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 company advocates for a balanced approach to investing, focusing on both growth and income to maximize investment returns [1]. - The strategy aims to create a solid base of classic dividend growth stocks, which can lead to significant bill-paying potential over time [1]. Performance Comparison - The total return from this hybrid investment strategy is reported to be on par with the S&P 500 index, indicating its effectiveness in generating returns [1].

WhiteHorse Finance, Inc. Earnings Presentation Quarter Ended December 31, 2024 NASDAQ: WHF (Common Stock) NASDAQ: WHFCL (7.875% Notes due 2028) Important Information and Forward Looking Statements References in this presentation to "WHF", "WhiteHorse Finance", "we", "us", "our" and "the Company" refer to WhiteHorse Finance, Inc. This presentation and the information and views included herein do not constitute investment advice, or a recommendation or an offer to enter into any transaction with the Company o ...

Financial Data and Key Metrics Changes - In Q4 2024, GAAP net investment income and core NII were $8 million or $0.34 per share, down from $9.2 million or $0.394 per share in Q3 2024 [7][26] - NAV per share at the end of Q4 was $12.31, a decrease of approximately 3.6% from the prior quarter, with net realized losses and markdowns totaling $4.9 million [8][12] - The weighted average effective yield on income-producing debt investments decreased to 12.5% as of the end of Q4, compared to 13.1% in Q3 2024 [13] Business Line Data and Key Metrics Changes - Gross capital deployments in Q4 were $35.4 million, offset by total repayments and sales of $46.2 million, resulting in net repayments of $10.8 million [8][10] - The effective yield on the JV's portfolio decreased to 11.1% compared to 11.7% in Q3 2024 [10][11] - Nonaccrual investments increased to 7.2% of the debt portfolio, up from 6.5% in the previous quarter [15] Market Data and Key Metrics Changes - The lending market remains aggressive, with lenders relaxing underwriting standards and compressing spreads [17][18] - The non-sponsor market is viewed as more attractive, with leverage supporting 3 to 4.5 times and pricing between SOFR 575 to SOFR 800 [19] Company Strategy and Development Direction - The company is focusing on non-sponsor lending, which has shown better risk returns and less competition [19][20] - The strategy includes avoiding excessive leverage and ensuring debt service coverages are reasonable on new deals [49][50] Management's Comments on Operating Environment and Future Outlook - The management believes the economy is generally healthy, but there is uncertainty regarding tariffs and inflationary policies [21][22] - The company expects high repayment activity in 2025 due to declining market pricing [24] Other Important Information - The company declared a first-quarter distribution of $0.385 per share, consistent with the prior quarter [33][35] - The company has approximately $40 million of capacity for new assets on the balance sheet and another $40 million in the JV [23][31] Q&A Session Summary Question: Scope for spreads to widen due to market uncertainties - Management confirmed that spreads were stable in Q4 and early 2025, with no upward pressure observed despite market uncertainties [39][40] Question: Strategy for mitigating nonaccruals and credit quality pressures - Management is focusing on careful analysis of portfolio risks, particularly regarding tariff impacts, and ensuring debt service coverages are reasonable [46][49] Question: Impact of base rates on NII and future expectations - Management indicated that the decline in NII was largely due to lower base rates, with a majority of the portfolio resetting on a quarterly basis [56][76] Question: Outlook on deleveraging in 2025 - Management does not expect deleveraging unless there is a significant supply-demand imbalance affecting new originations [66] Question: Dividend sustainability given spillover income - Management is actively evaluating the earning power of the BDC and will update the market on any decisions regarding the dividend [72]

