Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q1 2023 Earnings Presentation
25 slides from Stellus Capital Investment's earnings presentation, May 10, 2023
Slide 1: Stellus Capital Investment Corporation Investor Presentation
STELLUS CAPITAL INVESTMENT CORPORATION Investor Presentation Quarter ended March 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: Contents
Contents Stellus Capital Investment Corp. (NYSE: “SCM”) Page 4 Stellus Capital Management’s Competitive Advantage Page 5 Company Overview Page 11 Portfolio Overview WASHINGTON D.C. AREA 4520 East West Highway, Suite 605 Bethesda, MD 20814 Page 16 Performance and Dividends 301.634.3000 CHARLOTTE, NC
Slide 4: There are 48 Publicly-Traded BDCs ~ What is our Competitive Advantage?
There are 48 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 $877 million as of March 31, • 5-year RO
Slide 5: Company Overview: Navigating Lower Middle Market Capital Solutions
COMPANY OVERVIEW: Navigating Lower Middle Market Capital Solutions 5
Slide 6: Stable Growth with Access to Low-Cost Capital
Stable Growth with Access to Low-Cost Capital Management team focused on maintaining asset quality, proper capital allocation, and operational excellence 2012 2014 2017 2019 2020 - 2023 Net $173.8 Million $173.9 Million $220.2 Million $270.6 Million $280.9 Million Assets Stellus Capital Investment R
Slide 7: 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 • Private companies generating • Focus on originated loans, as $30 million per transaction. between $5 and $50 million of opposed to broadly syndica
Slide 8: Established Team and Institutional Platform
Established Team and Institutional Platform Stellus Capital Management’s* investment committee members have backgrounds in private credit, private equity, corporate finance, restructuring, management consulting, and accounting. TOTAL YEARS PAST - - - - - - - - - - - - - - - - - 5 10 15 20 25 30 35 4
Slide 9: Diverse Sponsor Relationships and Investment Experience
Diverse Sponsor Relationships and Investment Experience All partners have significant experience in restructuring Partners have invested Management team has approximately $8.5+ been investing together billion over the last 19 for over 19 years years* Stellus Capital Relationship-driven Management Te
Slide 10: Diverse Financial Sponsor Relationships
Diverse Financial Sponsor Relationships* *Logos represent certain private equity firms that members of Stellus Capital have worked with in the past. Inclusion of a firm’s logo in this list does not imply that such firm endorses Stellus Capital, its members or advisory services or SCM. Stellus Capita
Slide 11: 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 88 ~350 $8.5+ Cumulative Current Active Billion Completed Investments Invested Capital Investments Select List of Investme
Slide 12: Portfolio Statistics as of March 31, 2023
Portfolio Statistics as of March 31, 2023 Diverse Portfolio / Low Exposure to Retail and Energy No Geographic Concentration Over 25% Industry Concentration Geographic Concentration High Tech Energy: Oil & Gas <1% Hotel, Gaming, & North Carolina Idaho New York Industries 1% Finance <1% Leisure <1% Un
Slide 13: Stable Asset Quality: Portfolio is Performing in Accordance with Plan
Stable Asset Quality: Portfolio is Performing in Accordance with Plan Investment Category at 03/31/2023 RG 5 RG 4 0% 2% Investment Category Definitions (“Risk Grade” or “RG”): RG 1 1 Exceeding expectations 18% RG 3 2 Performing in accordance with 15% plan 3 Requires closer monitoring (no loss of ret
Slide 14: Debt Portfolio is 94% 1st Lien
Debt Portfolio is 94% 1st Lien Debt Investment Portfolio Fixed vs. Floating Rate Debt Investments * as of March 31, 2023 100% Fixed 94% 90% 3% 80% 70% 60% 50% 40% 30% 20% 14.2% 11.9% Floating 10% 5.6% 5% <1% 97% 0% 1st Lien Debt* 2nd Lien debt Unsecured debt % of Total Debt Portfolio Weighted Averag
Slide 15: Numerous Sources of Long-Term / Cost-Efficient Capital
Numerous Sources of Long-Term / Cost-Efficient Capital FUNDING SOURCES FACILITY/ISSUANCE SIZE OUTSTANDING(2) INTEREST RATE(3) MATURITY Syndicated Credit Facility led by $265 million $198 million SOFR + 2.6% September 18, 2025 Amegy(1) (4) SBIC I Debentures $150 million $150 million 3.41% Varied SBIC
Slide 16: Financial Performance and Distributions
Financial Performance and Distributions 16
Slide 17: Investment Portfolio Growth Since IPO
Investment Portfolio Growth Since IPO 17
Slide 18: First Quarter 2023 Overview
First Quarter 2023 Overview $0.45 Core NII per share* $41.2 million New investment activity during the quarter $877 Million Investments at fair value at March 31, 2023 Fou r N ew I n itial I nvestment Fu ndings & Two Follow On 12.16% I n vestments Weighted average yield on new investments New loan f
Slide 19: Cumulative Distributions Declared per share Since IPO
Cumulative Distributions Declared per share Since IPO $14.15 per share in cumulative distributions declared since SCM IPO in 2012* $14.15 per share in cumulative $16.00 distributions since $14.15 $14.00 $13.35 SCM IPO in 2012* $12.05 $12.00 $10.91 $9.76 $10.00 $8.40 Monthly dividends of $8.00 $7.04
Slide 20: Comparative Total Return LTM
Comparative Total Return LTM 140% 130% 31.16% 120% 8.80% 110% 6.84% 4.94% 3.10% 100% 0.14% 90% -10.28% 80% 70% -30.06% 60% Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr SCM (31.16%) Alerian MLP (8.80%) S&P/LSTA U.S. Leveraged Loan 100 (6.84%) S&P 500 (4.94%) RJ BDC Index (Mkt Cap Weight) (3.10%) RJ BD
Slide 21: Corporate Information
Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Raymond James Share Price $14.70 Chairman, President & Robert Dodd, 901-579-4560 Chief Executive Officer Bruce R. Bilger 1 Shares Outstanding 20,835,746 Keefe, Bruyette & Woods W. T
Slide 22: Stellus Capital Investment Corporation
STELLUS CAPITAL INVESTMENT CORPORATION Investor Presentation Quarter ended March 31, 2023 HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 23: Financial Highlights
Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 Amount Per Share Amount Per Share Net investment income $9.07 $0.46 $5.51 $0.28 Core net investment income(1) 8.87 0.45 5.75 0.29
Slide 24: Portfolio Characteristics
Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) (1) The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt and other income producing investments, including cash, PIK int
Slide 25: Recent Dividends Declared
Recent Dividends Declared* On April 19, 2023, the board declared a regular dividend of $0.1333 per share for each of April, May and June 2023, for an aggregate of $0.40 per share. Ex-Dividend Record Payment Amount per Declared Date Date Date Share 4/19/2023 4/28/2023 5/1/2023 5/15/2023 $ 0.1333 4/19
Stellus Capital Investment — Q1 2023 Earnings Presentation on 6ix