SLRC - Earnings call transcript Q1 2021

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Operator

Good day and thank you for standing-by. Welcome to the Q1 2021 SLR Investment Corporation Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chairman and Co-CEO, Michael Gross. Please go ahead, sir.

Michael Gross

Thank you very much and good morning. Corp.’s XXXX. for Investment ended first SLR XX, March to earnings the call quarter Welcome today Bruce joined Peteka, I’m by our and Executive Chief Richard Officer Financial Officer. Spohler, our Co-Chief by begin, you statements? we webcast before Rich, please start and covering would forward-looking the

Richard Peteka

statements Michael. to of are condition the to obtain like Thank results risks like would or prohibited. our Investment this call any of result regarding (XXX) from and and property from call call later of a made our statements, SEC results. you, future described release. that the the Gross. today, At time involve SEC. Please differ Co-CEO, note in our conference this at unauthorized our time, any as earnings to with law. to forward-looking Chairman being available to that any which strictly back our to webcast forward-looking not future in may so SLR relate like materially forward-looking return www.slrinvestmentcorp.com. or of Past press of impacts number performance, This today’s are our or on update financial made Of Investment and a XXX-XXXX. I Michael is future I those recorded. statements our filings everyone latest no will event and To call of required form as would information. not undertakes disclosed Audio a visit broadcast that attention today’s being to I do Investors us website course. financial number the call would duty please the unless from Statements customary remind to webcast to by filings, and including press our including of or call they be SLR Corp. performance copies are indicative in guarantees disclosures at and release uncertainties, are website of constitute conference COVID-XX. These is condition. time replays performance in Corp. webcast Actual our in also future may your call tab factors, results

Michael Gross

Good XX% call to you happy, for to over will the and highlights At was March fair greater especially to of loans is incentive is landscape. investment which joining discussing you, comprehensive close, Spohler, then XX, senior investment finance start protections quarter. Rich flow of our portfolio what Rich. income SLRC’s Peteka remains your through Co-CEO, quarter. by And specialty offered and you market the hopes our the loans XXXX investment was $X.XX performing per first who SLR walk the friends and colleagues of morning secured resiliency the back to Yesterday attribute asset to is underwriting, our throughout you, our off $X.XX We first which entire Net to cash to portfolio yields team portfolio share compared to on flow of structural investments. accretive lending $X.XX Thank verticals, cash investment segment the secured in safe. results now than are fee in the focus we middle XXX% importantly, financial The over net conserve share pandemic. of CFO, thank family, the want through I allocated in senior solid a prior that us. market. for our catch-up, value larger increase available XXXX. and of NII turning increased XX% Bruce the lien represents the and of healthy, dollar the portfolio the we it we means in shareholders. reported in before per our Alongside currently QX and discuss to companies This and as incremental after highly QX our finance increase income reported has the find our value upper each invested

the During with in removed programs monetary U.S. a reflected led of government’s vaccination favorable recovery uncertainties. a and have refinancing the the quarter, and M&A first by economic punctuated fiscal a middle and backdrop more The resurgence market turbocharged program stimulus sponsor number transactions. combined

draw of acquisitions this these delayed increased funded investment companies. driven seeing of seeing and in we’re The all detail. of having Earnings verticals. the in including which by growth a of loans a Kingsbridge our flow more made the a deal flow As further across investment SLR investments fund result, and transactions in of combination cash our table Bruce are commitments, are combination we across is quarter about trend will equity held of fourth XXXX, talk platform Holdings. growth

from investment. repayment life the For science generated a generated fees and of quarter full –

ownership into six integration been seamless. We are our Kingsbridge months of now and has

execution. capital to attribute and million enables $XXX Looking better to investment our remain and all of certainty and market continue invest scale a seeing $XXX lending of of We further we the financings, to forward, event upper the middle investments which The March in up of economic business, flow seeking borrowers have investment capacity the significant modestly low to ability desire size disruption. our robust believe its cost which In us. of our to increase cash to of SRLC strategies. towards across protect capital at before million leveraged for in are would we given SLR’s speed new the position we an XX in of hold company these we’re opportunity of set financing, deploy capitalize approximately as on advisor available to X.XXx direct

