Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended December 31, 2023
HOUSTON, March 4, 2024 /PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM) ("Stellus" or the "Company") today announced financial results for its fourth fiscal quarter and year ended December 31, 2023.
Robert T. Ladd, Chief Executive Officer of Stellus, stated, "I am pleased to report solid operating results for the quarter ended December 31, 2023, in which U.S. GAAP net investment income of $0.49 per share and core net investment income of $0.50 per share covered the regular dividend declared of $0.40 per share. Our loan portfolio is yielding 11.9%, as of December 31, 2023. We have concluded over eleven years of operations, during which our investors have received a total of $246 million in distributions, equivalent to $15.08 per share."
FINANCIAL HIGHLIGHTS ($ in millions, except data relating to per share amounts and shares outstanding) | |||||||||||
Three Months Ended | Three Months Ended | Year Ended | Year Ended | ||||||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | ||||||||
Amount | Per Share | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||
Net investment income | $11.91 | $0.49 | $9.71 | $0.50 | $42.21 | $1.92 | $28.59 | $1.46 | |||
Core net investment income(1) | 12.16 | 0.50 | 8.66 | 0.44 | 42.97 | 1.95 | 26.93 | 1.38 | |||
Net realized (loss) gain on investments | (30.54) | (1.26) | (1.00) | (0.06) | (30.21) | (1.38) | 3.66 | 0.19 | |||
Net realized loss on foreign currency translation | (0.04) | — | — | — | (0.11) | — | (0.01) | — | |||
Provision for taxes on realized gain on investments in taxable subsidiaries | 2.99 | 0.12 | — | — | 2.99 | 0.14 | — | — | |||
Total realized income(2) | ($15.68) | ($0.65) | $8.71 | $0.44 | $14.88 | $0.68 | $32.24 | $1.65 | |||
Distributions | (9.65) | (0.40) | (6.67) | (0.34) | (35.53) | (1.61) | (25.42) | (1.30) | |||
Net unrealized change in appreciation (depreciation) on investments | 27.13 | 1.13 | (4.73) | (0.24) | 2.79 | 0.13 | (17.55) | (0.90) | |||
Net unrealized change in appreciation (depreciation) on foreign currency translation | 0.01 | — | 0.06 | — | (0.01) | — | 0.01 | — | |||
Benefit (provision) for taxes on unrealized depreciation (appreciation) on investments in taxable subsidiaries | 0.02 | — | (0.06) | — | (0.13) | (0.01) | (0.21) | (0.01) | |||
Net increase in net assets resulting from operations | $11.48 | $0.48 | $3.98 | $0.20 | $17.53 | $0.80 | $14.49 | $0.74 | |||
Weighted average shares outstanding | 24,125,642 | 19,604,040 | 22,004,648 | 19,552,931 | |||||||
(1) | Core net investment income, as presented, excludes the impact of capital gains incentive fees (reversal) and income taxes, the majority of which are excise taxes. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S. generally accepted accounting principles ("U.S. GAAP") measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. A reconciliation of net investment income in accordance with U.S. GAAP to core net investment income is presented in the table below the financial statements. |
(2) | Total realized income is the sum of net investment income, net realized gains (losses) on investments, net realized gains (losses) on foreign currency, and loss on debt extinguishment; all U.S. GAAP measures. |
PORTFOLIO ACTIVITY ($ in millions, except data relating to per share amounts and number of portfolio companies) | ||||||||
As of | As of | |||||||
December 31, 2023 | December 31, 2022 | |||||||
Investments at fair value | $874.5 | $844.7 | ||||||
Total assets | $908.1 | $898.2 | ||||||
Net assets | $319.9 | $275.8 | ||||||
Shares outstanding | 24,125,642 | 19,666,769 | ||||||
Net asset value per share | $13.26 | $14.02 | ||||||
Three Months Ended | Three Months Ended | Year Ended | Year Ended | |||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||
New investments | $44.2 | $30.1 | $183.9 | $211.0 | ||||
Repayments of investments | (55.2) | (53.2) | (134.2) | (127.5) | ||||
Net activity | ($11.0) | ($23.1) | $49.7 | $83.5 | ||||
As of | As of | |||||||
December 31, 2023 | December 31, 2022 | |||||||
Number of portfolio company investments | 93 | 85 | ||||||
Number of debt investments | 81 | 73 | ||||||
Weighted average yield of debt and other income producing investments (3) | ||||||||
Cash | 11.0 % | 10.3 % | ||||||
Payment-in-kind ("PIK") | 0.5 % | 0.4 % | ||||||
Fee amortization | 0.4 % | 0.4 % | ||||||
Total | 11.9 % | 11.1 % | ||||||
Weighted average yield on total investments (4) | ||||||||
Cash | 10.3 % | 9.7 % | ||||||
Payment-in-kind ("PIK") | 0.5 % | 0.3 % | ||||||
Fee amortization | 0.3 % | 0.4 % | ||||||
Total | 11.1 % | 10.4 % | ||||||
(3) | The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company's investments for a given period will generally be higher than what investors in the Company's common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company's expenses or any sales load that may be paid by investors. |
(4) | The dollar-weighted average yield on total investments takes the same yields as calculated in the footnote above but weights them to determine the weighted average effective yield as a percentage of the Company's total investments, including non-income producing loans and equity. |
Results of Operations
Investment income for the years ended December 31, 2023 and 2022 totaled $105.8 million and $75.1 million, respectively, most of which was interest income from portfolio investments.
