Stellus Capital Investment Corporation · NYSE:SCM
Stellus Capital Investment — Q4 2021 Earnings Presentation
26 slides from Stellus Capital Investment's earnings presentation, Mar 2, 2022
Slide 1: Investor Presentation Year ended December 31, 2021
Investor Presentation Year ended December 31, 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: What is our Competitive Advantage?
There are 47 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 $772.9 million as of December 31, 2021 •
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 / 21 Net $173.8 Million $173.9 Million $220.2 Million $270.6 Million $285.1 Million Assets Stellus Capital Investment Rec
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 25 of $8.0 billion over the last 18 years years * Stellus Capital Management Relationship-driven tea
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: 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 73 300+ $8.0+ Current Active Cumulative Completed Billion Investments Investments Invested Capital Select List of Investme
Slide 12: Portfolio Statistics as of December 31, 2021
Portfolio Statistics as of December 31, 2021 Diverse Portfolio / Low Exposure to Retail and Energy No Geographic Concentration Over 20% Industry Concentration Geographic Concentration Utilities: Finance Hotel, Gaming, Oil & Gas 1% & Leisure North Carolina Puerto Rico Energy: 1% Capital Equipment Dis
Slide 13: Stable Asset Quality: Portfolio Performing in Accordance with Plan
Stable Asset Quality: Portfolio is Performing in Accordance with Plan Investment Category at 12/31/2021 RG 5 RG 4 0% 1% Investment Category Definitions: RG 1 8% 1 Exceeding expectations 2 Performing in accordance with plan RG 3 3 Requires closer monitoring 15% (no loss of return or principal) 4 In w
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 December 31, 2021 100% Fixed 91% 90% 4% 80% 70% 60% 50% 40% 30% 20% 14.3% 10% 8.0% 8% 7.3% Floating 1% 96% 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 $250 million $177.3 million LIBOR + 2.5% September 18, 2025 Facility led by Amegy(1) (4) SBIC I Debentures $150 million $150 million 3.41% Varied S
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 $800,000 80 $750,000 75 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 $100,000 - 1
Slide 18: Annual 2021 Overview
Annual 2021 Overview $1.22 Twenty-Seven New Initial Core NII per share* Investment Fundings & Thirty-Six Follow On Investments $387.3 million New loan fundings were 90% 1st lien, 4% Unsecured, and 6% Equity New investment activity during the year with a weighted average yield of 8.11% $23.7 million
Slide 19: Cumulative Distributions Declared per share Since IPO
Cumulative Distributions Declared per share Since IPO $14.00 $12.05 per share in $12.05 cumulative distributions $12.00 $10.91 since Stellus IPO in 2012 (as of December 30, 2021)* $10.00 $9.76 $8.40 Monthly dividends of $8.00 $7.04 $0.1133 declared for January, February, and $5.68 $6.00 March 2022**
Slide 20: Comparative Total Return LTM
Comparative Total Return LTM 130% 22.11% 120% 20.16% 17.74% 14.00% 110% 2.63% 100% 90% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar RJ BDC Index (Equal Weight) (22.11%) RJ BDC Index (Mkt Cap Weight) (20.16%) SCM (17.74%) S&P 500 (14.00%) S&P/LSTA U.S. Leveraged Loan 100 (2.63%) 04/04/2021 to 04/0
Slide 21: Favorable Performance Not Reflected in Comparative Price to Book
Favorable Performance Not Reflected in Comparative Price to Book (based on a ROE since IPO) • Stellus has delivered an average return on equity* (ROE) since IPO of 9.93% - In the top 10 of all publicly traded BDCs • BDCs performing at this level trade at an implied price to NAV of approximately 1.20
Slide 22: Corporate Information
Corporate Information Executive Officers Directors Research Coverage Share Information Robert T. Ladd J. Tim Arnoult 1 Hovde Group Share Price $13.82 Chairman, President & Bryce Rowe, 804-318-0969 Chief Executive Officer Bruce R. Bilger 1 Shares Outstanding 19,532,519 Keefe, Bruyette & Woods W. Todd
Slide 23: Appendix and Financial Supplements
Appendix and Financial Supplements HOUSTON, TX WASHINGTON D.C. CHARLOTTE, NC
Slide 24: Financial Highlights
Financial Highlights ($ in millions, except data relating to per share amounts and shares outstanding) 2021 2020 Amount Per Share Amount Per Share Net investment income $19.78 $1.01 $21.99 $1.13 Core net investment income (1) 23.75 1.22 22.40 1.15 Net realized gain (loss) on investments 23.71 1.22 (
Slide 25: Portfolio Characteristics
Portfolio Characteristics ($ in millions, except data relating to per share amounts and number of portfolio companies) As of As of December 31, December 31, As of As of 2021 2020 December 31, December 31, 2021 2020 Number of portfolio company investments 73 66 Investments at fair value $772.9 $653.4
Slide 26: Recent Dividends Declared
Recent Dividends Declared* • Q1 2022 Dividend: On January 13, 2022, the board declared a dividend of $0.0933 per share in each of January, February and March 2022, or an aggregate of $0.28 per share. Regular Ex-Dividend Declared Record Date Payment Date Amount Date per Share 1/13/22 1/27/22 1/28/22
Stellus Capital Investment — Q4 2021 Earnings Presentation on 6ix