SLR Investment (US:SLRC)2023-05-11 19:39Financial Data and Key Metrics Changes - For the three months ended March 31, 2023, gross investment income totaled $53.5 million, a slight decrease from $54.1 million for the three months ended December 31, 2022 [1] - Net investment income for the same period was $22.1 million or $0.41 per average share, compared to $22.5 million or $0.41 per average share for the previous quarter [29] - The net asset value at March 31, 2023, was approximately $984 million or $18.04 per share, down from $1 billion or $18.33 per share at December 31, 2022 [26] Business Line Data and Key Metrics Changes - The asset-based loan (ABL) portfolio totaled $1 billion, representing one-third of the comprehensive portfolio, with a weighted average asset level yield of 13.6% [10] - The equipment finance portfolio totaled $938 million, representing 32% of the total portfolio, with a weighted average asset level yield just under 10% [13] - The life science segment's portfolio totaled $323 million across 14 borrowers, contributing just under 24% of gross investment income for the quarter [17] Market Data and Key Metrics Changes - Yields in the private debt market have increased, with current yields of 12% to 13% compared to 7% to 9% a year ago [2] - The weighted average yield on the entire cash flow portfolio was 11.8%, up from 11.2% in the prior quarter [6] - The company has seen a strong pipeline with an average yield of over 12.5% and an LTV of 35% [3] Company Strategy and Development Direction - The company is focusing on defensive sectors such as healthcare services and insurance brokerage, with a portfolio that has strong credit metrics [5] - The strategy includes expanding the ABL segment, which has historically outperformed during market volatility [7] - The company plans to leverage its strong capital position to capitalize on attractive investment opportunities arising from regional banking sector disruptions [19][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current investment environment is favorable, particularly for specialty finance businesses benefiting from regional banking turmoil [78] - The company expects net portfolio growth throughout the year due to limited repayment activity and a strong investment pipeline [22] - Management expressed confidence in the portfolio's ability to perform well through economic downturns, enabling the company to capitalize on market dislocations [19] Other Important Information - The company waived approximately $110,000 of related incentive fees during the quarter [28] - The Board declared a monthly distribution of $0.136667 per share, payable on June 1, 2023 [31] - The company has significant available capital to fund future portfolio growth while remaining within its target leverage range of 0.9 to 1.25 times net debt to equity [27] Q&A Session Summary Question: Can you elaborate on the scaling of the SSLP and its impact on NII? - Management confirmed the target to grow the SSLP to $250 million by year-end, with current assets at about $150 million [66] Question: How do you expect to increase ROE over time? - Management indicated that they expect to increase ROE through significant capital deployment at attractive net yields [70] Question: Are there any systemic issues across the portfolio? - Management clarified that the write-down of one investment was idiosyncratic and not indicative of broader portfolio stress [100]