Gross operating expenses for the years ended December 31, 2023 and 2022, totaled $63.9 million and $46.5 million, respectively. The increase was driven primarily by increased interest expense and income incentive fees. For the same respective periods, base management fees totaled $15.5 million and $14.8 million, income incentive fees totaled $10.2 million and $3.8 million, capital gains incentive fee reversals totaled ($0.6) million and ($2.8) million, fees and expenses related to our borrowings totaled $32.0 million and $24.5 million (including interest and amortization of deferred financing costs), administrative expenses totaled $1.9 million and $1.8 million, income tax totaled $1.3 million and $1.2 million and other expenses totaled $3.6 million and $3.2 million. For the year ended December 31, 2023, the Company waived income incentive fees totaling $0.3 million for net operating expenses of $63.7 million. No such income incentive fees were waived for the year ended December 31, 2022.
Net investment income was $42.2 million and $28.6 million, or $1.92 and $1.46 per common share based on weighted average common shares outstanding of 22,004,648 and 19,552,931 for the years ended December 31, 2023 and 2022, respectively. Core net investment income, which is a non-U.S. GAAP measure that excludes the capital gains incentive fee (reversal) and income tax expense accruals, for the years ended December 31, 2023 and 2022 was $43.0 million and $26.9 million, or $1.95 and $1.38 per share, respectively.
For the years ended December 31, 2023 and 2022, the Company's investment portfolio had a net change in unrealized appreciation (depreciation) of $2.8 million and ($17.5) million, respectively, and the Company had net realized (losses) gains of ($30.2) million and $3.7 million, respectively. The full realizations for the year ended December 31, 2023 had previously been reflected as unrealized depreciation which were reversed during the year then ended and included in the $2.8 million of unrealized appreciation as of December 31, 2023.
Net increase in net assets resulting from operations totaled $17.5 million and $14.5 million, or $0.80 and $0.74 per common share, based on weighted average common shares outstanding of 22,004,648 and 19,552,931 for the years ended December 31, 2023 and 2022, respectively.
Liquidity and Capital Resources
On November 21, 2023, the Company entered into the Fourth Amendment to Amended and Restated Senior Secured Revolving Credit Agreement (the "Fourth Amendment Agreement") by and among the Company, as the borrower, Zions Bancorporation, N.A. dba Amegy Bank ("Amegy Bank"), as the administrative agent, and the lenders that are party thereto from time to time (collectively, the "Lenders"). The Fourth Amendment Agreement, among other things, (i) decreases the maximum commitment under the Company's credit agreement with the Lenders (the "Credit Facility") from $265.0 million to $260.0 million, (ii) increases the maximum accordion limit from $315.0 million to $350.0 million, (iii) authorizes the replacement of Canadian Dollar Offered Rate with a Canadian Overnight Repo Rate Average benchmark rate to be agreed for advances in Canadian Dollars, (iv) extends the Commitment Termination Date (as defined in the Fourth Amendment Agreement) to November 21, 2027 and Final Maturity Date (as defined in the Fourth Amendment Agreement) to November 21, 2028, and (v) reduces the Company's interest coverage ratio requirement from 2.00:1.00 to 1.75:1.00.
As of December 31, 2023 and December 31, 2022, the Company had $160.1 million and $199.2 million in outstanding borrowings under the Credit Facility, respectively.
The Company issued 4,458,873 shares during the year ended December 31, 2023 under the At-the-Market Program ("ATM Program"), for gross proceeds of $62.9 million. The average per share gross offering price of shares issued under the ATM Program during the year ended December 31, 2023 was $14.10. For the year ended December 31, 2023, net proceeds of $62.2 million, or $14.00 per share, exceeded net asset value per share, excluding the impact of offering expenses.
Distributions
During the three months ended December 31, 2023 and 2022, the Company declared aggregate distributions of $0.40 and $0.34 per share, respectively ($9.6 million and $6.7 million in the aggregate, respectively). During the years ended December 31, 2023 and 2022, the Company declared aggregate distributions of $1.60 and $1.30 per share, respectively ($35.5 million and $25.4 million in the aggregate, respectively). Tax characteristics of all distributions are reported to stockholders on Form 1099-DIV. Approximately $0.4 million of the dividends declared in 2023 are expected to be characterized as long-term capital gains. None of these dividends are expected to include a return of capital.