Company Performance - WhiteHorse Finance (WHF) reported quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.39 per share, and down from $0.46 per share a year ago, representing an earnings surprise of -12.82% [1] - The company posted revenues of $21.01 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 6.51%, and down from $25.63 million year-over-year [2] - Over the last four quarters, WhiteHorse has surpassed consensus EPS estimates just once and has topped consensus revenue estimates only once [2] Market Performance - WhiteHorse shares have increased approximately 8.6% since the beginning of the year, contrasting with the S&P 500's decline of -2.4% [3] - The current consensus EPS estimate for the upcoming quarter is $0.38 on revenues of $22.16 million, and for the current fiscal year, it is $1.45 on revenues of $86.81 million [7] Industry Outlook - The Financial - SBIC & Commercial Industry, to which WhiteHorse belongs, is currently in the top 34% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Incentive Fees - The incentive fee cap for Year 1 is set at $8.0 million, which is 20% of the cumulative pre-incentive fee net return of $120.0 million, less $16.0 million of cumulative incentive fees paid[81]. - In Year 2, the incentive fee accrued is $6.0 million, representing 20% of the cumulative net capital gains of $30.0 million, with a total cumulative pre-incentive fee net return of $150.0 million[81]. - For Year 3, the incentive fee cap remains at $8.0 million, with $7.0 million paid, reflecting 20% of cumulative pre-incentive fee net return of $145.0 million[81]. - In Year 4, the incentive fee accrued is $9.2 million, which is 20% of cumulative pre-incentive fee net return of $151.0 million, with $21.0 million of cumulative incentive fees paid[81]. - The incentive fee structure may create misaligned incentives for the Investment Adviser, potentially leading to riskier investments[221]. - The management fee is based on consolidated gross assets, which may result in lower returns for common stock investors due to debt and leverage[221]. - The Investment Adviser may receive incentive compensation even if the company incurs a net loss, with no recovery of previously paid fees[229]. Investment Advisory and Administration Agreements - The Investment Advisory Agreement was re-approved on October 30, 2024, and remains effective from year to year if approved annually by the board of directors[82]. - The board of directors determined that the investment advisory fee rates were reasonable in relation to the services provided, considering factors such as investment performance and anticipated costs[86]. - The Administration Agreement was renewed on October 30, 2024, allowing WhiteHorse Administration to provide necessary office facilities and administrative services[88]. Compliance and Regulatory Requirements - The company must ensure that qualifying assets represent at least 70% of its total assets to comply with the 1940 Act[98]. - The company is required to distribute at least 90% of its investment company taxable income to qualify as a RIC for U.S. federal income tax purposes[123]. - A 4% nondeductible U.S. federal excise tax applies to undistributed income unless certain distribution requirements are met[125]. - The company intends to make sufficient distributions each taxable year to satisfy the Excise Tax Avoidance Requirement[125]. - The company must derive at least 90% of its gross income from specific sources, including dividends and interest, to qualify as a business development company under the 1940 Act[127]. - At the end of each quarter, at least 50% of the company's assets must consist of cash, U.S. government securities, and other specified securities, while no more than 25% can be invested in securities of a single issuer[127]. - The company must maintain a bond issued by a reputable fidelity insurance company to protect against larceny and embezzlement[116]. - The company has adopted written compliance policies and procedures to prevent violations of federal securities laws[105]. - Changes in laws or regulations may require the company to alter its business strategy, potentially incurring significant compliance costs[246]. Investment Strategy and Risks - The company may invest up to 100% of its assets in privately negotiated transactions, and it does not intend to exceed the limits imposed by the 1940 Act on investments in registered investment companies[95]. - The company primarily invests in below investment grade securities, which may present special tax issues and affect the distribution of sufficient income to avoid U.S. federal income tax liabilities[133]. - Rising interest rates could adversely affect the company's net investment income, as the cost of funds may increase while interest income from investments may not rise correspondingly[207]. - Inflation has negatively impacted the operating results of portfolio companies, increasing costs and potentially affecting their ability to pay interest and principal on loans[212]. - The company engages in hedging transactions to mitigate risks associated with currency and interest rate fluctuations, but such transactions do not eliminate the possibility of losses[213]. - The company has entered into transactions to reduce currency exchange rate and interest rate risks, but unanticipated changes may lead to poorer investment performance[214]. - The company’s portfolio investments are recorded at fair value, with significant uncertainty regarding the valuation of non-publicly traded securities[238]. - All investments, except cash and cash equivalents, are classified as Level 3 under FASB ASC Topic 820, indicating reliance on unobservable inputs for valuation[238]. - The company adjusts the valuation of its portfolio quarterly, with changes recorded as net change in unrealized appreciation or depreciation in consolidated statements[240]. - The lack of liquidity in investments may adversely affect the company’s ability to sell investments quickly, potentially realizing significantly less than previously recorded values[241]. - Price declines and illiquidity in corporate debt markets may lead to increased net unrealized depreciation, adversely impacting the company’s NAV[243]. - The company may experience fluctuations in quarterly results due to various factors, including interest rates, default rates, and general economic conditions[245]. - The company may face operational disruptions if the Investment Adviser resigns, potentially affecting financial condition and market price of shares[258]. Conflicts of Interest - The valuation process for non-publicly traded securities may create conflicts of interest, as the Investment Adviser determines fair value[226]. - The company is restricted from entering certain transactions with affiliates without prior approval, limiting investment scope[233]. - The allocation policy for investment opportunities may not guarantee fair or equitable access for the company compared to other accounts managed by the Investment Adviser[234]. - The company may face conflicts of interest due to arrangements with H.I.G. Capital and the Investment Committee, affecting investment returns[217]. - The Investment Adviser controls the timing of capital gains recognition, which may impact the company's financial performance[222]. - The Investment Adviser’s liability is limited under the Investment Advisory Agreement, which may lead to riskier behavior on behalf of the company[263]. Portfolio Company Risks - Portfolio companies may experience financial distress, leading to uncertainty regarding the satisfaction of distressed debt, which may not yield anticipated returns[280]. - Rising interest rates could hinder portfolio companies' ability to make periodic loan payments, increasing the risk of defaults[281]. - Economic downturns may lead to increased non-performing assets and decreased portfolio value, adversely affecting revenues and net income[282]. - Defaults by portfolio companies could trigger cross-defaults and jeopardize the ability to meet obligations under debt securities held[293]. - The company may not have controlling equity interests in portfolio companies, limiting its ability to influence management decisions that could affect investment value[292]. - Portfolio companies may incur debt that ranks equally with or senior to the company's investments, potentially impacting recovery in insolvency situations[294]. - The value of collateral in liquidation scenarios is subject to market conditions, which may not be sufficient to satisfy loan obligations secured by second-priority liens[297]. - The company may face risks associated with syndicated loans, where it may lack sufficient influence to direct actions taken by the loan agent[285]. - The company may not realize gains from equity investments, as the value of such interests may decline instead of appreciating[289]. - Failure to make follow-on investments could impair the value of the portfolio and jeopardize the viability of portfolio companies[291]. - The ability to prepay loans may reduce yields if capital returned cannot be reinvested in transactions with equal or greater expected yields[300]. Debt and Financing Risks - WhiteHorse Credit's equity interests are subordinated in priority of payment to its obligations to debt holders and service providers[307]. - A payment default on a loan to a portfolio company could lead to a defaulted obligation under the Credit Facility, adversely affecting distributions to stockholders[308]. - WhiteHorse Credit must meet two coverage tests under the Credit Facility: a borrowing base test (≤ 60%) and a market value test (≥ 167.5%) to make new borrowings and distributions[310]. - The Private Notes and Public Notes are unsecured and effectively subordinated to any secured indebtedness incurred by the company or its subsidiaries[315]. - An event of default under the Credit Facility could prevent distributions to stockholders and may lead to liquidation of WhiteHorse Credit's assets[312]. - Investments in foreign companies may involve significant risks, including political instability and less liquid markets[303]. - The company may co-invest through joint ventures, which could involve risks specific to third-party management and inconsistent objectives[305]. - The indenture for the 4.000% 2026 Notes offers limited protection to holders, allowing the company to incur additional debt without restrictions[321]. - The indenture does not require the company to adhere to any financial tests or ratios, which could negatively impact the holders of the 4.000% 2026 Notes in case of adverse financial changes[323]. - The indenture for the 7.875% 2028 Notes similarly provides limited protections, allowing the company to issue additional debt and engage in various corporate transactions[326]. - Holders of the Private Notes may require the company to prepay upon a change in control, which could adversely affect its financial condition[333]. - The company may choose to prepay the Private Notes and redeem Public Notes when prevailing interest rates are lower, impacting holders' ability to reinvest at comparable rates[340]. - If the company defaults on its obligations, it may be unable to make payments on the Private Notes and Public Notes, potentially leading to bankruptcy or liquidation[341]. - Payments under the Private Notes and Public Notes to foreign entities may be subject to a 30% U.S. withholding tax under FATCA provisions[343].

