SLR Investment (SLRC) - 2025 Q1 - Quarterly Results

Q1 2025 Financial Results and Company Overview SLR Investment Corp. reported Q1 2025 Net Investment Income of $0.41 per share, with a slight decrease in NAV, while management expressed confidence in the portfolio and capital position Financial Highlights and CEO Commentary SLRC's Q1 2025 financial highlights include Net Investment Income matching distributions, a slight NAV decrease, and management's positive outlook on portfolio quality and market opportunities | Metric | Value | Comparison | | :--- | :--- | :--- | | Net Investment Income (NII) | $22.1 million ($0.41 per share) | - | | Quarterly Distribution | $0.41 per share | Payable June 27, 2025 | | Net Asset Value (NAV) | $18.16 per share | vs. $18.20 at Dec 31, 2024 | | Net Increase in Net Assets | $19.9 million ($0.37 per share) | - | - Management believes the portfolio is well-positioned, being heavily collateralized by working capital assets and focused on domestic services businesses, which provides resilience against uncertain tariff impacts[3] - The company observes a growing pipeline of asset-based lending opportunities due to market dislocation and the retreat of traditional banks, with over $800 million in available capital to leverage this trend[3] Portfolio Analysis The comprehensive investment portfolio demonstrates diversification, strong asset quality, and strategic growth in asset-based lending Comprehensive Portfolio Activity Q1 2025 saw total originations of $361.3 million and repayments of $390.6 million, resulting in a net portfolio decrease, with asset-based lending as the only growth category | Asset Class | Originations ($ million) | Repayments / Amortization ($ million) | Net Portfolio Activity ($ million) | | :--- | :--- | :--- | :--- | | Sponsor Finance | $44.8 | $73.0 | ($28.2) | | Asset-based Lending | $163.8 | $98.9 | $64.9 | | Equipment Finance | $128.1 | $173.5 | ($45.4) | | Life Science Finance | $24.6 | $45.2 | ($20.6) | | Total | $361.3 | $390.6 | ($29.3) | Comprehensive Portfolio Composition The $3.1 billion portfolio is highly diversified across 940 issuers, with 98.2% in senior secured loans, predominantly first lien, and asset-based and equipment financings as largest segments - The portfolio is diversified across approximately 940 unique issuers in over 105 industries, with an average exposure of $3.2 million (0.1%) per issuer[10] | Asset Class | Amount ($ million) | % of Portfolio | Weighted Avg. Asset Yield | | :--- | :--- | :--- | :--- | | Cash Flow Loans (Sponsor Finance) | $588.0 | 19.3% | 10.4% | | Asset-Based Loans | $1,121.3 | 36.7% | 13.8% | | Equipment Financings | $1,102.6 | 36.1% | 11.5% | | Life Science Loans | $186.8 | 6.1% | 12.5% | | Total Senior Secured | $2,998.7 | 98.2% | 12.2% | | Equity and Equity-like Securities | $54.2 | 1.8% | N/A | | Total Comprehensive Portfolio | $3,052.9 | 100.0% | - | - First lien senior secured loans make up 96.4% of the Comprehensive Investment Portfolio, underscoring a conservative credit profile[10][11] Asset Quality and Income Contribution Asset quality remains robust with minimal non-accruals and a high concentration in top risk categories, while asset-based lending significantly contributed to Q1 2025 investment income - As of March 31, 2025, only 0.4% of the portfolio at fair value was on non-accrual status[15] Internal Investment Rating (as of March 31, 2025) | Rating | Investments at Fair Value ($ million) | % of Total Portfolio | | :--- | :--- | :--- | | 1 (Least Risk) | $622.3 | 31.0% | | 2 | $1,334.9 | 66.6% | | 3 | $39.4 | 2.0% | | 4 (Most Risk) | $7.8 | 0.4% | Investment Income Contribution by Asset Class (Q1 2025) | Asset Class | Income ($ million) | % Contribution | | :--- | :--- | :--- | | Sponsor Finance | $17.0 | 32.0% | | Asset-based Lending | $19.5 | 36.7% | | Equipment Finance | $9.7 | 18.2% | | Life Science Finance | $7.0 | 13.1% | | Total | $53.2 | 100.0% | SLR Senior Lending Program (SSLP) The SSLP, a 50/50 joint venture, held a $165.6 million portfolio of senior secured loans, generating a stable 15.7% annualized yield for SLRC in Q1 2025 - At quarter-end, the SSLP's portfolio consisted of $165.6 million at fair