Recent Portfolio Activity
The Company invested in the following portfolio companies during the three months ended December 31, 2023:
Activity Type | Date | Company Name | Company Description | Investment Amount | Instrument Type | ||||||
Add-On Investment | October 3, 2023 | EH Real Estate Services, LLC* | Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers | $ | 2,281,116 | Revolver Commitment | |||||
$ | 3 | Equity | |||||||||
Add-On Investment | October 11, 2023 | Impact Home Services LLC* | Residential garage door, electrical, and plumbing services provider | $ | 539,718 | Senior Secured – First Lien | |||||
$ | 13,398 | Equity | |||||||||
Add-On Investment | October 16, 2023 | Equine Network, LLC* | Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry | $ | 955,516 | Senior Secured – First Lien | |||||
Add-On Investment | October 26, 2023 | Elliott Aviation, LLC* | Provider of maintenance, repair, and overhaul and fixed-base operator services to the business aviation sector. | $ | 56,148 | Senior Secured – First Lien | |||||
$ | 1,489 | Equity | |||||||||
Add-On Investment | October 31, 2023 | 2X LLC* | Provider of outsourced digital B2B marketing-as-a-service | $ | 1,448,388 | Senior Secured – First Lien | |||||
Add-On Investment | November 1, 2023 | Advanced Barrier Extrusions, LLC* | Manufacturer of high barrier forming web films | $ | 10,584 | Equity | |||||
Restructured Investment | November 6, 2023 | ArborWorks, LLC* | A professional tree care firm | $ | 3,461,538 | Senior Secured – First Lien | |||||
$ | 2,309,486 | Revolver Commitment | |||||||||
$ | 3,610,847 | Equity | |||||||||
Add-On Investment | November 15, 2023 | Monitorus Holding, LLC* | Provider of media monitoring and evaluation services | $ | 5,532 | Unsecured Convertible Bond | |||||
Add-On Investment | December 5, 2023 | Amika OpCo LLC* | Branded haircare platform | $ | 9,705,893 | Senior Secured – First Lien | |||||
New Investment | December 7, 2023 | evolv Consulting, LLC | Digital transformation consulting firm | $ | 10,000,000 | Senior Secured – First Lien | |||||
$ | 1,363,636 | Revolver Commitment | |||||||||
$ | 473,485 | Equity | |||||||||
New Investment | December 12, 2023 | AdCellerant LLC | Provider of outsourced digital marketing software and services | $ | 10,000,000 | Senior Secured – First Lien | |||||
$ | 875,995 | Revolver Commitment | |||||||||
$ | 728,710 | Equity | |||||||||
Add-On Investment | December 13, 2023 | Unicat Catalyst Holdings, LLC* | Manufacturer and distributor of catalysts and other industrial products | $ | 21,103 | Equity | |||||
Add-On Investment | December 20, 2023 | Advanced Barrier Extrusions, LLC* | Manufacturer of high barrier forming web films | $ | 68,034 | Equity | |||||
Add-On Investment | December 20, 2023 | Tower Arch Infolinks Media, LP** | Advertising placement partner for small to mid-sized publishers | $ | 1,226 | Equity | |||||
New Investment | December 21, 2023 | Michelli, LLC | Provider of test and measurement services and equipment | $ | 5,000,000 | Senior Secured – First Lien | |||||
$ | 3,888,228 | Delayed Draw Term Loan Commitment | |||||||||
$ | 1,296,076 | Revolver Commitment | |||||||||
$ | 509,215 | Equity | |||||||||
Add-On Investment | December 22, 2023 | Anne Lewis Strategies, LLC* | Provider of tech-enabled donor targeting and strategic digital fundraising services for non-profit and political organizations. | $ | 492,905 | Equity | |||||
*Existing portfolio company | |||||||||||
The Company realized investments in the following portfolio companies during the three months ended December 31, 2023:
Activity Type | Date | Company Name | Company Description | Proceeds Received | Realized Gain/(Loss) | Instrument Type | ||||||||
Full Repayment | October 24, 2023 | Interstate Waste Services, Inc.* | Provider of non-hazardous waste management, collection, and recycling services | $ | 368,448 | $ | (577,677) | Equity | ||||||
Restructured Investment | November 6, 2023 | ArborWorks, LLC* | A professional tree care firm | $ | — | $ | (9,080,023) | Senior Secured – First Lien | ||||||
$ | — | $ | (2,119,291) | Funded Revolver | ||||||||||
$ | — | $ | (130,900) | Equity | ||||||||||
Full Repayment | November 21, 2023 | SIB Holdings, LLC* | Provider of fixed cost reduction services | $ | 12,545,260 | $ | — | Senior Secured – First Lien | ||||||
