowings in the low $200 million and it has commitments up to $260 million. So we've got capacity there. So I think that's part of our calculus is that a fair amount of regular way leverage that's unused and is there for unfunded commitments, et cetera.

我認為這是對的。然後，如果你回到兩年前，當我們有不同的利率環境時，我們認為這是正確的運營槓桿。所以這不會改變我們的觀點。現在，如果我們認為宏觀因素風險更大，並且我們對其他問題非常擔憂，那麼我們會謹慎地考慮減少槓桿，瑞安，在這種情況下，我們減少槓桿將是我們的常規方式槓桿，就像銀行融資一樣。但我們目前正在運營該設施。它的借款額只有 2 億美元，但承諾金額高達 2.6 億美元。所以我們在那裡有能力。因此，我認為我們計算的一部分是，有相當數量的常規槓桿未被使用，並且用於無資金的承諾等。

So I think we're at the right spot. But it's a good point to raise, and we'll certainly consider over time, but we think our overall view of the economy and our portfolio would indicate that this is still an appropriate leverage level.

所以我認為我們來對地方了。但這是一個很好的提出點，我們肯定會隨著時間的推移進行考慮，但我們認為我們對經濟和投資組合的總體看法表明這仍然是一個合適的槓桿水平。

Our next question is coming from Christopher Nolan with Ladenburg Thalmann.

我們的下一個問題來自克里斯托弗·諾蘭和拉登堡·塔爾曼。

Rob, could you expand on Ryan's question a little bit? What is your broader economic view right now that guide your investment decisions?

羅布，你能詳細解釋一下瑞安的問題嗎？您目前指導投資決策的更廣泛的經濟觀點是什麼？

So I'd say, overall, we think the economy is certainly headwinds, but not materially -- has not materially changed the overall economy. Certainly inflation is of concern and has popped back up at least on a monthly basis. So we would be cautious but we don't see any significant downturn in the foreseeable future. The one thing that will impact the economy and all of our portfolios is if you have higher and higher interest rates.

所以我想說，總的來說，我們認為經濟肯定是逆風，但不是實質性的——並沒有實質性地改變整體經濟。當然，通貨膨脹令人擔憂，並且至少每月都會出現回升。因此，我們會持謹慎態度，但在可預見的未來，我們認為不會出現任何重大下滑。影響經濟和我們所有投資組合的一件事是利率是否越來越高。

And so as an example, if you went from a SOFR level today, which is in the high 4s to the high 6s or 7s that would be impactful. But at the current level, our portfolio can withstand higher rates certainly within the 100 to 200 basis points level. So I'd say cautious. But if it's helpful, again, our overall business is to support private equity firms acquiring new businesses, professionalizing them, creating great value for their investors and therefore, for ours. So the M&A activity is still very good in the country, and we think it's a very good place to be investing. So I'd say we're cautious, but positive and we expect to be quite active during this year.

舉個例子，如果您今天的 SOFR 水平從高 4 級上升到高 6 級或 7 級，這將會產生影響。但在目前的水平上，我們的投資組合可以承受 100 至 200 個基點水平內的更高利率。所以我想說要謹慎。但如果有幫助的話，我們的整體業務是支持私募股權公司收購新業務，使其專業化，為他們的投資者創造巨大的價值，從而為我們的投資者創造巨大的價值。因此，該國的併購活動仍然非常活躍，我們認為這是一個非常好的投資場所。所以我想說，我們是謹慎的，但也是積極的，我們預計今年會非常活躍。

Also, given the changing interest rate environment where you now have an inverted yield curve, would there be any scenario where you guys would actually start trying to become more liability sensitive or do you actually -- you start seeing the top of the interest rate tightening cycle, and you expect an easing cycle to start. Would you take appropriate measures whether through hedges or anything to try to protect your margins through a declining interest rate environment?

此外，考慮到不斷變化的利率環境，現在收益率曲線倒掛，是否會出現任何情況，你們實際上會開始嘗試變得更加負債敏感，或者你們實際上會開始看到利率收緊的頂部週期，並且您預計寬鬆週期將開始。您是否會採取適當的措施，無論是通過對沖還是其他方式，試圖在利率下降的環境中保護您的利潤？

It's a good thought, Chris. We've taken the approach over time that just kind of float, if you will, with the market. And so one approach one could take would be, though, if -- could you lock in some of our loans at fixed rates at higher rates with borrowers. That would be one approach one could take. Whether that would be interesting to our borrowers is another matter. But I think that we like the approach of just having the market rights that we get. And then we certainly would look at it, but I think -- I would think of us not as a firm that would be hedging interest rates.

這是個好主意，克里斯。隨著時間的推移，我們採取了一種隨市場浮動的方法，如果你願意的話。因此，人們可以採取的一種方法是，如果——你能以較高的利率向借款人鎖定我們的一些貸款嗎？這將是人們可以採取的一種方法。我們的借款人是否對此感興趣是另一回事。但我認為我們喜歡只擁有我們所獲得的市場權利的方法。然後我們當然會考慮它，但我認為——我認為我們不是一家對沖利率的公司。

Another question is, how many quarters of expanding investment spreads do you anticipate?

另一個問題是，您預計投資利差會持續幾個季度擴大？

So it looks like based on the curve that the expansion of rates will end this year. So that would be our -- we've learned to go with the forward curve. So I recall, Todd, it expands into the third -- kind of starts coming back or flattening in the third or fourth quarter of this year?

因此，根據曲線來看，利率擴張將於今年結束。這就是我們的——我們已經學會瞭如何順應未來曲線。所以我記得，托德，它擴展到了第三季度——今年第三季度或第四季度開始回升或趨於平緩？

Yes.

是的。

So we don't expect more than that, although certainly, there's some talk that it is going to go higher, but we would just go with the forward market curve.

因此，我們預計不會超過這個數字，儘管肯定有一些說法稱它會走高，但我們只會遵循遠期市場曲線。

Thank you. There are no further questions in queue. At this time, I would like to turn the call back to Mr. Ladd for any closing comments.

謝謝。隊列中沒有其他問題。此時，我想將電話轉回拉德先生以徵求結束意見。

Okay. Great. Thank you very much, Ali, and thank you, everyone, for your support on being on the call. And then we'll report, of course, the first quarter in early May and look forward to speaking with you then.

好的。偉大的。非常感謝你，阿里，也感謝大家對通話的支持。當然，我們將在五月初報告第一季度的情況，並期待屆時與您交談。

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.

謝謝。女士們先生們，今天的電話會議到此結束。此時您可以斷開線路，祝您度過愉快的一天，我們感謝您的參與。