Core Insights - Stellus Capital (SCM) reported quarterly earnings of $0.37 per share, missing the Zacks Consensus Estimate of $0.38 per share, and down from $0.50 per share a year ago, representing an earnings surprise of -2.63% [1] - The company posted revenues of $25.62 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.14% and down from $28.02 million year-over-year [2] - Stellus Capital shares have increased by approximately 12.7% since the beginning of the year, contrasting with a -0.5% decline in the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.36 on revenues of $25.67 million, and for the current fiscal year, it is $1.45 on revenues of $102.14 million [7] - The estimate revisions trend for Stellus Capital is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - SBIC & Commercial Industry, to which Stellus Capital belongs, is currently in the top 33% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - WhiteHorse Finance (WHF), another company in the same industry, is expected to report quarterly earnings of $0.40 per share, reflecting a year-over-year decline of 13% [9]

Core Insights - Stellus Capital Investment Corporation reported solid operating results for the fourth fiscal quarter and year ended December 31, 2024, with U.S. GAAP net investment income of $0.35 per share and core net investment income of $0.37 per share [2][9] - The company funded $109 million in investments during the quarter and received $65 million in repayments, resulting in a total portfolio value of $953 million at fair value [2][5] - Since inception, investors have received a total of $288 million in aggregate distributions, equivalent to $16.69 per share [2] Financial Highlights - For the three months ended December 31, 2024, net investment income was $9.64 million, or $0.35 per share, compared to $11.91 million, or $0.49 per share for the same period in 2023 [3][9] - Core net investment income for the same period was $10.15 million, or $0.37 per share, down from $12.16 million, or $0.50 per share in 2023 [3][9] - Total realized income for the quarter was $15.57 million, with distributions totaling $10.90 million, or $0.40 per share [3][14] Portfolio Activity - As of December 31, 2024, investments at fair value increased to $953.5 million from $874.5 million a year earlier [5] - The company had 105 portfolio company investments, up from 93 in the previous year [5] - New investments during the quarter totaled $108.5 million, while repayments amounted to $64.5 million [5] Liquidity and Capital Resources - The company's credit facility allows for borrowings up to $315 million, with an accordion feature for potential expansion to $350 million [12] - As of December 31, 2024, outstanding borrowings under the credit facility were $175.4 million, compared to $160.1 million a year earlier [13] Distributions - The company declared aggregate distributions of $0.40 per share for both the three months ended December 31, 2024, and 2023, totaling $10.9 million and $9.6 million, respectively [14] - Approximately $0.5 million of the dividends declared in 2024 are expected to be characterized as long-term capital gains [14] Recent Portfolio Activity - The company made several new investments and add-on investments in various sectors, including healthcare, cybersecurity, and digital marketing, totaling millions in investment amounts [15][16][18][19]