$ | 2,249,126 | $ | — | Senior Secured – First Lien | ||||||||||
$ | 843,422 | $ | — | Senior Secured – First Lien | ||||||||||
$ | 461,200 | $ | (38,800) | Equity | ||||||||||
Full Realization | November 29, 2023 | U.S. Auto Sales, Inc. et al* | Integrated used car retailer and subprime auto finance company | $ | — | $ | (985,000) | Equity | ||||||
Full Repayment | November 30, 2023 | Archer Systems, LLC* | Provider of mass tort settlement administrative solutions | $ | 3,788,754 | $ | — | Senior Secured – First Lien | ||||||
Full Repayment | December 21, 2023 | Kelleyamerit Holdings, Inc.* | Nation-wide provider of fleet maintenance and repair services | $ | 9,750,000 | $ | — | Senior Secured – First Lien | ||||||
$ | 1,500,000 | $ | — | Senior Secured – First Lien | ||||||||||
Full Realization | December 21, 2023 | International Designs Holdings LLC* | Distributor of design-oriented surfaces, appliances and architectural specialty products | $ | 569,427 | $ | 369,427 | Equity | ||||||
Full Repayment | December 22, 2023 | BLP Buyer, Inc.* | Distributor of lifting solutions | $ | 6,116,486 | $ | — | Senior Secured – First Lien | ||||||
$ | 1,725,633 | $ | — | Senior Secured – First Lien | ||||||||||
Full Realization | December 31, 2023 | Protect America, Inc.* | Provider of residential security monitoring and home automation systems | $ | — | $ | (17,979,749) | Senior Secured – Second Lien | ||||||
Events Subsequent to December 31, 2023
The Company's management has evaluated subsequent events through March 4, 2024. There have been no subsequent events that require recognition or disclosure except for the following described below.
Investment Portfolio
The Company invested in the following portfolio companies subsequent to December 31, 2023:
Activity Type | Date | Company Name | Company Description | Investment Amount | Instrument Type | ||||||
Add-On Investment | January 5, 2024 | Whisps Holdings LP* | Manufacturer of cheese-based snacks | $ | 75,192 | Equity | |||||
Add-On Investment | January 8, 2024 | EH Real Estate Services, LLC* | Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers | $ | 475,233 | Senior Secured – First Lien | |||||
Add-On Investment | January 9, 2024 | Morgan Electrical Group Intermediate Holdings, Inc.* | Provider of commercial electrical services | $ | 23,531 | Equity | |||||
Add-On Investment | January 12, 2024 | Impact Home Services LLC* | Residential garage door, electrical, and plumbing services provider | $ | 50,914 | Equity | |||||
Add-On Investment | January 31, 2024 | Impact Home Services LLC* | Residential garage door, electrical, and plumbing services provider | $ | 22,331 | Equity | |||||
Add-On Investment | February 7, 2024 | Unicat Catalyst Holdings, LLC* | Manufacturer and distributor of catalysts and other industrial products | $ | 7,032 | Equity | |||||
Add-On Investment | February 28, 2024 | Monitorus Holding, LLC* | Provider of media monitoring and evaluation services | $ | 13,290 | Equity | |||||
*Existing portfolio company | |||||||||||
The Company realized investments in the following portfolio company subsequent to December 31, 2023:
Activity Type | Date | Company Name | Company Description | Proceeds Received | Instrument Type | ||||||
Full Repayment | January 8, 2024 | Peltram Plumbing Holdings, LLC* | Provider of plumbing solutions. | $ | 16,160,003 | Senior Secured – First Lien | |||||
*Existing portfolio company | |||||||||||
Credit Facility
The outstanding balance under the Credit Facility as of March 4, 2024 was $148.5 million.
Distributions Declared
On January 13, 2024, our Board of Directors declared a regular monthly distribution for each of January, February, and March 2024, as follows:
Ex-Dividend | Record | Payment | Amount per | ||||||
Declared | Date | Date | Date | Share | |||||
1/13/2024 | 1/30/2024 | 1/31/2024 | 2/15/2024 | $ | 0.1333 | ||||
1/13/2024 | 2/28/2024 | 2/29/2024 | 3/15/2024 | $ | 0.1333 | ||||
1/13/2024 | 3/28/2024 | 3/29/2024 | 4/15/2024 | $ | 0.1333 | ||||
Conference Call Information
Stellus Capital Investment Corporation will host a conference call to discuss these results on Tuesday, March 5, 2024 at 12:00 PM, Central Time. The conference call will be led by Robert T. Ladd, Chief Executive Officer, and W. Todd Huskinson, Chief Financial Officer, Chief Compliance Officer, Treasurer, and Secretary.
