Financial Data and Key Metrics Changes - For fiscal year 2019, the company reported realized income of $2.30 per share, covering the dividend of $1.36 per share, which included net realized gains of $19.6 million or $1.07 per share [8] - Core net investment income was $1.32 per share, while GAAP net investment income was $1.23 per share [9] - Net asset value increased from $224.8 million to $270.6 million, primarily due to an equity offering, with a per share increase from $14.09 to $14.14 [11] Business Line Data and Key Metrics Changes - The investment portfolio at fair value was approximately $629 million across 63 portfolio companies, up from $505 million across 57 companies at the end of 2018 [17] - During 2019, the company invested $251 million in 17 new and 12 existing portfolio companies, with repayments of approximately $128 million, resulting in net portfolio growth of about $124 million [17] - 96% of loans were secured, and 93% were priced at floating rates, indicating a focus on secured lending [18] Market Data and Key Metrics Changes - The 90-day LIBOR rate decreased from 195 basis points at December 31 to about 1.24% recently, impacting the pricing of loans [22] - The company has been structuring loans with LIBOR floors, averaging around 1%, to mitigate the impact of falling rates [22][30] Company Strategy and Development Direction - The strategy includes modest investments in the equity of portfolio companies to generate realized gains sufficient to offset losses over time [20] - The company aims to maintain a cautious approach in investing, particularly in light of potential economic impacts from the coronavirus [44] Management's Comments on Operating Environment and Future Outlook - Management noted that while there has been limited impact from sourcing from China, the long-term effects of COVID-19 are being closely monitored [23] - The company expects to generate an additional $4 million of realized gains for the year, following $1.3 million received since year-end [24] Other Important Information - The company has two loans in non-accrual status, comprising just under 1% of the fair value of the loan portfolio, indicating stable asset quality [19] - The company has paid over $141 million in dividends since its IPO, representing $10 per share to investors [16] Q&A Session Summary Question: Impact of China sourcing supply chain - Management indicated limited direct exposure to China among portfolio companies, but potential broader impacts on the U.S. economy are being evaluated [27][29] Question: LIBOR floor issue - Most loans have LIBOR floors, with less than 5% having no floors, and recent structuring has included higher floors to maintain yield [30][32] Question: Markdowns in the fourth quarter - Management noted technological changes in the security monitoring business affecting incumbent companies, but did not comment on specific portfolio companies [34] Question: Leverage expectations - The targeted regulatory leverage is aimed at one-to-one, with potential adjustments based on economic conditions and bank support [41][54] Question: Monitoring portfolio companies amid COVID-19 - The investment teams maintain constant contact with portfolio companies to assess real-time impacts and will provide more information in the next quarterly call [57][59]

Financial Data and Key Metrics Changes - The company reported realized income of $0.63 per share, including gains of $0.33 per share, exceeding the dividend of $0.34 per share by $0.29 [8] - Total realized income to date, including $19.1 million of realized gains, is $1.92 per share, surpassing distributions of $1.02 per share for the same period, representing an annualized return on equity of 12.4% for the third quarter and 12.7% year to date [9] - Net asset value increased by $2.1 million over the quarter, or $0.11 per share, from $14.29 to $14.40 per share, primarily due to realized gains [10] Business Line Data and Key Metrics Changes - The portfolio ended the quarter with a fair value of $586.4 million across 61 portfolio companies, a $55 million increase over the second quarter [12] - The portfolio is weighted toward first lien and unitranche loans, now comprising 73% of the total portfolio, which is expected to result in stronger asset quality over time [13] - Non-accrual loans decreased to just three portfolio companies, comprising 2.3% of the fair value of the total portfolio, down from four loans and 4.8% in the prior quarter [15] Market Data and Key Metrics Changes - The yield on the debt portfolio decreased from 10.9% to 9.4% during 2019, driven by a lower LIBOR rate and a continued rotation towards first lien and unitranche loans [17] - The portfolio size increased to approximately $630 million, up $42 million since quarter end [18] Company Strategy and Development Direction - The company received its second SBIC license in August, allowing access to up to $175 million of SBA debentures, which are a long-term low-cost source of capital [16] - The company expects modest growth for the balance of the quarter, with earnings for the fourth quarter not expected to fully cover the dividend from GAAP NII due to lower yields and current leverage levels [18] Management's Comments on Operating Environment and Future Outlook - Management indicated that while they expect to cover the dividend gap from additional realized gains, they do not expect to fully cover it from GAAP NII in the fourth quarter [18] - The company anticipates that it will take a couple of years to fully deploy the SBIC debentures, with a goal of exceeding a $700 million portfolio size to cover dividends from a GAAP NII basis [49] Other Important Information - The company noted that the average investment per company is $9.6 million, with the largest investment at $21.2 million at fair value [13] - The company has been operating at a regulatory leverage of about 0.68 to 0.7 to 1, implying a need for a portfolio in excess of $700 million to achieve a 1 to 1 regulatory leverage [49] Q&A Session Summary Question: Performance of furniture factory outlet portfolio company - Management refrained from discussing specific private companies but acknowledged a slight markdown in the first lien piece while the smaller sub-debt pieces were marked at zero [25] Question: Average cost range of SBA debentures - The current environment suggests that the average cost of debentures drawn down is around 3% to 4% [27] Question: Tax expense recorded this quarter - The tax expense of approximately $350,000 is related to excise tax accrued during the year [29] Question: Percentage of deal flow that is SBIC compliant - Approximately 50% of the company's activity has historically qualified for SBIC compliance, with a realistic deployment timeline of about 18 months to a couple of years [36] Question: Update on Grupo Hima portfolio company - The reduction in the mark for Grupo Hima was to reflect new information, with management indicating that the first lien should ultimately be worth full value [45] Question: Portfolio size needed to cover dividends from GAAP NII - A portfolio in excess of $700 million is needed to achieve a 1 to 1 regulatory leverage, with a combination of lower cost SBIC debentures and bank facilities expected to improve the position [49] Question: Expectations for realized gains in 2020 - Management expects realized gains to be lower in 2020 compared to the current year, potentially around half as much, but still anticipates additional realized gains from newer equity positions [52]

Stellus Capital Investment (NYSE:SCM) Q2 2019 Earnings Conference Call August 9, 2019 11:00 AM ET Company Participants Todd Huskinson - Chief Financial Officer Robert Ladd - Chief Executive Officer Conference Call Participants Robert Dodd - Raymond James Christopher Nolan - Ladenburg Thalmann Ryan Lynch - KBW Chris Kotowski - Oppenheimer & Company Operator Good morning, ladies and gentlemen and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporatio ...

Stellus Capital Investment Corporation (NYSE:SCM) Q1 2019 Earnings Conference Call May 10, 2019 11:00 AM ET Company Participants Robert Ladd - Chief Executive Officer Todd Huskinson - Chief Financial Officer Conference Call Participants Christopher Nolan - Ladenburg Thalmann Robert Dodd - Raymond James Ryan Lynch - KBW Operator 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 repor ...

Stellus Capital Investment Corporation (NYSE:SCM) Q4 2018 Earnings Conference Call March 6, 2019 11:00 AM ET Company Participants Robert Ladd - Chairman, President and Chief Executive Officer Todd Huskinson - Chief Compliance Officer and Chief Financial Officer Conference Call Participants Operator 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 Fo ...