Stellus Capital Investment Corp (SCM) 2024 Q2 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 Stellus Capital Investment Corporation's conference call to report financial results for its second fiscal quarter ended June 30, 2024. (Operator Instructions). This conference is being recorded, August 8, 2024.

早安，女士們先生們，感謝你們的支持。此時，我謹歡迎大家參加 Stellus Capital Investment Corporation 的電話會議，報告截至 2024 年 6 月 30 日的第二財季財務表現。（操作員說明）。本次會議將於 2024 年 8 月 8 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 your conference.

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

Okay. Thank you, Paul, and good morning, everyone, and thank you for joining our conference call today covering the quarter ended June 30, 2024. 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.

好的。謝謝保羅，大家早安，謝謝您今天參加我們的電話會議，內容涉及截至 2024 年 6 月 30 日的季度。今天早上與我一起的是我們的財務長 Todd Huskinson，他將介紹有關前瞻性陳述的重要資訊以及我們的財務資訊概述。

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. Audio replay of the call will be available by using the telephone number and pin provided in our press release announcing this call.

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。透過使用我們在宣布本次通話的新聞稿中提供的電話號碼和密碼，可以重播本次通話的音訊。

I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to materially differ from these projections. We will not update any 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.

我還想提請您注意我們新聞稿中有關前瞻性資訊的慣例安全港披露。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，以了解可能導致實際結果與這些預測有重大差異的重要因素。除非法律要求，我們不會更新任何前瞻性聲明。要取得我們最新的 SEC 備案文件副本，請造訪我們的網站 www.stelluscapital.com，點擊「公共投資者」連結或致電 713-292-5400 與我們聯絡。

Now I'll cover our operating results for the quarter, I would like to start with our life-to-date activity. Since our IPO in November 2012, we've invested approximately $2.5 billion in over 195 companies and received approximately $1.6 billion of repayments, while maintaining stable asset quality. We've paid over $262 million of dividends to our investors, which represents $15.75 per share to an investor in our IPO in November 2012, which was offered at $15 per share.

現在我將介紹本季的營運業績，我想從我們迄今為止的活動開始。自 2012 年 11 月首次公開募股以來，我們已向超過 195 家公司投資了約 25 億美元，並收到了約 16 億美元的還款，同時保持了穩定的資產品質。我們已向投資者支付了超過 2.62 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 15.75 美元，發行價為每股 15 美元。

Turning to operating results. In the second quarter, we more than covered the declared dividend of $0.40 per share with GAAP net investment income of $0.48 per share. Core net investment income was $0.50 per share, which excludes estimated excise taxes. Net investment income per share was benefited by increased fee income from a variety of sources and the waiver of $1.6 million or $0.06 per share of incentive fees during the quarter due to a limitation from the total return test. Net asset value per share decreased $0.05 during the quarter due to net unrealized depreciation on our investment portfolio, offset by the generation of net investment income in excess of the dividend.

轉向經營業績。第二季度，我們超出了每股 0.40 美元的宣派股息，GAAP 淨投資收益為每股 0.48 美元。核心淨投資收益為每股 0.50 美元，其中不包括估計的消費稅。每股淨投資收益受益於各種來源的費用收入增加以及由於總回報測試的限製而在本季度免除 160 萬美元或每股 0.06 美元的激勵費用。由於我們的投資組合未實現淨折舊，本季度每股資產淨值下降了 0.05 美元，但被超過股息的淨投資收入所抵消。

We also realized a gain of $2 million or $0.08 per share on an equity investment during the quarter. Our ATM program was active during the quarter, and we issued $25.2 million in shares at an average gross price of $13.89 per share, all issuances were above net asset value. We ended the quarter with an investment portfolio at fair value of $900 million across 100 portfolio companies up from $876 million across 94 companies as of March 31, '24.

本季我們也實現了 200 萬美元或每股 0.08 美元的股權投資收益。我們的 ATM 計劃在本季很活躍，我們發行了 2,520 萬美元的股票，平均毛價為每股 13.89 美元，所有發行均高於資產淨值。截至本季末，我們在 100 家投資組合公司中的投資組合公允價值為 9 億美元，而截至 2024 年 3 月 31 日，投資組合為 94 家公司中的公允價值為 8.76 億美元。

During the second quarter, we invested $53 million in eight new portfolio companies and had $13.3 million in other investment activity at par. We also received two full repayments totaling $31 million and $9.7 million of other repayments, both at par, resulting in net portfolio growth of $23.8 million at fair value. At June 30, 99% of our loans were secured and 98% were priced at floating rates. Our average loan per company is $9.5 million, and the largest overall investment is $19.6 million, both at fair value. All but one of our portfolio companies are backed by a private equity firm.

