Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q3 2022 Earnings Presentation
25 slides from Stellus Capital Investment's earnings presentation, Nov 4, 2022
Slide 1: Stellus Capital Investment Corporation Investor Presentation
STELLUS CAPITAL INVESTMENT CORPORATION Investor Presentation Quarter ended September 30, 2022 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”) Stellus Capital Management’s Competitive Page 4 Advantage Page 5 Company Overview WASHINGTON D.C. AREA 4520 East West Highway, Suite 605 Page 11 Portfolio Overview Bethesda, MD 20814 301.634.3000 CHARLOTTE, NC Page 16 Performance and Dividends
Slide 4: 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 $872 million as of September • 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 - 2022 Net $173.8 Million $173.9 Million $220.2 Million $270.6 Million $285.0 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 $8.1 been investing together billion over the last 18 for over 18 years years* Stellus Capital Relationship-driven Management Tea
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: 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 89 330+ Current Active Cumulative $8.1+ Completed Billion Investments Investments Invested Capital Select List of Investme
Slide 12: Portfolio Statistics as of September 30, 2022
Portfolio Statistics as of September 30, 2022 Diverse Portfolio / Low Exposure to Retail and Energy No Geographic Concentration Over 25% Industry Concentration Geographic Concentration High Tech Industries Utilities: Oil & Gas Finance Media: Diversified & North Carolina Idaho Virginia Puerto Rico 1%
Slide 13: Stable Asset Quality: Portfolio Performing in Accordance with Plan
Stable Asset Quality: Portfolio is Performing in Accordance with Plan Investment Category at 9/30/2022 RG 5 RG 4 0% 3% Investment Category Definitions (“Risk Grade” or “RG”): RG 1 1 Exceeding expectations 18% 2 Performing in accordance with RG 3 plan 15% 3 Requires closer monitoring (no loss of retu
Slide 14: Debt Portfolio is 92% 1st Lien
Debt Portfolio is 92% 1st Lien Debt Investment Portfolio Fixed vs. Floating Rate Debt Investments * as of September 30, 2022 100% Fixed 92% 90% 3% 80% 70% 60% 50% 40% 30% 20% 14.2% 10.2% Floating 10% 7% 6.1% <1% 97% 0% 1st Lien Debt* 2nd Lien debt Unsecured debt % of Total Debt Portfolio Weighted Av
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 $199 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
$100,000 $150,000 $350,000 $450,000 $500,000 $700,000 $200,000 $550,000 $600,000 $750,000 $850,000 $250,000 $300,000 $400,000 $650,000 $900,000 $800,000 $ in 000s Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q
Slide 18: Third Quarter 2022 Overview
Third Quarter 2022 Overview $0.35 Core NII per share* Seven New Initial Investment $56.9 million Fundings & Nineteen Follow On New investment activity during the quarter Investments New loan fundings were 100% 1st lien with a weighted $1.6 million average yield of 10.23% Realized gain during the qua
Slide 19: Cumulative Distributions Declared per Share Since IPO
Cumulative Distributions Declared per share Since IPO $13.01 per share in cumulative distributions declared since SCM IPO in 2012 (as of September 30, 2022) $13.01 per share in cumulative $14.00 $13.01 distributions since $12.05 SCM IPO in 2012 (as of $12.00 $10.91 September 30, 2022) $9.76 $10.00 $
Slide 20: Comparative Total Return LTM
Comparative Total Return LTM 140% 130% 120% 20.76% 110% 5.51% 100% -2.34% -7.61% 90% -10.52% -15.92% 80% -21.62% 70% -37.67% 60% 50% 40% Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Alerian MLP (20.76%) SCM (5.51%) S&P/LSTA U.S. Leveraged Loan 100 (-2.34%) RJ BDC Index (Mkt Cap Weight) (-7.61%) R
Slide 21: Corporate Information
Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Raymond James Share Price $13.27 Chairman, President & Robert Dodd, 901-579-4560 Chief Executive Officer Bruce R. Bilger 1 Shares Outstanding 19,545,935 Keefe, Bruyette & Woods W. T
Slide 22: Stellus Capital Investment Corporation
STELLUS CAPITAL INVESTMENT CORPORATION Investor Presentation Quarter ended September 30, 2022 HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 23: Financial Highlights
Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) Q3 2022 YTD 2022 Amount Per Share Amount Per Share Net investment income $7.19 $0.37 $18.88 $0.97 Core net investment income (1) 6.90 0.35 18.27 0.94 Net realized gains on investments 1.55 0.08 4.6
Slide 24: Portfolio Characteristics
Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) As of As of As of As of September 30, December 31, September 30, December 31, 2022 2021 2022 2021 Investments at fair value $871.1 $772.9 Number of portfolio company investments 89
Slide 25: Recent Dividends Declared
Recent Dividends Declared* On October 4, 2022, the board declared a regular dividend of $0.0933 per share and an additional dividend of $0.02 per share in each of October, November, and December 2022, for an aggregate of $0.34 per share. Ex- Regular Additional Total Record Payment Declared Dividend
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