SLR Investment (US:SLRC)2021-05-06 18:59Financial Data and Key Metrics Changes - The company reported net investment income of $0.37 per share for Q1 2021, an increase from $0.35 in Q4 2020, indicating strong earnings growth [7] - Net asset value increased by $0.10 per share to $20.26 compared to $20.16 at the end of Q4 2020 [14] - Gross investment income for Q1 2021 totaled $35.9 million, up from $31.4 million in Q4 2020, while expenses rose to $20.4 million from $16.5 million [16] Business Line Data and Key Metrics Changes - The cash flow loan portfolio was $325 million, representing approximately 16% of the comprehensive portfolio, with an average EBITDA of new loans exceeding $100 million [22] - The asset-based portfolio totaled just over $440 million, accounting for 22% of the comprehensive portfolio, with a weighted average yield of 10.5% [25] - The equipment finance portfolio stood at $320 million, with 100% of investments being first lien loans and a weighted average asset level yield of just over 10% [30] - The life science lending portfolio totaled just over $330 million, representing 16% of the total portfolio and nearly 32% of gross investment income for the quarter [32] Market Data and Key Metrics Changes - The U.S. middle market showed a favorable economic backdrop with increased sponsor-led M&A and refinancing transactions, supported by government fiscal and monetary stimulus [9] - The weighted average investment risk rating of the portfolio was under 2, with only 2.8% rated 3s and 4s, down from 7.5% in the previous year [19] Company Strategy and Development Direction - The company plans to deploy approximately $700 million of low-cost available capital towards new investments across all strategies, maintaining a modest leverage of 0.82x [11] - The focus remains on first lien cash flow loans in defensive sectors and increasing investments in specialty finance assets [34] - The company aims to capitalize on the robust opportunity set in the market, driven by increased middle-market sponsor activity [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's credit quality and earnings growth, highlighting the economic recovery and solid footing of the portfolio [39] - There is an expectation of continued growth in net investment income, which is anticipated to fully cover the dividend [40] - The company believes it is still in the early stages of capitalizing on substantial opportunities as financial sponsors deploy record amounts of capital [41] Other Important Information - The company declared a Q2 2021 distribution of $0.41 per share, payable on July 2, 2021 [17] - The integration of Kingsbridge is proceeding smoothly, with a strong credit quality portfolio and expected gross income of approximately $20 million for the year [29] Q&A Session Summary Question: Inquiry about dividend income from SOAG - Management indicated that the investment in long lease aircraft has been attractive but is winding down, expecting less income moving forward [45] Question: Commentary on other income lines and normalization - Management noted that the income from life science loans is episodically recurring and difficult to predict on a quarterly basis, but expects more consistency as the portfolio grows [47] Question: Potential for NAV per share upside post-COVID recovery - Management believes there is still some potential for NAV per share upside, as the sectors invested in have shown resilience and recovery [48]