Stellus Capital Investment Corporation (NYSE:SCM) 2024 First Quarter Earnings Report Call Record May 10, 2024
Stellaus Capital Investment Corporation wasn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (Please see here for the detail).
operator: Good evening, ladies and gentlemen, thank you. I would like to welcome you to Stellaus Capital Investment Corporation’s conference call to report its financial results for the first quarter ending March 31, 2024. This conference will be recorded today, May 10, 2024. Please turn the call over to Mr. Robert Rudd, Chief Executive Officer of Stellaus Capital Investment Corporation. Mr. Rudd, may we begin the meeting?
Robert Rudd: Thank you, Kelly, and good morning everyone, and thank you for joining the call. Welcome to the conference call for the quarter ending March 31, 2024. We are joined this morning by Todd Huskinson, our Chief Financial Officer, to discuss important information regarding forward-looking statements.
Todd Huskinson: Thank you, Rob. I would like to let everyone know that today’s call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and unauthorized broadcasting of this call in any form is strictly prohibited. You can play the audio of the call using the phone number and PIN provided in the press release announcing the call. We also draw your attention to customary safe harbor disclosures in our press releases regarding forward-looking information. Today’s conference call may also include forward-looking statements and projections, and we will discuss important factors that could cause actual results to differ materially from those projected, including our latest filings with the SEC. Please refer to the documents.
We do not update forward-looking statements unless required by law. To obtain a copy of our most recent SEC filings, please visit the “Public Investors” link on our website (www.stelluscapital.com) or call 713-292-5400. I would now like to turn the call back to our Chief Executive Officer, Rob Rudd.
Robert Rudd: Thank you, Todd. This morning I’ll start by talking about our operating results, and then I’ll do a review of our portfolio, including asset quality. Next, let’s talk about dividends and prospects.
Todd Huskinson: In the first quarter, GAAP net investment income of $0.42 per share more than covered the $0.40 per share dividend. Core net investment income excluding estimated excise taxes was $0.44 per share. Net asset value per share increased $0.15 during the quarter due to an increase in the net unrealized value of our investment portfolio and the accrual of NII in excess of dividends. A look back at my life so far. Overall, since his IPO in November 2012, we have invested approximately $2.5 billion in over 190 of his companies and received approximately $1.6 billion in repayments while maintaining stable asset quality. Ta. To date, the company has paid out more than $252 million in dividends to investors. This equates to $15.35 per share for investors in his November 2012 IPO.
Look at the quality of your portfolio and assets. The Company ended the quarter with a fair value investment portfolio of 94 portfolio companies of $876 million, up from $874 million of 93 companies as of December 31, 2023. During the first quarter, we invested $23.8 million in three new portfolio companies and $5.8 million in three portfolio companies. The same applies to other investment activities. We also received two full repayments totaling $26.2 million and another repayment of $5.0 million, both at par, resulting in a net portfolio repayment of $1.4 million, including the impact of net unrealized gains of $3.1 million. Increased. As of March 31, 99% of our loans were secured and 98% had variable interest rates. The average loan amount per company was $9.9 million, and the maximum overall investment amount was $19.5 million, all at fair value.
Substantially all portfolio companies are backed by private equity firms. Overall, our asset quality is slightly better than planned. 25% of our portfolio is rated 1 or more above plan, and 19% of our portfolio is marked with an investment strategy (3 or below investment advertising category), which means it does not meet plan or expectations. means. Currently, we hold four interest-free loans of his, which represent 2.1% of his total fair value of his loan portfolio. So let’s turn to Rob and discuss the dividend and the overall outlook.
Robert Rudd: yes. Thank you, Todd. As a reminder, part of our investment strategy has been to invest in the stocks of our portfolio companies in a conservative manner in order to generate enough realized gains to offset losses over time. There was no realization in the first quarter, but in the second quarter so far he has realized one stock position and plans to realize one more. This means total revenue is expected to be approximately $5.3 million with realized gains of $3.8 million. And NAV rose slightly. Note that the combined multiple of these two realizations is just over three times the original cost basis. At the end of the quarter, he had $60.6 million in equity investments marked at cost of $74.9 million.
Our historical experience indicates that the ultimate realized value of this portfolio will be more than twice the cost basis of the portfolio. However, of course, the ultimate performance of our current stock position will depend on a variety of factors, including, among other things, the economic environment and the sponsor’s exit strategy. Next, let’s talk about dividends. As you can see, we continue to pay out his $0.40 per share dividend every quarter. And, to accomplish this objective, we will continue to pay a monthly dividend of approximately $0.13 per share through the third quarter of 2024, subject to board approval, resulting in a total of Dividends are expected to be $0.40 per share. And then to the outlook. Since the end of the quarter, we have raised $10.9 million in equivalent funding for two new portfolio companies and two existing portfolio companies.
In addition, the Company received one repayment of $11.4 million in par value and one equity realization as described above. Its revenue was approximately $3 million, and realized profits amounted to him $2 million. This activity, in turn, combined with other net funds of approximately $2.8 million, results in a total fair value of our portfolio, including 95 portfolio companies, of approximately $875 million. Again, this is as of today. I’m looking forward to my quarterly balance now. We expect a significant increase in funding, but loan repayments are unknown. As a result, we expect him to end the quarter with a portfolio in excess of $925 million, or $50 million higher than he currently is. Now, let’s move on to questions.
Mr. Kelly, would you please start the question and answer session?
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