value, invested in 31 different borrowers[17] - In Q1 2025, SLRC earned $1.9 million from its SSLP investment, representing an annualized yield of 15.7% on cost, consistent with Q4 2024[18] Financial Performance SLRC's Q1 2025 financial performance reflects a decrease in net investment income due to a smaller portfolio and lower index rates, partially offset by reduced expenses Quarter-over-Quarter Results of Operations Q1 2025 net investment income decreased to $22.1 million ($0.41/share) from $23.9 million ($0.44/share) in Q1 2024, driven by lower gross investment income and partially offset by reduced interest expenses | Metric (in millions, except per share) | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Investment Income | $53.2 | $58.1 | ($4.9) | | Net Expenses | $31.1 | $34.2 | ($3.1) | | Net Investment Income | $22.1 | $23.9 | ($1.8) | | NII per Share | $0.41 | $0.44 | ($0.03) | | Net Realized/Unrealized Gain (Loss) | ($2.2) | $4.0 | ($6.2) | | Net Increase in Net Assets | $19.9 | $27.9 | ($8.0) | | Earnings per Share | $0.37 | $0.51 | ($0.14) | - The year-over-year decrease in gross investment income was primarily due to a smaller income-producing portfolio and a decrease in index rates[19] - The decrease in expenses was mainly due to lower interest expense resulting from reduced average borrowings and lower index rates[20] Capital Structure and Liquidity SLRC maintains a healthy capital structure with a net debt-to-equity ratio within target, enhanced liquidity from recent unsecured note issuance, and no near-term debt maturities Capital and Liquidity Overview As of March 31, 2025, SLRC's net debt-to-equity ratio was 1.04x, within target, supported by a recent $50.0 million unsecured note issuance and over $800 million in available capital - The company's net debt-to-equity ratio was 1.04x as of March 31, 2025, compared to 1.16x a year prior, and is within the target range of 0.9x to 1.25x[27] - In February 2025, the company issued $50.0 million of 6.14% unsecured notes due 2028, bringing total unsecured notes outstanding to $359 million, with the next maturity not until December 2026[26] - Including borrowing capacity at its specialty finance companies, SLRC had over $800 million of available capital as of March 31, 2025[28] Subsequent Events Subsequent to the quarter's end, the Board of Directors declared a quarterly distribution, maintaining consistency for shareholders Dividend Declaration On May 7, 2025, the Board of Directors declared a quarterly distribution of $0.41 per share, payable in June 2025 - On May 7, 2025, the Board declared a quarterly distribution of $0.41 per share, payable on June 27, 2025, to shareholders of record as of June 13, 2025[30] Consolidated Financial Statements The consolidated financial statements provide a detailed overview of SLRC's assets, liabilities, and operational results for the quarter ended March 31, 2025 Consolidated Statements of Assets and Liabilities As of March 31, 2025, total assets increased to $2.50 billion, total liabilities to $1.51 billion, resulting in a slight decrease in total net assets to $990.5 million and NAV per share of $18.16 Balance Sheet Highlights (in thousands, except per share) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Investments at Fair Value | $2,004,399 | $2,005,634 | | Total Assets | $2,502,972 | $2,449,417 | | Total Liabilities | $1,512,487 | $1,456,491 | | Total Net Assets | $990,485 | $992,926 | | Net Asset Value Per Share | $18.16 | $18.20 | Consolidated Statements of Operations For Q1 2025, SLRC reported $53.2 million in total investment income, $22.1 million in net investment income, and a net increase in net assets of $19.9 million ($0.37 per share) after accounting for losses Statement of Operations Highlights (in thousands, except per share) | Account | Three months ended Mar 31, 2025 | Three months ended Mar 31, 2024 | | :--- | :--- | :--- | | Total Investment Income | $53,178 | $58,099 | | Net Expenses | $31,073 | $34,247 | | Net Investment Income | $22,105 | $23,852 | | Net Realized & Unrealized Gain (Loss) | ($2,179) | $4,019 | | Net Increase in Net Assets | $19,926 | $27,871 | | Earnings Per Share | $0.37 | $0.51 |