Investment Portfolio - As of December 31, 2024, the company had $953.5 million invested in 105 companies, with approximately 90% in first lien debt[419]. - The investment portfolio composition included 1% second lien debt, 1% unsecured debt, and 8% equity investments at fair value[419]. - The total investments at fair value as of December 31, 2024, were $953.5 million, compared to $874.5 million for the same period in 2023, reflecting a growth of approximately 9%[420]. - The geographical concentration of investments showed Texas and California as the top states, accounting for 16.15% and 16.00% of total investments at fair value, respectively[422]. - The investment strategy focuses on lower middle-market companies with EBITDA between $5 million and $50 million[418]. - The portfolio included unitranche investments, which accounted for 2% of the total portfolio at fair value as of December 31, 2024[419]. - The overall investment strategy focuses on sectors such as media, healthcare, and environmental industries, indicating a diversified portfolio approach[548]. - The overall investment portfolio reflects a diverse range of industries, including consumer goods, energy, aerospace, and environmental services[594]. - The company continues to focus on strategic investments to enhance its portfolio and drive future growth[595]. Financial Performance - The total investment income for the year ended December 31, 2024, was $104.7 million, a slight decrease from $105.8 million in 2023[444]. - Net investment income for the year ended December 31, 2024 was $41.9 million, or $1.64 per common share, compared to $42.2 million, or $1.92 per common share in 2023[450]. - Net realized losses on investments for the year ended December 31, 2024 totaled ($15.7) million, with proceeds from repayments of investments amounting to $151.8 million[454]. - The net change in unrealized appreciation for the year ended December 31, 2024 was $19.6 million, a significant increase from $2.8 million in 2023[456]. - The net increase in net assets resulting from operations for the year ended December 31, 2024 was $45.8 million, or $1.79 per common share, compared to $17.5 million, or $0.80 per common share in 2023[462]. - Total operating expenses were $64.6 million, an increase from $63.9 million in 2023 and $46.5 million in 2022[449]. - The company recognized $2.5 million of non-recurring income in 2024, related to early repayments and amendments to specific loan positions[444]. Cash and Liquidity - The company had cash and cash equivalents of $20.1 million as of December 31, 2024, down from $26.1 million in 2023[432]. - Cash flows from operating activities used net cash of $28.6 million for the year ended December 31, 2024, primarily for portfolio investments[465]. - The net decrease in cash and cash equivalents for the year was $(6,067,147) in 2024, compared to $(21,917,588) in 2023[541]. - The company had $45.4 million of undistributed taxable income as of December 31, 2024, to be carried forward for distributions in 2025[496]. Debt and Financing - The company had unfunded commitments of $41.3 million as of December 31, 2024, up from $37.0 million in 2023, indicating an increase in potential future investments[421]. - The Credit Facility allows borrowings up to a maximum of $315.0 million, with an accordion feature to increase commitments to $350.0 million[472]. - As of December 31, 2024, the outstanding balance under the Credit Facility was $175.4 million, up from $160.1 million in 2023[475]. - Interest expense for the Credit Facility was $13.6 million in 2024, compared to $14.7 million in 2023, with a weighted average interest rate of 8.3%[476]. - The company has a total of $1,325,032 in revolver commitments for ArborWorks, LLC, maturing on November 6, 2028, with a 0.00% interest rate[574]. - Total unfunded debt commitments amount to $40,989,533[576]. Asset Quality and Coverage - The asset coverage ratio as of December 31, 2024, was 234%, which is above the regulatory requirement of 150%[415]. - The asset quality ratings showed that 24% of the portfolio was in Investment Category 1 as of December 31, 2024, consistent with the previous year[437]. - As of December 31, 2024, the investment portfolio at fair value represented approximately 97.2% of total assets[504]. - The company has maintained compliance with RIC requirements as of December 31, 2024, allowing it to avoid U.S. federal income taxes on distributed income[413]. Shareholder Distributions - The company intends to distribute between 90% and 100% of its taxable income to satisfy RIC requirements under Subchapter M of the Code[469]. - The company declared a regular monthly distribution of $0.1333 per share for January, February, and March 2025[511]. - Stockholder distributions paid were $37,560,442 in 2024, compared to $35,527,480 in 2023[541]. - Distributions Per Share remained stable at $1.61 for both 2024 and 2023, up from $1.30 in 2022[536]. Changes in Investments - The company made $221.2 million in investments across 21 new portfolio companies and 29 existing portfolio companies during the year ended December 31, 2024, compared to $190.9 million in investments in 2023[433][434]. - Loans to seven portfolio companies were on non-accrual status as of December 31, 2024, representing approximately 8.3% of the loan portfolio at cost, an increase from 4.2% in 2023[439]. - The company did not engage in interest rate hedging activities for the years ended December 31, 2024, and 2023[515]. Changes in Assets and Liabilities - As of December 31, 2024, total assets amounted to $980.90 million, an increase from $908.09 million as of December 31, 2023, representing a growth of approximately 7.99%[534]. - Total liabilities increased to $610.98 million from $588.15 million, which is an increase of about 3.09%[534]. - Net assets grew to $369.92 million from $319.94 million, indicating a significant increase of approximately 15.61%[534]. - The net asset value per share increased to $13.46 from $13.26, reflecting a growth of about 1.51%[534].

Core Viewpoint - Stellus Capital Investment Corporation is set to release its financial results for Q4 and the full year of 2024 on March 4, 2025, after market close [1] Financial Results Announcement - The financial results will be discussed in a conference call on March 5, 2025, at 10:00 AM Central Time, led by the CEO and CFO [2] - A replay of the conference call will be available starting two hours after the call and can be accessed until March 19, 2025 [3] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [4] - The company's investment objective focuses on maximizing total return through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5.0 million and $50.0 million [4] - Investment strategies include first lien, second lien, unitranche, and mezzanine debt financing, along with corresponding equity investments [4]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines high-quality dividend stocks with other investment vehicles such as Business Development Companies, REITs, and Closed End Funds to enhance income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on creating a balanced portfolio that captures both growth and income, aiming for a total return that aligns with the performance of the S&P 500 [1]. - The author highlights the effectiveness of utilizing classic dividend growth stocks as a foundational element in the investment strategy [1]. Personal Experience - The author shares their journey from sharing investment knowledge on social media to expanding insights through written articles, indicating a commitment to educating others about investment opportunities [1].

