Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q1 2022 Earnings Presentation
26 slides from Stellus Capital Investment's earnings presentation, May 12, 2022
Slide 1: Investor Presentation, Quarter ended March 31, 2022
Investor Presentation Quarter ended March 31, 2022
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 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 $838 million as of March 31, 2022 • ROE
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 $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 investing together for over 25 approximately $8.0 billion over years the last 18 years* Stellus Capital Management Relationship-driven 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: 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 78 300+ $8.0+ Current Active Cumulative Completed Billion Investments Investments Invested Capital Select List of Investme
Slide 12: Portfolio Statistics as of March 31, 2022
Portfolio Statistics as of March 31, 2022 Diverse Portfolio / Low Exposure to Retail and Energy No Geographic Concentration Over 25% Industry Concentration Geographic Concentration Automoti Finance Hotel, Gaming, ve 0% & Leisure South Carolina Missouri Puerto Rico 1% 0% Energy: Oil & Gas Education 1
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 3/31/2022 RG 5 RG 4 0% 0% Investment Category Definitions RG 1 13% (“Risk Grade” or “RG”): RG 3 1 Exceeding expectations 14% 2 Performing in accordance with plan 3 Requires closer monitoring (no loss of retu
Slide 14: Debt Portfolio is 91% 1st Lien
Debt Portfolio is 91% 1st Lien Debt Investment Portfolio Fixed vs. Floating Rate Debt Investments * as of March 31, 2022 100% Fixed 91% 90% 3% 80% 70% 60% 50% 40% 30% 20% 14.3% Floating 10% 8.0% 8% 7.6% 97% 1% 0% 1st Lien Debt* 2nd Lien debt Unsecured debt % of Total Debt Portfolio Weighted Average
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 $265 million $205 million LIBOR + 2.5% September 18, 2025 Facility led by Amegy(1) (4) SBIC I Debentures $150 million $150 million 3.41% Varied SBI
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 $850,000 85 $800,000 80 75 $750,000 FV of Investment Portfolio at Quarter End # of Portfolio Companies 70 $700,000 65 $650,000 60 $600,000 55 $550,000 50 $500,000 45 $450,000 40 $400,000 35 30 $350,000 25 $300,000 20 $250,000 15 $200,000 10 $150,000 5
Slide 18: First Quarter 2022 Overview
First Quarter 2022 Overview $0.29 Core NII per share* Six New Initial Investment $74.5 million Fundings & Six Follow On New investment activity during the quarter Investments New loan fundings were 90% 1st lien, 7% 2nd lien, and 3% Equity $3.4 million with a weighted average yield of 7.60% Realized
Slide 19: Cumulative Distributions Declared per share Since IPO
Cumulative Distributions Declared per share Since IPO $14.00 $12.33 $12.33 per share in $12.00 $12.05 cumulative distributions $10.91 since SCM IPO in 2012 (as of $9.76 March 31, 2022) $10.00 $8.40 $8.00 Monthly dividends of $7.04 $0.1133 declared for April, $5.68 $6.00 May and June 2022* $4.32 $4.0
Slide 20: Comparative Total Return LTM
Comparative Total Return LTM 125% 120% 115% 110% 105% 4.20% 1.14% 0.92% 100% -0.63% -2.01% 95% 90% Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May SCM (4.20%) RJ BDC Index (Mkt Cap Weight) (1.14%) RJ BDC Index (Equal Weight) (0.92%) S&P/LSTA U.S. Leveraged Loan 100 (-0.63%) S&P 500 (-2.01%) 06/03/20
Slide 21: Favorable Performance Not Reflected in Comparative Price to Book
Favorable Performance Not Reflected in Comparative Price to Book (based on ROE since IPO) • scm has delivered an average return on equity* (ROE) since IPO of 9.86% - In the top 10 of all publicly traded BDCs • BDCs performing at this level trade at an implied price to NAV of approximately 1.00x • sc
Slide 22: Corporate Information
Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Hovde Group Share Price $12.68 Chairman, President & Bryce Rowe, 804-318-0969 Bruce R. Bilger 1 Shares Outstanding 19,545,935 Chief Executive Officer Keefe, Bruyette & Woods Dean D’
Slide 23: Appendix and Financial Supplements
Appendix and Financial Supplements HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 24: Financial Highlights
Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) Q1 2022 Q1 2021 Amount Per Share Amount Per Share Net investment income $5.51 $0.28 $5.06 $0.26 Core net investment income (1) 5.75 0.29 5.38 0.28 Net realized gain (loss) on investments 3.46 0.18
Slide 25: Portfolio Characteristics
Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) As of As of March 31, December 31, As of As of 2022 2021 March 31, December 31, 2022 2021 Number of portfolio company investments 78 73 Investments at fair value $838.0 $772.9 Numbe
Slide 26: Recent Dividends Declared
Recent Dividends Declared* • Q2 2022 Dividend: On April 19, 2022, the board declared a regular dividend of $0.0933 per share and an additional dividend of $0.02 per share in each of April, May and 2022, for an aggregate of $0.34 per share. Ex- Regular Additional Total Record Payment Declared Dividen
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