For those wishing to participate by telephone, please dial (888) 506-0062. Use passcode 183087. Starting approximately two hours after the conclusion of the call, a replay will be available through Tuesday, March 19, 2024 by dialing (877) 481-4010 and entering passcode 50028. The replay will also be available on the Company's website.
For those wishing to participate via Live Webcast, connect via the Public (SCIC) section of our website at www.stelluscapital.com, under the Events tab. A replay of the conference will be available on our website for approximately 90 days.
About Stellus Capital Investment Corporation
The Company is an externally-managed, closed-end, non-diversified investment management company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended. The Company's investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation by investing primarily in private middle-market companies (typically those with $5.0 million to $50.0 million of EBITDA (earnings before interest, taxes, depreciation and amortization)) through first lien (including unitranche) loans, second lien loans and unsecured debt financing, with corresponding equity co-investments. The Company's investment activities are managed by its investment adviser, Stellus Capital Management. To learn more about Stellus Capital Investment Corporation, visit www.stelluscapital.com under the "Public (SCIC)" tab.
Forward-Looking Statements
Statements included herein may contain "forward-looking statements" which relate to future performance or financial condition. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of assumptions, risks and uncertainties, which change over time. Actual results may differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including those described from time to time in filings by the Company with the Securities and Exchange Commission including the final prospectus that will be filed with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Contacts
Stellus Capital Investment Corporation
W. Todd Huskinson, Chief Financial Officer
(713) 292-5414
[email protected]
STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES | ||||||
December 31, 2023 | December 31, 2022 | |||||
ASSETS | ||||||
Control investments at fair value (amortized cost of $17,285,138 and $0, respectively) | $ | 6,175,994 | $ | — | ||
Non-controlled, non-affiliated investments, at fair value (amortized cost of $884,858,412 and $875,823,177, respectively) | 868,284,689 | 844,733,638 | ||||
Cash and cash equivalents | 26,125,741 | 48,043,329 | ||||
Receivable for sales and repayments of investments | 371,877 | 718,794 | ||||
Interest receivable | 4,882,338 | 3,984,409 | ||||
Income tax receivable | 1,588,708 | — | ||||
Other receivables | 42,995 | 34,245 | ||||
Deferred offering costs | 7,312 | 1,100 | ||||
Prepaid expenses | 606,674 | 667,267 | ||||
Total Assets | $ | 908,086,328 | $ | 898,182,782 | ||
LIABILITIES | ||||||
2026 Notes payable | $ | 98,996,412 | $ | 98,549,692 | ||
Credit Facility payable | 156,564,776 | 197,685,281 | ||||
SBA-guaranteed debentures | 320,273,358 | 307,895,195 | ||||
Management fees payable | 2,918,536 | 7,150,407 | ||||
Income incentive fees payable | 2,885,180 | 2,464,408 | ||||
Capital gains incentive fees payable | — | 569,528 | ||||
Interest payable | 5,241,164 | 4,640,841 | ||||
Related party payable | — | 1,060,321 | ||||
Unearned revenue | 397,725 | 320,675 | ||||
Administrative services payable | 402,151 | 356,919 | ||||
Income tax payable | — | 1,175,373 | ||||
Deferred tax liability | 188,893 | 61,936 | ||||
Other accrued expenses and liabilities | 278,345 | 475,593 | ||||
Total Liabilities | $ | 588,146,540 | $ | 622,406,169 | ||
Commitments and contingencies (Note 7) | ||||||
Net Assets | $ | 319,939,788 | $ | 275,776,613 | ||
NET ASSETS | ||||||
Common stock, par value $0.001 per share (100,000,000 shares authorized; 24,125,642 and 19,666,769 issued and outstanding, respectively) | $ | 24,125 | $ | 19,667 | ||
Paid-in capital | 335,918,984 | 275,114,720 | ||||
Total distributable (loss) earnings | (16,003,321) | 642,226 | ||||
Net Assets | $ | 319,939,788 | $ | 275,776,613 | ||
Total Liabilities and Net Assets | $ | 908,086,328 | $ | 898,182,782 | ||
Net Asset Value Per Share | $ | 13.26 | $ | 14.02 | ||
STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
For the years ended | |||||||||
December 31, 2023 | December 31, 2022 | December 31, 2021 | |||||||
