
Financial Data and Key Metrics Changes - Adjusted net investment income increased to $0.33 per share in Q3 2022, up from $0.24 per share in Q2 2022, primarily due to rising interest rate coupons on the loan portfolio [10][20] - Net asset value per share decreased to $13.58 from $14.57 in the previous quarter, but remains approximately 9% above its prepandemic level at the end of 2019 [15][22] - Total investment income for the quarter was $13.4 million, up from $10.4 million in the prior quarter, reflecting increases in interest, dividend, and fee income [25] Business Line Data and Key Metrics Changes - Approximately 99% of the loan portfolio is senior secured, with 94% being floating rate, benefiting from the rising interest rate environment [12][31] - The income yield on the investment portfolio was 11.1%, a significant increase of 250 basis points from the last quarter [34] Market Data and Key Metrics Changes - Three-month LIBOR increased by almost 1.5% to 3.75% as of September 30, 2022, with the Fed increasing rates by an additional 75 basis points recently [31] - The company has a debt-to-equity ratio of approximately 1.66x, which increased modestly quarter-over-quarter due to unrealized depreciation on investments [28] Company Strategy and Development Direction - The company focuses on capital preservation with 99% of its loan portfolio being senior secured and aims to maintain a long-term debt-to-equity ratio of approximately 1.3 to 1.4x [27][29] - The company remains cautious with new originations but is evaluating incremental funding opportunities for portfolio companies that identify growth prospects [30] Management's Comments on Operating Environment and Future Outlook - Management believes the balance sheet positioning will continue to provide tailwinds in the rising interest rate environment, with operational flexibility due to long-term debt maturing in 2025 or later [9][37] - The company views the recent decline in net asset value as a one-off situation related to a specific investment and maintains confidence in the overall quality and fundamentals of its portfolio [22][36] Other Important Information - The company has invested over $1.9 billion since 2011 with a cumulative net realized loss of just 1.9%, generating attractive yields on its portfolio [39] - The adviser managing the company has a strong alignment of interest with shareholders, holding a 22% ownership stake in the BDC [41] Q&A Session Summary Question: What is the outlook for the company's performance in the current economic environment? - Management expressed confidence in the balance sheet positioning and the ability to navigate the rising interest rate environment, expecting continued benefits from the floating rate nature of the loan portfolio [9][36] Question: How does the company view its recent decline in net asset value? - Management characterized the decline as a one-off situation related to a specific investment in the post-secondary for-profit education sector, which is not expected to recur [22][36]