Stellus Capital Investment Corporation · NYSE:SCM

Stellus Capital Investment — Investor Day (December 2021)

28 slides from Stellus Capital Investment's investor day presentation, Dec 14, 2021

  1. Slide 1: Stellus Capital Investment Corporation Investor Day

    Stellus Capital Investment Corporation Investor Day December 14, 2021 HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC

  2. 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

  3. Slide 3: Introduction to Stellus

    Introduction to Stellus Overview Stellus Capital Management, SCM’s investment adviser (“Stellus Based in Houston, TX Capital”), has one of the most experienced private credit investment teams in the marketplace with over 300 combined years of principal investing experience WASHINGTON D.C. AREA 4520

  4. Slide 4: Representatives: Select Team Biographies

    Representatives Select Team Biographies ▪ Prior to Stellus Capital, joined the D. E. Shaw group in 2004 to lead the launch of the firm’s Direct Capital Unit, following a Robert T. Ladd distinguished career in principal investing, energy, corporate finance and restructuring, and commercial banking. H

  5. Slide 5: Representatives: Selected Team Biographies

    Representatives Selected Team Biographies ▪ Prior to Stellus Capital, joined the D. E. Shaw group in 2004 to participate in the launch of the firm’s Direct Capital Unit. Joshua Davis ▪ Former Vice President of Duke Capital Partners, LLC, a merchant banking subsidiary of Duke Energy Corporation focus

  6. Slide 6: Why Invest? $2.1 Billion AUM for Stellus Platform

    Why Invest? 8.4 Current % 9.9 3-Year % 9 Track Record of Years Dividend Yield (1) Return-on-Equity (1) Covering Dividend 17 Management Years $ 7 Billion Invested in 300 Track Record Companies $2.1 Billion AUM for Stellus Platform (1) Past performance is not indicative of future results. No assurance

  7. Slide 7: Stellus Capital Investment Highlights

    Stellus Capital Investment Highlights Why Us? Experienced, ▪ Partners have worked together for over 17 years and have built a culture of promoting from within Cohesive Team ▪ Combine both extensive direct lending and restructuring experience ▪ Sourced and managed across multiple cycles over $7.1 bil

  8. Slide 8: The Advantages of the Lower Middle Market

    The Advantages of the Lower Middle Market (“LMM”) Performing, Cash-generating Companies that Lack Access to Traditional Financing Companies that have EBITDA of $5 million to $50 million Lower Middle Market Industry Advantages Large and Growing $289 billion of dry powder in middle market private equi

  9. Slide 9: Investing Strategy Overview

    Investing Strategy Overview Focus on Senior Secured / Unitranche Lending Stellus Capital Solutions EBITDA Leverage Multiple Yield Flexibility Across Debt Spectrum 0.0x-3.0x First Lien L+4%-6% ▪ Ability to originate loans across the capital structure 0.0x-5.0x L+5%-8% Unitranche ▪ Wide range of custo

  10. Slide 10: Target Investment: What We Look For

    Stellus Capital Investment Target Investment What We Look For? Target Borrowers Transaction Types Typical Structures ▪ EBITDA: $5 million to $50 ▪ Leveraged buyouts ▪ Investment sizes: $10 million to million ▪ Acquisitions $50 million ▪ Primarily sponsored ▪ Recapitalizations ▪ Cash interest, up-fro

  11. Slide 11: Differentiated Source Capabilities

    Differentiated Source Capabilities Lead majority of transactions and is a preferred financing source for sponsors and management teams Network of Deep Relationships ▪ Lower middle market private equity ▪ Commercial banks firms ▪ Investment banks ▪ Portfolio companies of private equity ▪ Corporate op

  12. Slide 12: Experience Matters in Deal Selection

    Experience Matters in Deal Selection Track Record and Expertise Focus on Free Avoid Size Cash Flow and Commodity Selection Operating Price Exposure Leverage Start Out Know Your A Lien Strong Partners Matters | 12

  13. Slide 13: Portfolio Management

    Portfolio Management Highly Selective Focused on diversification in all ways—size, industry, sponsor and geography Investment teams in continuous contact with borrowers and typically have board observation rights Formal performance and valuation review of all companies quarterly Third party review o

  14. Slide 14: Portfolio Statistics as of September 30, 2021

    Portfolio Statistics as of September 30, 2021 Diverse Portfolio / Broad Geographical Reach Industry Concentration Geographic Concentration Note: Percentages are based total investments at fair value. | 14