Investment Income - For the fourth quarter ended December 31, 2024, total investment income was $21.0 million, a decrease of 8.1% from $22.9 million in the previous quarter[3]. - Net investment income for the fourth quarter was $8.0 million, down 12.9% from $9.2 million in the prior quarter, resulting in a net investment income per share of $0.343[3]. Investment Portfolio - The fair value of the investment portfolio decreased to $642.2 million as of December 31, 2024, down 1.9% from $654.3 million at the end of the previous quarter[4]. - The weighted average effective yield on income-producing debt investments in the portfolio was 12.5%[4]. - The portfolio consisted of 127 positions across 71 companies, with approximately 78.2% in first lien secured loans[4]. Company Investments - During the fourth quarter, WhiteHorse Finance made investments totaling $27.4 million in six new portfolio companies and added $8.0 million to existing companies[5]. - WhiteHorse Finance transferred assets totaling $13.7 million to STRS JV during the fourth quarter[6]. Distributions and Net Asset Value - The company declared a distribution of $0.385 per share for the fourth quarter, consistent with the previous quarter's distribution[7]. - The net asset value per share decreased to $12.31, down 3.6% from $12.77 in the prior quarter[3]. Realized and Unrealized Gains - Net realized losses for the fourth quarter were $12.3 million, while net unrealized appreciation was $8.2 million, reflecting a significant change from the previous quarter[3].

