Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q4 2023 Earnings Presentation
22 slides from Stellus Capital Investment's earnings presentation, Mar 5, 2024
Slide 1: Stellus Capital Investment Corporation Investor Presentation
Stellus Capital Investment Corporation Investor Presentation Year ended December 31, 2023 HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY. THE INFORMATION CONTAINED HEREIN IS NOT INTENDED TO PROVIDE, AND SHOULD NOT BE RELIED UPON FOR, ACCOUNTING, LEGAL OR TAX ADVICE OR INVESTMENT RECOMMENDATIONS. THIS PRESENTATION IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER
Slide 3: There are 47 Publicly-Traded BDCs ~ What is our Competitive Advantage?
There are 47 Publicly-Traded BDCs ~ What is our Competitive Advantage? Strong Historical Portfolio Performance and Consistent Returns to Shareholders Strong History of Underwriting Credit Favorable Performance Over Time • Fair Value of investment portfolio of $874.5 million as of • ROE since IPO of
Slide 4: SCM Provides Flexible Financing for Middle Market Companies
SCM Provides Flexible Financing for Middle Market Companies Investment Type & Size Investment Focus Origination Focus Investment size between $10 and $60 Private companies generating between Focus on originated loans, as opposed million per transaction. $5 and $50 million of EBITDA. to broadly
Slide 5: Established Private Credit Team and Institutional Platform
Established Private Credit Team and Institutional Platform • Stellus’ private credit team’s long tenure enables cohesive evaluation and efficient execution of investment opportunities Experienced Team Longevity Continuity Extensive underwriting and Senior members of the investment team have Five of
Slide 6: Diverse Sponsor Relationships and Investment Experience
Diverse Sponsor Relationships and Investment Experience All partners have significant experience in restructuring Management team has been Partners have invested investing together for over 20 approximately $9.0 billion since years 2004* Stellus Capital Management Relationship-driven team who Team H
Slide 7: Sourcing and Origination
Sourcing and Origination • The Stellus deal team is responsible for origination and sourcing utilizing a highly focused regional approach resulting in a diverse financial sponsor network. • Since 2004, the Stellus Capital team has partnered with over 190 unique sponsors1 1. Includes investments cons
Slide 8: Stellus Capital Management has one of the most experienced lower middle market investment teams
Stellus Capital Management has one of the most experienced lower middle market investment teams in the marketplace with over 300 combined years of principal investing experience 96 ~350 ~$9.0 Cumulative Current Active Billion Completed Investments Invested Capital Investments Select List of Investme
Slide 9: SCM Focuses on Shareholders
SCM Focuses on Shareholders • SCIC aligns interest with shareholders Incentive Fee Hurdle Rate 1 Total Return Hurdle Rate 1 8.2% 8.0% <50% 8.0% 7.8% SCIC has a total return hurdle of externally- 7.6% (aka a "lookback") that can limit 7.4% 7.3% the income-based incentive fee in managed publicly- 7.2%
Slide 10: Stable Asset Quality: Portfolio is Performing in Accordance with Plan
Stable Asset Quality: Portfolio is Performing in Accordance with Plan Investment Category Definitions at fair Risk Grade Trends value (“Risk Grade” or “RG”): 17% 18% 1 Exceeding expectations 25% 25% 24% 2 Performing in accordance with plan 3 Requires closer monitoring 66% 65% 61% 61% 62% (no loss of
Slide 11: Loan Investment Portfolio
Loan Investment Portfolio Historical Return on Equity of 1st Lien Debt* Yield of 12.2% 2nd Lien Debt Yield of 7.5% Unsecured Debt Yield of 14.2% >2.5x** Consistent Focus on Secured Investments 7% 7% 7% 7% 8% 1% 1% 1% 1% 2% 1% 5% 5% 4% 2% 87% 87% 88% 90% 89% Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 1s
