Alcentra Capital Corporation Announces Third Quarter 2015 Financial Results and Announces Quarterly Dividend of $0.34 Per Share

NEW YORK, Nov. 9, 2015 /PRNewswire/ -- Alcentra Capital Corporation (NASDAQ: ABDC) ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market companies based in the United States, today announced its financial results for the third quarter ended September 30, 2015.

Third Quarter 2015 Financial Highlights

• Total investment income of $8.5 million
• Net investment income of $5.1 million, or $0.38 per share
• Adjusted net investment income of $4.7 million, or $0.348 per share⁽¹⁾
• Net increase in net assets resulting from operations of $3.2 million, or $0.24 per share
• Invested $21.2 million in debt and equity securities, including investments in two new portfolio companies
• Received proceeds from repayments and amortizations of $15.8 million
• Paid regular quarterly dividend of $0.34 per share on October 6, 2015
• Net asset value (NAV) of $201.7 million, or $14.92 per share, as of September 30, 2015, which is down slightly from the prior quarter, but up from $14.63 at the time of the IPO.
• Weighted Average Portfolio Leverage – 3.70x, which is a slight increase from the prior quarter
• Weighted Average Portfolio Yield – 12.2%, up from 12.1% in the prior quarter

Management Commentary

"Our third quarter results demonstrate our focus on managing the portfolio for yield at a time when capital is relatively fixed. The yield on new investments has been higher than the yield on redeemed investments for the 2nd and 3rd quarters. Net originations were moderately up, but we had a few deals close in the first week after the close of the quarter which could have easily closed in the September period.

We have previously stated that the M&A market would benefit our portfolio, and we have seen that in the announced sale of HealthFusion to Quality Systems Inc. (NASDAQ: "QSII") for $165 million of cash consideration plus potential additional contingent consideration of up to $25 million. HealthFusion is a privately held developer of web-based cloud computing software for physicians, hospitals and medical billing services.

In addition, Cologix, Inc. announced the purchase of Net Access LLC in a transaction expected to close before year-end.  The sale of Net Access will produce a gain on our investment and allow us to reduce the equity weighting in the portfolio towards our stated goal of 10% - 15%.

We expect more M&A activity to occur in our portfolio over the next six-to nine months".

(1) Supplemental information regarding adjusted net investment income:

On a supplemental basis, we provide information relating to adjusted net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income is a useful indicator of operations exclusive of any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliations of net investment income to adjusted net investment income are set forth in Schedule 1.

Third Quarter 2015 Financial Results

For the three months ended September 30, 2015, total investment income was $8.507 million. This is flat from last quarter mainly due to timing of repayments and deployment of capital. Interest and PIK income comprised $8.032 million and other income comprised $0.475 million of which prepayment fee income was approximately $0.387 for the quarter ended September 30, 2015.

For the three months ended September 30, 2015, total expenses were $3.365 million. Interest and financing expenses for the three months ended September 30, 2015 was $1.427 million and the base management fee was $1.274 million. The income based incentive fee for the three months ended September 30, 2015 was $0.546 million and the capital gains incentive fee accrual was $(0.434) million. The administrative service fee, professional fees and other general and administrative expenses totaled $0.552 million for the three months ended September 30, 2015.

Net investment income for the three months ended September 30, 2015 was $5.142 million ($0.38 per share).

During the three months ended September 30, 2015, we recorded a net change in unrealized depreciation on investments of $3.228 million.

Alcentra Capital Corporation's net increase in net assets resulting from operations during the three months September 30, 2015, was $3.254 million, or $0.24 per share.

Per share results for the second quarter ended September 30, 2015 are based on shares outstanding of 13.516 million.

Portfolio and Investment Activities

As of September 30, 2015, Alcentra had debt and equity investments in 29 portfolio companies with a total fair value of $288.9 million. The average portfolio investment on a cost basis was $9.9 million and equity constitutes 20.0% of the portfolio, which is down from 28% at the time of the IPO. During the third quarter ended September 30, 2015, Alcentra made investments of $21.23 million, including investments in two new portfolio companies and received proceeds from repayments and amortizations of investments of $15.8 million. As of September 30, 2015, the weighted average yield on debt investments was 12.2%, which was an increase in the weighted average yield from the June 30, 2015 reporting period of 12.1%.

Third quarter 2015 investment activity included the following new portfolio company investments:

• PharmaLogic Holdings, LLC operates specialty nuclear pharmacies throughout rural and suburban areas in the United States. Alcentra invested $15.5 million in subordinated notes on September 1, 2015
• Graco Supply Company is a leading value-added distributor of chemical products, packaging services, and related supply chain and vendor managed inventory services for the manufacture and maintenance, repair and overhaul of commercial and military aircraft. Alcentra provided capital on September 17, 2015.

Alcentra had no investments on non-accrual status as of September 30, 2015.

Liquidity and Capital Resources

At September 30, 2015, Alcentra had $11.4 million in cash and cash equivalents.  The cash balance was larger than normal in anticipation of funding one to two investments whose closing was then pushed into October.  Alcentra had $52.6 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $40.0 million outstanding of Alcentra Capital Internotes as of September 30, 2015.

Subsequent Events

• On October 15, 2015, Alcentra funded a $5,500,000 investment in Xpress Global Systems, LLC (13.5% 2nd Lien).
• On October 15, 2015, Stancor repaid a portion of its debt in the amount of $1,028,364.
• On October 16, 2015, Alcentra funded an $8,225,000 investment in NTI Holdings, LLC (9% Unitranche and equity).
• On October 20, 2015, Alcentra amended the terms of its deal with My Alarm Company from 16.25% subordinated debt to 12% 2^nd Lien Debt and extended the maturity to July 2019.
• On October 20, 2015, Cologix, Inc. announced the purchase of Net Access LLC, an existing portfolio company. Alcentra's investment consists of equity. We expect the transaction to close before year-end.
• On October 30, 2015, Alcentra funded an additional $2,000,000 million to Alpine, an existing portfolio company.
• On October 30, 2015, Quality Systems, Inc. announced an agreement to acquire Health Fusion Holdings, Inc. for $165 million plus potential additional contingent consideration of up to $25 million. Health Fusion is an existing portfolio company and Alcentra's investment consists of $5,923,000 of 1^st lien debt and 1.79% of warrants. We expect the transaction to close before year-end.

Fourth Quarter 2015 Dividend of $0.34 Per Share Declared

On November 5, 2015, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the fourth quarter of 2015 payable on January 7, 2016 to stockholders of record as of December 31, 2015.

Alcentra has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

Third Quarter 2015 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 11:00 am ET on Tuesday, November 10, 2015. To participate in the conference call, please dial (844) 832-0218 approximately 10 minutes prior to the call. International callers should dial (484) 756-4314. Please reference conference ID # 74817751.

A live webcast of the conference call will be available at http://investors.alcentracapital.com/events-presentations. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

An archived webcast replay will be available on the Company's website until November 10, 2016.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $100.0 million. Alcentra' investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Alcentra seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.

Alcentra is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. In addition, for tax purposes, Alcentra has elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

FORWARD-LOOKING STATEMENTS

This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Alcentra' filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 

Schedule 1

Supplemental Information Regarding Adjusted Net Investment Income

On a supplemental basis, we provide information relating to adjusted net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses for such year. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income is a useful indicator of operations exclusive of any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. The following table provides a reconciliation of net investment income to adjusted net investment income for the three and nine months ended September 30, 2015.

                                                        

                                            

SOURCE Alcentra Capital Corporation