INVESTMENT INCOME | |||||||||
Interest income | $ | 102,016,788 | $ | 72,964,999 | $ | 61,536,686 | |||
From control investments: | |||||||||
Interest income | $ | 37,897 | $ | — | $ | — | |||
From non-controlled, non-affiliated investments | |||||||||
Interest income | 101,978,891 | 72,964,999 | 61,536,686 | ||||||
Other income | 3,830,780 | 2,147,577 | 2,142,308 | ||||||
Total Investment Income | $ | 105,847,568 | $ | 75,112,576 | $ | 63,678,994 | |||
OPERATING EXPENSES | |||||||||
Management fees | $ | 15,452,347 | $ | 14,848,174 | $ | 13,169,606 | |||
Valuation fees | 373,628 | 351,752 | 313,437 | ||||||
Administrative services expenses | 1,908,191 | 1,810,576 | 1,798,966 | ||||||
Income incentive fees | 10,189,888 | 3,782,151 | 3,043,470 | ||||||
Capital gains incentive (reversal) fee | (569,528) | (2,818,623) | 2,867,131 | ||||||
Professional fees | 1,455,372 | 1,103,693 | 1,082,917 | ||||||
Directors' fees | 406,000 | 329,000 | 315,000 | ||||||
Insurance expense | 492,596 | 503,907 | 482,140 | ||||||
Interest expense and other fees | 32,011,317 | 24,469,285 | 18,721,058 | ||||||
Income tax expense | 1,333,452 | 1,161,668 | 1,102,374 | ||||||
Other general and administrative expenses | 891,170 | 984,309 | 1,006,428 | ||||||
Total Operating Expenses | $ | 63,944,433 | $ | 46,525,892 | $ | 43,902,527 | |||
Income incentive fee waiver | (307,442) | — | — | ||||||
Total Operating Expenses, net of fee waivers | $ | 63,636,991 | $ | 46,525,892 | $ | 43,902,527 | |||
Net Investment Income | $ | 42,210,577 | $ | 28,586,684 | $ | 19,776,467 | |||
Net realized loss on non-controlled, non-affiliated investments | $ | (30,211,467) | $ | 3,660,595 | $ | 23,710,167 | |||
Net realized loss on foreign currency translation | (112,481) | (6,091) | — | ||||||
Loss on debt extinguishment | — | — | (539,250) | ||||||
Net change in unrealized depreciation on control investments | (430,577) | — | — | ||||||
Net change in unrealized appreciation (depreciation) on non-controlled, non-affiliated investments | 3,222,729 | (17,542,230) | (6,928,160) | ||||||
Net change in unrealized (depreciation) appreciation on foreign currency translation | (6,504) | 6,040 | — | ||||||
(Provision) benefit for taxes on net unrealized (appreciation) depreciation on investments | (126,957) | (213,214) | 510,868 | ||||||
Benefit (provision) for taxes on net realized loss (gain) on investments | 2,987,847 | — | (2,957,220) | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 17,533,167 | 14,491,784 | 33,572,872 | |||||
Net Investment Income Per Share—basic and diluted | $ | 1.92 | $ | 1.46 | $ | 1.01 | |||
Net Increase in Net Assets Resulting from Operations Per Share – basic and diluted | $ | 0.80 | $ | 0.74 | $ | 1.72 | |||
Weighted Average Shares of Common Stock Outstanding—basic and diluted | 22,004,648 | 19,552,931 | 19,489,750 | ||||||
Distributions Per Share—basic and diluted | $ | 1.61 | $ | 1.30 | $ | 1.14 | |||
STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS | ||||||||||||||
Common Stock | Total | |||||||||||||
Number | Par | Paid-in | distributable | |||||||||||
of shares | value | capital | (loss) earnings | Net Assets | ||||||||||
Balances as of December 31, 2020 | 19,486,003 | $ | 19,486 | $ | 276,026,667 | $ | (2,685,504) | $ | 273,360,649 | |||||
Net investment income | — | — | — | 19,776,467 | 19,776,467 | |||||||||
Net realized gain on investments | — | — | — | 23,710,167 | 23,710,167 | |||||||||
Loss on debt extinguishment | — | — | — | (539,250) | (539,250) | |||||||||
Net change in unrealized depreciation on investments | — | — | — | (6,928,160) | (6,928,160) | |||||||||
Benefit for taxes on unrealized depreciation on investments | 510,868 | 510,868 | ||||||||||||
Provision for taxes on realized gain on investments | — | — | — | (2,957,220) | (2,957,220) | |||||||||
Return of capital and other tax related adjustments | — | — | (1,861,213) | 1,861,213 | — | |||||||||
Distributions from net investment income | — | — | — | (21,201,567) | (21,201,567) | |||||||||
Distributions from net realized capital gains | — | — | — | (1,014,420) | (1,014,420) | |||||||||
Issuance of common stock, net of offering costs(1) | 31,592 | 32 | 393,667 | — | 393,699 | |||||||||
Balances at December 31, 2021 | 19,517,595 | $ | 19,518 | $ | 274,559,121 | $ | 10,532,594 | $ | 285,111,233 | |||||
Net investment income | — | — | — | 28,586,684 | 28,586,684 | |||||||||
