Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q2 2021 Earnings Presentation
27 slides from Stellus Capital Investment's earnings presentation, Jun 30, 2021
Slide 1: Investor Presentation: Second quarter ended June 30, 2021
Investor Presentation Second quarter ended June 30, 2021
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 WASHINGTON D.C. AREA Page 11 Portfolio Overview 4520 East West Highway, Suite 605 Bethesda, MD 20814 Page 16 Performance and Dividends 301.634.3000 CHARLOTTE, NC
Slide 4: There are 46 Publicly-Traded BDCs: What is our Competitive Advantage?
There are 46 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 $781.9 million as of June 30, 2021 • In
Slide 5: Company Overview: Navigating Lower Middle Market Capital Solutions
COMPANY OVERVIEW: Navigating Lower Middle Market Capital Solutions 5
Slide 6: Stable Growth with Ample Access to Low-Cost Capital
Stable Growth with Ample Access to Low-Cost Capital Management team focused on maintaining asset quality, proper capital allocation, and operational excellence 2012 2014 2017 2019 2020 / 21 Net $173.8 Million $173.9 Million $220.2 Million $270.6 Million $274.2 Million at 6/30/2021 Assets* Stellus Ca
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 $30 • Private companies generating between • Focus on originated loans, as opposed to million per transaction. $5 and $50 million of EBITDA. broadly
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 Management team has been Partners have invested in excess investing together for over 20 of $6 billion over the last 16 years years * Stellus Capital Management Relationship-driven team
Slide 10: Diverse Financial Sponsor Relationships
Diverse Financial Sponsor Relationships* Riverside Partners *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
Slide 11: Stellus 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 75 290+ $6.6+ Current Active Cumulative Completed Billion Investments Investments Invested Capital Select List of Investme
Slide 12: Portfolio Statistics as of June 30, 2021
Portfolio Statistics as of June 30, 2021 Diverse Portfolio / Low Exposure to Retail and Energy No Geographic Concentration Over 20% Industry Concentration Geographic Concentration Utilities: Oil & Gas Finance VA TN PR NH MA Hotel, Gaming, & Leisure UT Construction & Building 1% 1% Energy: Oil & Gas
Slide 13: Managing Risk: Resilient Portfolio Prior to and Throughout COVID-19
Managing Risk: Resilient Portfolio Prior to and Throughout COVID-19 Pandemic Over 90% of portfolio exceeding expectations or performing in accordance with plan Investment Category at 12/31/2019 Investment Category at 6/30/2021 RG 5 RG 5 Investment Category Definitions: RG 4 1% 2% 1% 1 Exceeding expe
Slide 14: Debt Portfolio is 89% 1st Lien
Debt Portfolio is 89% 1st Lien Debt Investment Portfolio Fixed vs. Floating Rate Debt Investments * as of June 30, 2021 90% 89% 80% Fixed 70% 4% 60% 50% 40% 30% 20% 12.7% 10% 8.2% 8% 7.3% Floating 3% 96% 0% 1st Lien Debt 2nd Lien debt Unsecured debt % of Total Debt Portfolio Weighted Average Yield C
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 $230 million $192.6 million LIBOR + 2.5% September 18, 2025 Facility led by Amegy(1) (4) SBIC I Debentures $150 million $150 million 3.41% Varied (
Slide 16: Financial Performance and Distributions
Financial Performance and Distributions 16
Slide 17: Investment Portfolio Growth Since IPO
Investment Portfolio Growth Since IPO $ in 000s $750,000 80 $700,000 75 FV of Investment Portfolio at Quarter End # of Portfolio Companies 70 $650,000 65 $600,000 60 $550,000 55 $500,000 50 45 $450,000 40 $400,000 35 $350,000 30 $300,000 25 20 $250,000 15 $200,000 10 $150,000 5 $100,000 - Q4 Q1 Q2 Q
Slide 18: Second Quarter 2021 Overview
Second Quarter 2021 Overview $0.28 Seven New Initial Investment NII per share Fundings New loan fundings were 100% 1st lien with a weighted average yield $85.6 million of 7.9% New investment activity during the quarter Distributions 7.9% $0.25 per share in the aggregate paid to stockholders in Weigh
Slide 19: Cumulative Distributions Declared per share Since IPO
Cumulative Distributions Declared per share Since IPO $12.00 $11.41 $10.91 $11.41 per share in cumulative distributions $10.00 $9.76 since Stellus IPO in 2012 (as of March 30, 2021) $8.40 $8.00 $7.04 Monthly dividends of $0.09 declared for April, May, and $6.00 $5.68 June 2021 $4.32 $4.00 $2.96 Curr
Slide 20: Comparative Total Return LTM
Comparative Total Return LTM 20
Slide 21: Favorable Performance Not Reflected in Comparative Price to Book
Favorable Performance Not Reflected in Comparative Price to Book (based on a 3-Year ROE) • Stellus has delivered a 3-year average return on equity* (ROE) of 9.8% - In the top 10 of all publicly traded BDCs • BDCs performing at this level trade at an implied price to NAV of approximately 1.1x • Stell
Slide 22: Future / Why Stellus
Stability and Growth Continued Throughout 2020 2020 Future / Why Stellus Sustainable Financial Structure Stable Portfolio Achieve Higher than Peer ROE and Shareholder Returns Strong portfolio performance Extended and expanded capital Over the past 3 years, SCM is in throughout the pandemic structure
Slide 23: Corporate Information
Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Hovde Group Share Price** $12.97 Chairman, President & Bryce Rowe, 804-318-0969 Chief Executive Officer Bruce R. Bilger 1 Shares Outstanding 19,486,003 Keefe, Bruyette & Woods W. To
Slide 24: Appendix and Financial Supplements
Appendix and Financial Supplements HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 25: Financial Highlights
Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) Q2-21 YTD-21 Amount Per Share Amount Per Share Net investment income $5.53 $0.28 $10.60 $0.54 Core net investment income (1) 5.84 0.30 11.22 0.58 Net realized (loss) on investments (1.78) (0.09) (1
Slide 26: Portfolio Characteristics
Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) As of As of As of As of June 30, December 31, June 30, December 31, 2021 2020 2021 2020 Investments at fair value $781.9 $653.4 Number of portfolio company investments 76 66 Total a
Slide 27: Dividends Declared
Dividends Declared Paid Monthly On July 20, 2021, the Company’ Board of Directors declared a monthly dividend of $0.09 per share for each of the months of July, August, and September 2021, which is $0.27 per share in the aggregate for the second quarter. In addition, the board has declared a supplem
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