第二季度，我們向八家新的投資組合公司投資了 5,300 萬美元，並在其他投資活動中投資了 1,330 萬美元。我們還收到了兩筆總額為 3,100 萬美元的全額還款和 970 萬美元的其他還款，均按面值計算，導致投資組合淨增長（以公允價值計算）為 2,380 萬美元。截至 6 月 30 日，我們 99% 的貸款已獲得擔保，98% 的貸款以浮動利率定價。我們每家公司的平均貸款為 950 萬美元，最大的總投資為 1,960 萬美元，均以公允價值計算。在我們的投資組合公司中，除了一家之外，其他所有公司都得到了私募股權公司的支持。

Overall, our asset quality is slightly better than planned. At fair value, 23% of our portfolio is rated a one or ahead of plan and 15% of the portfolio is marked at an investment category of three or below, meaning not meeting plan or expectations. Currently, we have five loans on nonaccrual, which comprised 2.9% of the fair value of the total loan portfolio.

整體而言，我們的資產品質略優於計畫。以公允價值計算，我們的投資組合中有23% 的投資類別被評為1 級或提前於計劃，15% 的投資組合被評為3 級或以下的投資類別，這意味著未達到計劃或預期。目前，我們有五筆非應計貸款，佔貸款組合公允價值的 2.9%。

With that, I'll turn it back over to Rob to discuss the overall outlook.

這樣，我會將其轉回給 Rob 討論整體前景。

Okay. Thank you, Todd. As we look ahead to the third and fourth quarters, I'll cover portfolio growth, equity realizations, capital management and dividends. Based on an active pipeline, we expect to end the third quarter with a portfolio of between $920 million and $940 million. We do not know of any loan repayments in Q3, although we did have an equity realization which is disclosed in our subsequent events for $2.6 million of proceeds and a realized gain of a little over $2 million.

好的。謝謝你，托德。當我們展望第三季和第四季時，我將討論投資組合成長、股權變現、資本管理和股息。基於活躍的管道，我們預計第三季末的投資組合將達到 9.2 億至 9.4 億美元。我們不知道第三季是否有任何貸款償還，儘管我們確實實現了股權變現（在後續活動中披露），收益為 260 萬美元，實現收益略高於 200 萬美元。

For Q4, we are aware of two likely repayments totaling $17 million and one of the companies has an equity co-investment, which is currently carried at $1.8 million at fair value. We expect that new fundings will exceed repayments for Q4. As Todd noted earlier, we had a good second quarter for equity issuance under our ATM program. We have a meaningful amount of capacity in our bank facility and cash in our SBIC, but we will look to continue to increase the bank facility over time. Given our current capital base, we have the ability to grow the portfolio to over $960 million.

對於第四季度，我們知道兩筆可能的還款總額為 1,700 萬美元，其中一家公司擁有股權共同投資，目前以公允價值計算為 180 萬美元。我們預計新資金將超過第四季的還款額。正如托德之前指出的，我們的 ATM 計劃下的股票發行第二季度表現良好。我們的銀行融資和 SBIC 現金擁有大量容量，但我們將隨著時間的推移繼續增加銀行融資。鑑於我們目前的資本基礎，我們有能力將投資組合擴大到超過 9.6 億美元。

And finally, regarding dividends, we expect to continue, subject to Board approval to distribute at a rate of $0.40 per share per quarter payable monthly through the rest of the year. This should be supported by earnings and a large amount of spillover income.

最後，關於股息，在董事會批准的情況下，我們預計將繼續以每季每股 0.40 美元的比例分配，並在今年剩餘時間內每月支付。這應該得到盈利和大量溢出收入的支持。

And with that, I'll open up for questions. And Paul, please, we'll start the Q&A session now.

接下來，我將開放提問。保羅，請我們現在開始問答環節。

(Operator Instructions) Christopher Nolan, Ladenburg Thalmann.

（操作員說明）克里斯多福諾蘭、拉登堡塔爾曼。

Nice quarter, by the way. The fee waiver, is that something that we should expect to repeat in coming quarters?

順便說一句，季度不錯。費用減免是我們應該在未來幾季重複的事情嗎？

So Chris, first, I would say it depends, of course, on each quarter's performance going forward in the mechanics of the 12-quarter test. But I think at this point, we don't expect anything for the remainder of this year under the test absent any other movements in the current performance.

所以克里斯，首先，我想說這當然取決於 12 季測試機制中每季的表現。但我認為，在這一點上，如果當前表現沒有任何其他變化，我們預計今年剩餘時間不會有任何變化。

Got it. And then, I guess, turning to nonaccruals, EH Real Estate, obviously, that's a big position there. It's a big driver for the nonaccruals. Can you give a little color in terms of what sector they're involved in?

知道了。然後，我想，轉向非應計項目，EH 房地產顯然是一個很大的頭寸。這是非應計費用的重要推動力。您能否介紹一下他們所涉足的領域？

Sure, Chris. Chris, this is a residential realtor title company insurance business in the Midwest.

當然，克里斯。克里斯，這是一家位於中西部的住宅房地產經紀人產權公司保險公司。

Okay. And then I guess the final question. It's just the unrealized depreciation in the quarter. Any particular color was just normal mark adjustments?

好的。然後我猜最後一個問題。這只是本季未實現的折舊。任何特定的顏色只是正常的標記調整？

So it's driven more on company-specific activities. But again, overall, not a large number.