Net realized gain on investments | — | — | — | 3,660,595 | 3,660,595 | |||||||||
Net realized loss on foreign currency translation | — | — | — | (6,091) | (6,091) | |||||||||
Net change in unrealized depreciation on investments | — | — | — | (17,542,230) | (17,542,230) | |||||||||
Net change in unrealized appreciation on foreign currency translations | — | — | — | 6,040 | 6,040 | |||||||||
Provision for taxes on unrealized appreciation on investments | — | — | — | (213,214) | (213,214) | |||||||||
Return of capital and other tax related adjustments | — | — | (1,040,884) | 1,040,884 | — | |||||||||
Distributions from net investment income | — | — | — | (21,633,343) | (21,633,343) | |||||||||
Distributions from net realized capital gains | — | — | — | (3,789,693) | (3,789,693) | |||||||||
Issuance of common stock, net of offering costs(1) | 149,174 | 149 | 1,596,483 | — | 1,596,632 | |||||||||
Balances at December 31, 2022 | 19,666,769 | $ | 19,667 | $ | 275,114,720 | $ | 642,226 | $ | 275,776,613 | |||||
Net investment income | — | — | — | 42,210,577 | 42,210,577 | |||||||||
Net realized loss on investments | — | — | — | (30,211,467) | (30,211,467) | |||||||||
Net realized loss on foreign currency translation | — | — | — | (112,481) | (112,481) | |||||||||
Net change in unrealized appreciation on investments | — | — | — | 2,792,152 | 2,792,152 | |||||||||
Net change in unrealized depreciation on foreign currency translations | — | — | — | (6,504) | (6,504) | |||||||||
Provision for taxes on unrealized appreciation on investments | — | — | — | (126,957) | (126,957) | |||||||||
Benefit for taxes on realized loss on investments | — | — | — | 2,987,847 | 2,987,847 | |||||||||
Return of capital and other tax related adjustments | — | — | (1,348,766) | 1,348,766 | — | |||||||||
Distributions from net investment income | — | — | — | (35,080,734) | (35,080,734) | |||||||||
Distributions from net realized capital gains | — | — | — | (446,746) | (446,746) | |||||||||
Issuance of common stock, net of offering costs(1) | 4,458,873 | 4,458 | 62,153,030 | — | 62,157,488 | |||||||||
Balances at December 31, 2023 | 24,125,642 | $ | 24,125 | $ | 335,918,984 | $ | (16,003,321) | $ | 319,939,788 | |||||
(1) | See Note 4 to the Consolidated Financial Statements on Form 10-Q filed with the Securities and Exchange Commission on March 4, 2024 for more information on offering costs. |
STELLUS CAPITAL INVESTMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
For the years ended | |||||||||
December 31, 2023 | December 31, 2022 | December 31, 2021 | |||||||
Cash flows from operating activities | |||||||||
Net increase in net assets resulting from operations | $ | 17,533,167 | $ | 14,491,784 | $ | 33,572,872 | |||
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities: | |||||||||
Purchases of investments | (183,858,762) | (211,010,869) | (387,281,160) | ||||||
Proceeds from sales and repayments of investments | 134,223,224 | 127,548,194 | 287,639,512 | ||||||
Net change in unrealized (appreciation) depreciation on investments | (2,792,152) | 17,542,230 | 6,928,160 | ||||||
Net change in unrealized depreciation (appreciation) on foreign currency translations | 6,360 | (5,897) | — | ||||||
Increase in investments due to PIK | (3,799,843) | (1,357,177) | (939,030) | ||||||
Amortization of premium and accretion of discount, net | (2,749,543) | (2,519,462) | (2,412,991) | ||||||
Deferred tax provision (benefit) | 126,957 | 213,214 | (510,868) | ||||||
Amortization of loan structure fees | 657,323 | 567,375 | 518,930 | ||||||
Amortization of deferred financing costs | 446,720 | 446,719 | 444,153 | ||||||
Amortization of loan fees on SBA-guaranteed debentures | 1,255,753 | 1,227,952 | 1,088,132 | ||||||
Net realized loss (gain) on investments | 30,211,467 | (3,660,595) | (23,703,499) | ||||||
Loss on debt extinguishment | — | — | 539,250 | ||||||
Changes in other assets and liabilities | |||||||||
Increase in interest receivable | (897,929) | (1,039,810) | (755,151) | ||||||
Increase in income tax receivable | (1,588,708) | — | — | ||||||
(Increase) decrease in other receivables | (8,750) | 20,507 | (29,257) | ||||||
Decrease (increase) in prepaid expenses | 60,593 | (155,053) | (25,026) | ||||||
(Decrease) increase in management fees payable | (4,231,871) | 3,696,182 | 628,903 | ||||||
Increase in income incentive fees payable | 420,772 | 715,278 | 1,067,470 | ||||||
