Stellus Capital Investment (SCM) 8 Nov 24 2024 Q3 Earnings call transcript
In Stellus Capital Investment Corporation's latest earnings call, CEO Robert Ladd and CFO Todd Huskinson discussed the company's third fiscal quarter results, providing insights into the company's performance, financial health, and outlook for the future. The call touched on various themes, including portfolio growth, equity realizations, capital management, and dividends, offering a comprehensive view of Stellus Capital's current state and future prospects.
Financial Highlights
For the third quarter, Stellus Capital reported GAAP net investment income of $0.39 per share and core net investment income of $0.40 per share, excluding estimated excise taxes. The company's net asset value per share increased by $0.19 during the quarter due to net unrealized depreciation on its investment portfolio. Stellus Capital's asset quality remains stable, with 98% of its loans secured and 95% priced at floating rates.
Portfolio Growth and Investment Activity
Looking ahead, Stellus Capital expects to end the fourth quarter with a portfolio between $930 million and $950 million. The company anticipates approximately $29 million in loan repayments and $5.3 million in equity realization proceeds, leading to realized gains of $4.3 million. Stellus Capital has increased its bank facility by $55 million, providing ample capacity for portfolio growth.
Despite a slightly lower NII in the third quarter compared to expectations, Stellus Capital remains optimistic about its ability to grow its portfolio to $1 billion or more. The company's investment activity is expected to pick up in the fourth quarter, with 10 to 15 active deals in progress.
Equity Realizations and Dividends
The earnings call also highlighted the company's equity realization strategy, with proceeds of $2.6 million and a realized gain of $2.2 million from one portfolio company. Stellus Capital declared a dividend for the fourth quarter at a rate of $0.40 per quarter, payable monthly.
Challenges and Opportunities
The call also addressed the impact of lower interest rates on the company's earnings, with CFO Todd Huskinson noting that it could slightly impact the company's earnings per share in the fourth quarter. However, Stellus Capital remains confident in its ability to navigate these challenges, leveraging its active pipeline and strategic investment approach.
Analysts' Questions
Analysts on the call raised questions about the company's NII run rate, the impact of lower interest rates, and the recurrence of incentive fee waivers. Stellus Capital's management provided clear and detailed responses, offering insights into the company's financial strategy and outlook.
Conclusion
Stellus Capital Investment Corporation's earnings call provided a comprehensive overview of its financial performance and strategic direction. Despite facing challenges such as lower interest rates and changing market conditions, Stellus Capital remains focused on portfolio growth, equity realizations, and dividend payments. The company's optimistic outlook, coupled with its strategic approach to investment and capital management, positions it well for future success.