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Stellus Capital Investment (SCM) - 2024 Q3 - Earnings Call Transcript
SCMStellus Capital Investment (SCM)2024-11-08 20:24
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Financial Data and Key Metrics Changes - In Q3 2024, the company generated GAAP net investment income of 0.39pershareandcorenetinvestmentincomeof0.39 per share and core net investment income of 0.40 per share, which excludes estimated excise taxes [7] - Net asset value per share increased by 0.19duringthequarter,primarilyduetonetunrealizeddepreciationontheinvestmentportfolio[7]−Theinvestmentportfolioatfairvaluewas0.19 during the quarter, primarily due to net unrealized depreciation on the investment portfolio [7] - The investment portfolio at fair value was 908.7 million, up from 899.7millionasofJune30,2024[8]BusinessLineDataandKeyMetricsChanges−Thecompanyinvested899.7 million as of June 30, 2024 [8] Business Line Data and Key Metrics Changes - The company invested 9.4 million in one new portfolio company and had 8.4millioninotherinvestmentactivityatparduringthethirdquarter[8]−Thecompanyreceivedonefullrepaymenttotaling8.4 million in other investment activity at par during the third quarter [8] - The company received one full repayment totaling 8.4 million and 5.5millionofotherrepayments,bothatpar[8]−985.5 million of other repayments, both at par [8] - 98% of loans were secured and 95% were priced at floating rates, with an average loan per company of 9.5 million [8] Market Data and Key Metrics Changes - The company expects to end Q4 with a portfolio between 930millionand930 million and 950 million, with anticipated loan repayments of approximately 29million[10]−Theaverageyieldisprojectedtodecreasefrom11.729 million [10] - The average yield is projected to decrease from 11.7% in the prior quarter to 11% for Q4 due to lower SOFR rates [15] Company Strategy and Development Direction - The company plans to grow its portfolio to over 1 billion, supported by an increased bank facility from 260millionto260 million to 315 million [11] - The company declared a dividend for Q4 at a rate of 0.40perquarter,payablemonthly[11]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementnotedthatthelowerSOFRrateimpactednetinvestmentincome,andtheyexpectinvestmentactivitytopickupinQ4[13][14]−Thecompanyisconfidentinreachingthe0.40 per quarter, payable monthly [11] Management's Comments on Operating Environment and Future Outlook - Management noted that the lower SOFR rate impacted net investment income, and they expect investment activity to pick up in Q4 [13][14] - The company is confident in reaching the 930 million to 950millionportfoliotargetbyyear−end,citing10to15activedeals[25]OtherImportantInformation−Thecompanyhaspaidover950 million portfolio target by year-end, citing 10 to 15 active deals [25] Other Important Information - The company has paid over 273 million in dividends since its IPO, representing 16.28persharetoaninvestorintheIPO[6]−Spilloverincomestandsat16.28 per share to an investor in the IPO [6] - Spillover income stands at 42 million as of the end of Q3 [22] Q&A Session Summary Question: Was there any temporary driver for NII being below the dividend this quarter? - Management indicated that a lower SOFR rate and lighter investment activity contributed to the lower NII, but nothing unusual was noted [13] Question: Is the current EPS run rate sustainable? - Management suggested that the EPS run rate would depend on other income in Q4, with a reminder that SOFR rates have dropped [15] Question: What is the status of the fee waiver? - Management indicated that a fee waiver might occur in Q2 2025, depending on future performance [19] Question: What is the spillover income? - Spillover income currently stands at 42million[20]Question:WilltheappreciationtiedtoapotentialtransactionoccurinQ4?−ManagementconfirmedthattheexpectedappreciationisanticipatedtooccurinQ4[21]Question:Howconfidentisthecompanyinreachingthe42 million [20] Question: Will the appreciation tied to a potential transaction occur in Q4? - Management confirmed that the expected appreciation is anticipated to occur in Q4 [21] Question: How confident is the company in reaching the 930 million to $950 million target? - Management expressed confidence, citing 10 to 15 active deals [25]