Slide 12: Portfolio Construction as of December 31, 2023
Portfolio Construction as of December 31, 2023 Broad Industry Diversification 11.9% 10.5% 97% 11.7% First Lien / Senior Secured Weighted Average Yield 6.7% Debt4 6.1% $10.50 23.7% 5.2% 99% Average Loan Investment Size 5.0% Sponsor Backed (in millions)1 Transactions1 3.9% 1.8% 98% 3.8% 3.5% Largest I
Slide 13: Investment Portfolio Growth Since IPO
Investment Portfolio Growth Since IPO Historical Capital Deployment, Deal Activity, and SCIC Milestones $900,000 FV of Investment Portfolio # of Portfolio Companies 105 100 $850,000 Receives second SBIC 95 License $800,000 90 Stellus Capital $750,000 Investment Corporation 85 completes IPO in Comple
Slide 14: Fourth Quarter 2023 Overview
Fourth Quarter 2023 Overview $0.49 Core NII per share* $44.2 million New investment activity during the quarter $874.5 million Investments at fair value as of December 31, 2023 Three New Initial Investment Fundings & Eleven Follow On 12.28% Investments Weighted average yield on new debt investments
Slide 15: Cumulative Distributions Declared per share Since IPO
Cumulative Distributions Declared per share Since IPO Monthly dividends of Annualized indicated $15.35 per share in Current monthly $0.1333 per share dividend yield of cumulative dividend is $0.40 per declared in Q4 for ~12% while distributions since share for the October, November, maintaining a st
Slide 16: Numerous Sources of Long-Term / Cost-Efficient Capital
Numerous Sources of Long-Term / Cost-Efficient Capital • Favorable floating rate asset and liability mix as 98% of our portfolio companies are floating rate loans and 73% of our funded debt liabilities are at fixed interest rates. • Access to low cost, fixed rate, longer-term leverage from the U.S.
Slide 17: Comparative Total Return Since Stellus IPO
Comparative Total Return Since Stellus IPO 350% 276.02% 208.92% 300% 187.29% 250% 200% 102.92% 60.28% 150% 39.25% 100% -28.61% 50% -58.26% 0% '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 S&P 500 (276.02%) RJ BDC Index (Equal Weight) (208.92%) SCM (187.29%) RJ BDC Index (Mkt Cap Weight) (102.92%) S&P/
Slide 18: Corporate Information
Corporate Information Executive Officers Securities Listing Research Coverage Robert T. Ladd Common Stock NYSE : SCM Raymond James Chairman, President & Robert Dodd, 901-579-4560 Chief Executive Officer Corporate Headquarters Keefe, Bruyette & Woods W. Todd Huskinson 4400 Post Oak Parkway, Suite 220
Slide 19: Income Statement Summary
Income Statement Summary Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 INVESTMENT INCOME (audited) (unaudited) (unaudited) (unaudited) (audited) Interest income $ 22,572,562 $ 23,408,604 $ 25,662,895 $ 26,223,986 $ 26,721,303 Other income 794,298 666,743 922,122 941,040 1,300,875 Total Investment Income $
Slide 20: Per Share Change in Net Asset Value (NAV)
Per Share Change in Net Asset Value (NAV) Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 (1) Per Share Data: (audited) (unaudited) (unaudited) (unaudited) (audited) Net asset value at beginning of period $ 14.18 $ 14.02 $ 13.87 $ 13.67 $ 13.19 Net investment income 0.50 0.46 0.49 0.47 0.49 Change in unreal
Slide 21: Balance Sheet Summary
Balance Sheet Summary Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 ASSETS (audited) (unaudited) (unaudited) (unaudited) (audited) Investments at fair value $ 844,733,638 $ 877,493,781 $ 881,666,450 $ 886,338,148 $ 874,460,683 Cash and cash equivalents 48,043,329 17,852,100 14,924,382 19,210,721 26,125,74
Slide 22: Liquidity and Capitalization
Liquidity and Capitalization Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Assets Available (audited) (unaudited) (unaudited) (unaudited) (audited) SCM cash and cash equivalents $ 2,022,587 $ 1,449,824 $ 2,708,699 $ 660,065 $ 2,215,740 (1) SBIC cash and cash equivalents 46,020,742 16,402,276 12,215,683 18
Stellus Capital Investment — Q4 2023 Earnings Presentation on 6ix