Dividend Announcement - Stellus Capital Investment Corporation declared a monthly dividend of $0 1333 per share for January, February, and March 2025, totaling $0 40 per share for the first quarter [1] - The dividends will be paid to shareholders of record in February, March, and April 2025 [1] - The ex-dividend dates are January 31, 2025, February 28, 2025, and March 31, 2025, with payment dates on February 14, 2025, March 14, 2025, and April 15, 2025, respectively [2] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [3] - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5 0 million and $50 0 million [3] - The company focuses on first lien, second lien, unitranche, and mezzanine debt financing, as well as corresponding equity investments [3] - Investment activities are managed by Stellus Capital Management [3]

Core Points - Stellus Capital Investment Corporation has declared a monthly dividend of $0.1333 for January, February, and March 2025, totaling $0.40 per share for the first quarter [1] - The regular dividend will be paid to shareholders of record in February, March, and April 2025 [1] Dividend Summary - The ex-dividend date for the January dividend is January 31, 2025, with a payment date of February 14, 2025 [2] - The ex-dividend date for the February dividend is February 28, 2025, with a payment date of March 14, 2025 [2] - The ex-dividend date for the March dividend is March 31, 2025, with a payment date of April 15, 2025 [2] Company Overview - Stellus Capital Investment Corporation is an externally-managed, closed-end, non-diversified investment management company regulated as a business development company under the Investment Company Act of 1940 [3] - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation by investing primarily in private middle-market companies with EBITDA between $5.0 million and $50.0 million [3] - Investment strategies include first lien, second lien, unitranche, and mezzanine debt financing, along with corresponding equity investments [3]

Core Insights - The article emphasizes the importance of innovation and disruption in the financial sector, particularly focusing on high-tech and early growth companies [1] Company and Industry Summary - The financial researcher highlights a beneficial long position in SCM shares, indicating confidence in the company's future performance [2] - The article aims to provide insights into current events and significant news within the industry, suggesting a proactive approach to identifying investment opportunities [1]

Financial Data and Key Metrics Changes - In Q3 2024, the company generated GAAP net investment income of $0.39 per share and core net investment income of $0.40 per share, which excludes estimated excise taxes [7] - Net asset value per share increased by $0.19 during the quarter, primarily due to net unrealized depreciation on the investment portfolio [7] - The investment portfolio at fair value was $908.7 million, up from $899.7 million as of June 30, 2024 [8] Business Line Data and Key Metrics Changes - The company invested $9.4 million in one new portfolio company and had $8.4 million in other investment activity at par during the third quarter [8] - The company received one full repayment totaling $8.4 million and $5.5 million of other repayments, both at par [8] - 98% of loans were secured and 95% were priced at floating rates, with an average loan per company of $9.5 million [8] Market Data and Key Metrics Changes - The company expects to end Q4 with a portfolio between $930 million and $950 million, with anticipated loan repayments of approximately $29 million [10] - The average yield is projected to decrease from 11.7% in the prior quarter to 11% for Q4 due to lower SOFR rates [15] Company Strategy and Development Direction - The company plans to grow its portfolio to over $1 billion, supported by an increased bank facility from $260 million to $315 million [11] - The company declared a dividend for Q4 at a rate of $0.40 per quarter, payable monthly [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the lower SOFR rate impacted net investment income, and they expect investment activity to pick up in Q4 [13][14] - The company is confident in reaching the $930 million to $950 million portfolio target by year-end, citing 10 to 15 active deals [25] Other Important Information - The company has paid over $273 million in dividends since its IPO, representing $16.28 per share to an investor in the IPO [6] - Spillover income stands at $42 million as of the end of Q3 [22] Q&A Session Summary Question: Was there any temporary driver for NII being below the dividend this quarter? - Management indicated that a lower SOFR rate and lighter investment activity contributed to the lower NII, but nothing unusual was noted [13] Question: Is the current EPS run rate sustainable? - Management suggested that the EPS run rate would depend on other income in Q4, with a reminder that SOFR rates have dropped [15] Question: What is the status of the fee waiver? - Management indicated that a fee waiver might occur in Q2 2025, depending on future performance [19] Question: What is the spillover income? - Spillover income currently stands at $42 million [20] Question: Will the appreciation tied to a potential transaction occur in Q4? - Management confirmed that the expected appreciation is anticipated to occur in Q4 [21] Question: How confident is the company in reaching the $930 million to $950 million target? - Management expressed confidence, citing 10 to 15 active deals [25]

Financial Performance - Stellus Capital reported quarterly earnings of $0.40 per share, missing the Zacks Consensus Estimate of $0.46 per share, and down from $0.49 per share a year ago, representing an earnings surprise of -13.04% [1] - The company posted revenues of $26.5 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 3.14%, and down from $27.17 million year-over-year [2] - The current consensus EPS estimate for the coming quarter is $0.42 on revenues of $27.62 million, and for the current fiscal year, it is $1.84 on revenues of $107.6 million [7] Market Performance - Stellus Capital shares have increased by approximately 7.9% since the beginning of the year, while the S&P 500 has gained 24.3% [3] - The company has surpassed consensus EPS estimates two times over the last four quarters and topped consensus revenue estimates three times during the same period [2] Earnings Outlook - The estimate revisions trend for Stellus Capital is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] - The sustainability of the stock's immediate price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] Industry Context - Stellus Capital operates within the Financial - SBIC & Commercial Industry, which is currently ranked in the bottom 27% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Stellus Capital may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [8]