  15. Slide 15: Managing Risk: Resilient Portfolio Through COVID-19 Pandemic

    Managing Risk: Resilient Portfolio Prior to and Throughout COVID-19 Pandemic Portfolio exceeding expectations or performing in accordance with plan Lower risk profile since COVID / improvement quarter-over-quarter Investment Category at Investment Category at Investment Category at 12/31/2019 6/30/2

  16. Slide 16: Equity Co-Invest Highlights

    Equity Co-Invest Highlights Achieve Net Realized Equity Gains Over Time • Equity Co-Investments are Key to Investment Strategy • Life to Date Net Realized Equity Gains of $39 Million(1) • 22 Equity Realizations Life to Date Since 9/30/2021, $9.2 Million of Additional • Current Equity Positions: 61 w

  17. Slide 17: Financials

    STELLUS CAPITAL INVESTMENT CORPORATION Financials

  18. Slide 18: Financials

    Financials Core NII has Covered Dividend Since Inception 000's except per share ($ data) Q3per in 000's except 2021 Q2 2021 share data) Q12021 Q3 2021 FY 2020 Q1 2021 Q2 2021 FY 2020 ($ in 000's except per share data) Q3 2021 Unaudited Unaudited Unaudited Unaudited Unaudited Audited Unaudited Audite

  19. Slide 19: Diversified Sources of Long-Term / Cost-Efficient Capital

    Diversified Sources of Long-Term / Cost-Efficient Capital FUNDING SOURCES FACILITY/ISSUANCE SIZE OUTSTANDING(2) INTEREST RATE(3) MATURITY Syndicated Credit $230 million $189.8 million LIBOR + 2.5% September 18, 2025 Facility led by Amegy(1) (4) SBIC I Debentures $150 million $150 million 3.41% (Fixe

  20. Slide 20: Beneficiary of Higher Interest Rates

    Interest Rate Sensitivity Loan Portfolio Funding Sources Weighted average 95% LIBOR floors 35% 65% loan portfolio at floating rates 1.2% floating rate are fixed rate Beneficiary of Higher Interest Rates | 20

  21. Slide 21: Cumulative Distributions Declared per share Since IPO

    Cumulative Distributions Declared per share Since IPO $11.99 per share in cumulative distributions since Stellus IPO in 2012 (as of September 30, 2021)* *Includes dividends for fourth quarter ended December 31, 2021 declared on September 14, 2021 | 21

  22. Slide 22: Recent Dividends Declared

    Recent Dividends Declared* The regular dividend is an aggregate of $0.28 per share for the fourth quarter as follows: Regular Ex-Dividend Declared Record Date Payment Date Amount Date per Share 9/14/21 10/28/21 10/29/21 11/15/21 $0.0933 9/14/21 11/29/21 11/30/21 12/15/21 $0.0933 9/14/21 12/15/21 12/

  23. Slide 23: What Factors Will Impact 2022

    What Factors Will Impact 2022 Macro- LMM Private Track Record economic M&A Activity Equity Dry of Investing Outlook Powder | 23

  24. Slide 24: Why Invest? $2.1 Billion AUM for Stellus Platform

    Why Invest? 8.4 Current % 9.9 3-Year % 9 Track Record of Years Dividend Yield (1) Return-on-Equity (1) Covering Dividend 17 Management Years $ 7 Billion Invested in 300 Track Record Companies $2.1 Billion AUM for Stellus Platform (1) Past performance is not indicative of future results. No assurance

  25. Slide 25: Corporate Information

    Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Hovde Group Share Price $13.31 Chairman, President & Bryce Rowe, 804-318-0969 Chief Executive Officer Bruce R. Bilger 1 Shares Outstanding 19,486,003 Keefe, Bruyette & Woods W. Todd

  26. Slide 26: Appendix and Financial Supplements

    Appendix and Financial Supplements HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC

  27. Slide 27: Financial Highlights

    Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) Q3-21 YTD-21 Amount Per Share Amount Per Share Net investment income $4.06 $0.21 $14.66 $0.75 Core net investment income (1) 6.00 0.31 17.22 0.88 Net realized gain on investments 7.92 0.40 6.60 0.3

  28. Slide 28: Portfolio Characteristics

    Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) As of As of September 30, December 31, As of As of 2021 2020 September December 31, 30, Number of portfolio company investments 74 66 2021 2020 Number of portfolio company debt inve

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