CION Investment (CION) - 2024 Q4 - Annual Report

Investment Activity - The company reported a net portfolio activity of $(22,409) thousand for the year ended December 31, 2024, compared to$49,937 thousand for 2023, indicating a significant decrease in investment activity [421]. - The company’s total purchases and drawdowns of senior secured first lien debt increased to $439,038 thousand in 2024 from$340,704 thousand in 2023 [421]. - The number of portfolio companies decreased from 111 in 2023 to 105 in 2024, indicating a consolidation in the investment strategy [422]. Financial Performance - The average annual EBITDA of portfolio companies decreased from $61.7 million in 2023 to$53.6 million in 2024, indicating a decline in the financial performance of its investments [422][424]. - The investment income for the year ended December 31, 2024, was $252,432, slightly up from$251,010 in 2023 [432]. - Net investment income after taxes decreased to $95,860 in 2024 from$105,022 in 2023, primarily due to increased interest expenses [437]. - The gross annual portfolio yield based on the purchase price for 2024 was 10.96%, down from 12.12% in 2023, reflecting a decrease in investment returns [422][424]. Portfolio Composition - As of December 31, 2024, the company's total investments amounted to $1,943,693 thousand, with a fair value of$1,888,688 thousand, while the average annual EBITDA of portfolio companies was $53.6 million [422]. - The company’s investment portfolio as of December 31, 2024, was primarily composed of senior secured first lien debt, accounting for 86.0$160,093, up from $135,000 in 2023 [426]. Operating Expenses - The company’s management fees and subordinated incentive fees on income are the primary operating expenses, reflecting the cost structure of the investment advisory agreement [417]. - The operating expenses and income taxes totaled$156,572 in 2024, up from $145,988 in 2023, driven by higher interest expenses [435]. Distributions - The company declared a quarterly base distribution of$0.36 per share for Q1 2025, payable on April 11, 2025 [420]. - Total distributions for the year ended December 31, 2022, were $1.45 per share, totaling$81,575, while for 2023, it increased to $1.61 per share, totaling$87,867, representing a 11% increase year-over-year [464]. - For the year ended December 31, 2024, total distributions are projected to be $1.52 per share, totaling$81,308, indicating a decrease of approximately 5.6% compared to 2023 [464]. Borrowings and Commitments - As of March 5, 2025, aggregate outstanding borrowings under the JPM Credit Facility increased from $325,000 to$345,000 [465]. - The company had $125,000 in aggregate principal amount of 2026 Notes outstanding as of March 5, 2025, with no unfunded principal amount [467]. - Unfunded commitments as of December 31, 2024, were$70,681, an increase from $47,349 in 2023 [426]. Interest Rate Sensitivity - As of December 31, 2024, 81.1% of the company's investments paid variable interest rates, indicating a significant exposure to interest rate fluctuations [493]. - The interest rate sensitivity analysis shows that a 300 basis point increase in interest rates could result in a 20.5% increase in net interest income, while a 300 basis point decrease could lead to a 19.0% decrease [495]. - The company expects that a rise in interest rates could lead to a substantial increase in net investment income, particularly due to the majority of variable rate investments [493]. Market Conditions - Market volatility has been exacerbated by geopolitical events, rising energy prices, and uncertainties related to the 2024 U.S. elections, affecting overall economic conditions [499]. - The U.S. inflation rate remains elevated, with potential persistence in the near to medium-term, which could impact the company's portfolio companies' profit margins [499]. - Persistent inflationary pressures and foreign currency exchange volatility could affect the company's portfolio companies' respective profit margins [499].