Core Viewpoint - WhiteHorse Finance, Inc. reported its financial results for Q4 and the year ended December 31, 2024, highlighting a distribution of $0.385 per share, despite facing challenges in its investment portfolio [1][2]. Financial Performance - Total investment income for Q4 2024 was $21.009 million, down from $22.851 million in Q3 2024, representing an 8.1% decrease [3]. - Total expenses, including excise tax, decreased by 4.9% to $13.032 million from $13.697 million [3]. - Net investment income for Q4 was $7.977 million, a decline of 12.9% from $9.154 million in Q3 [3]. - The net investment income per share decreased to $0.343 from $0.394, also a 12.9% drop [3]. - The company declared a special distribution of $0.245 per share during the same period [3][7]. Portfolio and Investment Activity - As of December 31, 2024, the fair value of the investment portfolio was $642.2 million, down from $654.3 million as of September 30, 2024, a decrease of 1.9% [4]. - The portfolio consisted of 127 positions across 71 companies, with a weighted average effective yield of 12.5% on income-producing debt investments [4]. - The average debt investment size was $5.5 million, with 78.2% in first lien secured loans [4]. - During Q4, the company invested $27.4 million in six new portfolio companies and added $8.0 million to existing companies [5]. - Proceeds from sales and repayments totaled approximately $32.5 million, driven by full repayments from several companies [5]. Distributions - The board declared a distribution of $0.385 per share for Q4 2024, payable on April 4, 2025, to stockholders of record as of March 21, 2025 [1][7]. - This distribution marks the forty-ninth consecutive quarter with distributions at or above $0.355 since the company's IPO [8].

Company Overview - WhiteHorse Finance, Inc. is a business development company that focuses on originating and investing in loans to privately held, lower middle market companies across various industries [4] - The investment activities of the company are managed by H.I.G. WhiteHorse Advisers, LLC, which is an affiliate of H.I.G. Capital, a global alternative asset manager with $67 billion of capital under management [4] Financial Results Announcement - WhiteHorse Finance will release its fourth quarter and full year financial results for the year ended December 31, 2024, on March 7, 2025 [1] - A conference call to discuss the financial results will take place on the same day at 2:00 p.m. ET [1] Teleconference Access - Investors can access the teleconference by dialing 800-267-6316 (domestic) or +1 203-518-9783 (international) approximately 10 minutes before the scheduled start time, referencing ID WHFQ424 [2] - A replay of the teleconference will be available starting two hours after the call's completion through March 14, 2025 [3]

Core Viewpoint - The article emphasizes the importance of value investing and highlights WhiteHorse Finance (WHF) as a strong candidate for value investors due to its favorable financial metrics and Zacks Rank [1][2][7]. Company Analysis - WhiteHorse Finance (WHF) currently holds a Zacks Rank of 2 (Buy) and an A grade for Value, indicating strong potential for value investors [4]. - WHF has a P/E ratio of 6.91, significantly lower than the industry average P/E of 9.70, suggesting it may be undervalued [4]. - The Forward P/E for WHF has fluctuated between 5.83 and 8.03 over the past year, with a median of 7.15 [4]. - The company has a P/B ratio of 0.79, compared to the industry average of 1.03, further indicating its undervaluation [5]. - WHF's P/B ratio has ranged from 0.75 to 0.98 in the past year, with a median of 0.91 [5]. - The P/S ratio for WHF stands at 2.42, which is lower than the industry average P/S of 3.75, reinforcing the notion of undervaluation [6]. Investment Outlook - The combination of WHF's strong earnings outlook and favorable valuation metrics positions it as an attractive value stock at the moment [7].

Core Viewpoint - The focus is on identifying undervalued stocks through fundamental analysis and valuation metrics, with WhiteHorse Finance (WHF) highlighted as a strong value stock opportunity [2][4][7] Group 1: Company Overview - WhiteHorse Finance (WHF) currently holds a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for investors [4] - The stock has a Forward P/E ratio of 6.74, significantly lower than the industry average of 9.32, suggesting it may be undervalued [4] - Over the past year, WHF's Forward P/E has fluctuated between 5.83 and 8.03, with a median of 7.15, indicating relative stability [4] Group 2: Valuation Metrics - WHF's P/B ratio stands at 0.77, compared to the industry's average P/B of 0.99, further supporting the notion of undervaluation [5] - The stock's P/B has ranged from 0.75 to 0.98 over the past year, with a median of 0.91, reflecting its attractive valuation [5] - WHF has a P/S ratio of 2.36, which is lower than the industry's average P/S of 3.62, reinforcing its value proposition [6] Group 3: Investment Outlook - The combination of WHF's strong valuation metrics and positive earnings outlook positions it as an impressive value stock at the moment [7]