因此，它更多地推動公司特定的活動。但同樣，整體而言，數量並不大。

Okay. And then I guess, finally, Rob, you mentioned how you're looking to increase the credit facility, but your leverage ratios are so low. Is the thinking here to given the uncertain credit environment to tap the credit facility more going forward? Or you just be more cautious.

好的。然後我想，最後，羅布，你提到了你如何尋求增加信貸額度，但你的槓桿率太低了。這裡的想法是考慮到不確定的信貸環境，進一步利用信貸便利嗎？或者你只是更加謹慎。

Yes. So we have quite a bit of unused capacity in the current credit facility, which has a commitment of $260 million. And so we certainly will use that up as we grow the portfolio. But again, we'd like to given the additional capital base that was raised last year and so far this year, to have that start to better match the equity base. And this would enable us to take what I described as a portfolio potential of over $960 to over $1 billion.

是的。因此，我們目前的信貸安排中有相當多的未使用產能，該信貸安排的承諾金額為 2.6 億美元。因此，隨著我們擴大投資組合，我們肯定會利用它。但同樣，我們希望提供去年和今年迄今籌集的額外資本基礎，以便開始更好地匹配股本基礎。這將使我們能夠實現我所描述的超過 960 美元到超過 10 億美元的投資組合潛力。

Sean Paul Adams, Raymond James.

肖恩·保羅·亞當斯，雷蒙德·詹姆斯。

Congrats on the quarter. Really quick question touching back on the nonaccruals, I know you guys added one new nonaccrual last quarter, J.R. Watkins. I think now we're sitting at five total nonaccruals. Is there any time line or pathway for resolution for NAVs?

恭喜本季。關於非應計項目的快速問題，我知道你們上個季度增加了一個新的非應計項目，J.R.沃特金斯。我認為現在我們的非應計費用總額為五。是否有解決資產淨值的時間表或途徑？

They all have kind of specific paths from here, Sean. So I probably wouldn't describe anything. As you know, we somewhat guarded about talking about individual companies that operate in our country, but each will have their own path, and they're being worked hard, how is that.

他們都有從這裡出發的特定路徑，肖恩。所以我可能不會描述任何東西。如你所知，我們在談論在我們國家運營的個別公司時有些謹慎，但每個公司都有自己的道路，而且他們都在努力工作，怎麼樣？

Yes, that's perfect. That's great. And then turning over to leverage. You guys are a little bit higher in terms of a total leverage basis. What are your thoughts on either moderating or staying exactly where you're at over the coming quarters in terms of the changes and like the forward rate curve?

是的，那就完美了。那太棒了。然後轉向槓桿。你們的總槓桿率有點高。您對未來幾季的變化以及遠期利率曲線的調整或保持原樣有何看法？

Sure, sure. So I'd say a few things to look at leverage. So we're actually less levered now than we normally are. This is due to the equity raise. So as we bring the portfolio back up to kind of full potential think of us being a target leverage on a regulatory test would be about 1:1 and on a total test, gap test, including the SBIC debentures at a little over 2:1. So we'd like to increase the leverage, but not significantly, but more back to our target levels.

當然，當然。所以我想說一些關於槓桿的事情。所以我們現在的槓桿率其實比平常低。這是由於股權融資所致。因此，當我們將投資組合恢復到全部潛力時，我們作為監管測試的目標槓桿約為 1:1，而在整體測試、缺口測試（包括 SBIC 債券）中，槓桿率約為 2:1 。因此，我們希望增加槓桿，但幅度不會很大，但會回到我們的目標水準。

One thing that might be less obvious is we have over $30 million of cash right now in our SBIC licenses. So when that's deployed, that won't increase the leverage. So it's just as a footnote there. And then as we look ahead, we think it's a very interesting time to invest in the lower middle market in this country, and we're optimistic about the future and the many private equity firms we work with. So we're very selective in our investing. And so we'll continue to invest in a smart way. And again, we'd like to see our leverage come back up to more of the target.

一件可能不太明顯的事情是，我們的 SBIC 許可證中目前擁有超過 3000 萬美元的現金。因此，部署後，槓桿率不會增加。所以它只是作為腳註。展望未來，我們認為現在是投資這個國家中低端市場的非常有趣的時機，我們對未來以及與我們合作的許多私募股權公司持樂觀態度。所以我們在投資時非常有選擇性。因此，我們將繼續以明智的方式進行投資。再次，我們希望看到我們的槓桿率恢復到更多目標。

Thank you. And there were no other questions in queue at this time. I would now like to hand the call back to Mr. Robert Ladd for closing remarks.

謝謝。而且此時隊列中沒有其他問題。現在我想將電話轉回給羅伯特·拉德先生做總結發言。

Okay. Thanks, everyone, for your support of our company and we look forward to updating you again in early November for the results from the third quarter. .

好的。感謝大家對我們公司的支持，我們期待在 11 月初再次向您更新第三季的業績。。

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

謝謝。今天的會議到此結束。此時您可以斷開線路。感謝您的參與。