(Decrease) increase in capital gains incentive fees payable | (569,528) | (2,818,623) | 2,867,130 | ||||||
Increase (decrease) in administrative services payable | 45,232 | (29,449) | (5,123) | ||||||
Increase in interest payable | 600,323 | 947,179 | 1,549,577 | ||||||
(Decrease) increase in related party payable | (1,060,321) | 1,060,321 | — | ||||||
Increase (decrease) in unearned revenue | 77,050 | (209,051) | 6,302 | ||||||
(Decrease) increase in income tax payable | (1,175,373) | (2,094,141) | 2,544,749 | ||||||
(Decrease) increase in other accrued expenses and liabilities | (197,248) | 136,635 | 164,227 | ||||||
Net Cash Used in Operating Activities | $ | (17,265,087) | $ | (56,286,557) | $ | (76,102,738) | |||
Cash flows from Financing Activities | |||||||||
Proceeds from the issuance of common stock | $ | 63,348,436 | $ | 2,158,540 | $ | 449,515 | |||
Sales load for common stock issued | (943,248) | (31,066) | (2,489) | ||||||
Offering costs paid for common stock issued | (253,913) | (517,054) | (53,327) | ||||||
Stockholder distributions paid | (35,527,480) | (26,594,095) | (21,044,928) | ||||||
Repayment of Notes | — | — | (48,875,000) | ||||||
Proceeds from issuance of Notes | — | — | 100,000,000 | ||||||
Financing costs paid on Notes | — | — | (2,237,835) | ||||||
Proceeds from SBA-guaranteed debentures | 11,400,000 | 63,600,000 | 73,500,000 | ||||||
Financing costs paid on SBA-guaranteed debentures | (277,590) | (1,548,660) | (3,139,725) | ||||||
Financing costs paid on Credit facility | (2,663,106) | (193,635) | (136,219) | ||||||
Borrowings under Credit Facility | 108,400,000 | 149,888,800 | 268,700,000 | ||||||
Repayments of Credit Facility | (148,135,600) | (126,607,800) | (265,360,000) | ||||||
Partial share redemption | — | — | — | ||||||
Net Cash (Used) Provided by Financing Activities | $ | (4,652,501) | $ | 60,155,030 | $ | 101,799,992 | |||
Net (Decrease) Increase in Cash and Cash Equivalents | $ | (21,917,588) | $ | 3,868,473 | $ | 25,697,254 | |||
Cash and Cash Equivalents Balance at Beginning of Period | 48,043,329 | 44,174,856 | 18,477,602 | ||||||
Cash and Cash Equivalents Balance at End of Period | $ | 26,125,741 | $ | 48,043,329 | $ | 44,174,856 | |||
Supplemental and Non-Cash Activities | |||||||||
Cash paid for interest expense | $ | 29,051,198 | $ | 21,280,060 | $ | 15,099,656 | |||
Income and excise tax paid | 2,508,825 | 3,255,809 | 1,445,000 | ||||||
(Decrease) increase in distributions payable | — | (1,171,059) | 1,171,059 | ||||||
Increase (decrease) in deferred offering costs | 6,212 | (13,788) | (75,112) | ||||||
Gain on conversion of equity investment | — | — | 6,668 | ||||||
Exchange of investments | 3,610,846 | — | — | ||||||
Reconciliation of Core Net Investment Income (1) (Unaudited) | ||||||||
Three Months Ended | Three Months Ended | Year Ended | Year Ended | |||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||
Net investment income | $11,908,914 | $9,708,610 | $42,210,577 | $28,586,684 | ||||
Capital gains incentive reversal | — | (1,146,074) | (569,528) | (2,818,623) | ||||
Income tax expense | 251,395 | 94,900 | 1,333,452 | 1,161,668 | ||||
Core net investment income | $12,160,309 | $8,657,436 | $42,974,501 | $26,929,729 | ||||
Per share amounts: | ||||||||
Net investment income per share | $0.49 | $0.50 | $1.92 | $1.46 | ||||
Core net investment income per share | $0.50 | $0.44 | $1.95 | $1.38 | ||||
Reconciliation of Realized Net Investment Income (2) (Unaudited) | ||||||||
Three Months Ended | Three Months Ended | Year Ended | Year Ended | |||||
December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||
Net investment income | $11,908,914 | $9,708,610 | $42,210,577 | $28,586,684 | ||||
Net realized loss on investments | (30,536,249) | (998,222) | (30,211,467) | 3,660,595 | ||||
Net realized loss on foreign currency translation | (39,699) | 1,935 | (112,481) | (6,091) | ||||
Benefit for taxes on realized loss on investments | 2,987,847 | — | 2,987,847 | — | ||||
Total Realized Net Investment Income | ($15,679,187) | $8,712,323 | $14,874,476 | $32,241,188 | ||||
Per share amounts: | ||||||||
Net investment income per share | $0.49 | $0.50 | $1.92 | $1.46 | ||||
Realized net investment income per share | ($0.65) | $0.44 | $0.68 | $1.65 | ||||
SOURCE Stellus Capital Investment Corporation
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