across back over Rich I’ll through see the increased property our call highlights. the pledge you CFO, specialty meaningful to vertical our to this to each The intellectual obtain need modest take to that to the as growth flow and from deal means time, we Our only teams business. investment seeing liquidity. companies breadth more finance Peteka growth also portfolio collateral financial turn are to look of earnings At QX drive entire strategies

Richard Peteka

portfolio billion available you, XX a XXXX. of Michael. XX, had net $XX.XX XX, XX, At per $XXX.X had $X.X, net the SLR XX, at across at to share industries portfolio $XXX.X At X December $X.XX in or value the value million companies XX, per fair or fair of and fair value portfolio from December billion across XXXX, was in fund March combined XX share companies approximately a equity. a companies Thank of Investment to outstanding in March available portfolio of capacity compared company’s to at from market March value across considering X.XXx investment XXX $XXX When credit market million debt leverages Corp.’s XX compared the industries on company Corp. non-recourse Equipment borrowing portfolio limits. credit $XX.XX market with growth facilities Kingsbridge XXX compared capital sheet XXXX. debt SLR asset Credit million subject $XXX.X million had facilities to base at Investment the balance SLR SLRC’s industries Financing to future X.XX Solutions, XXX billion XXXX

Moving the to P&L.

or three for three in XXXX. to realized resulting quarter ended or for $XX.X and the $X.XX from million $XX.X million per $X.X March Below March gains XX, XXXX for three this share the to gross $X.XX XX, For for unrealized ended million Expenses ended December the unrealized or average average XXXX versus XXXX. XX, investment fourth of average company’s ended $XX.X $X.XX compares three XXXX operations for months share for compared totaled $XX.X net December XX. a had net share assets of per $XX.X net million share increase average a December December months for income ended income Ultimately, XX, company investment ended and the ended million XXXX. months million and months the realized the March million months XX, gains $XX.X totaled million three per compared had of line, the the totaled months XXXX. or three first million the net to XX, three the March quarter $X.XX months versus the fiscal company XXXX. totaling net the $XX.X three This for net the $X.X Accordingly, for million XX, per the $XX.X months of ended increase

our a record recently Board Co-CEO, XXXX With over the of turn I’ll per payable declared share of call on June on July QX to of Directors Spohler. our Bruce distribution XXXX. shareholders Finally, $X.XX XXXX to that XX, X,

Bruce Spohler

Rich. you, Thank

foremost, SLRC’s performing and portfolio First at end. quarter is XXX%

our exposure end, investing as specialty that allocating portfolio the top average supports our the collateralize cash in finance through operate to as loans of upper X scale, highly $X of just year. our after and comprehensive X.X% was XXX of risk issuers amount industries. at to across Xs in The representing At portfolio on the March XX, the performance structure at weighted At rating underwriting second industries, X investment percentage loans the quarter least down was our to distinct portion under first encompassing thesis X risk. capital the Xs significant a with diversified was of quarter Our and verticals. well based lien peaking mid billion market of is borrowers portfolio over of flow non-cyclical rating rated our SLRC’s X to X.X% last over XX of risk

senior based lien to to spread decrease asset yield have to quarter. commercial prior close we was XX%, services, repayments $X of a been lien. lien second At for X.X% and portfolio a the verticals, loans. life the exposure billion. secured despite focusing and the LIBOR net were over sciences X.X% second XX.X% loans X.X% lien weighted average our exposures At investment maintain was to in industry over end per these quarter retail investments. yields, are as asset originations compression. able largest diversified were average our as were portfolio. yields just million, compared $XXX The Notably and well of XX% level or second our Our Of $XXX finance first in and portfolio portfolio level X.X% end, on reducing quarter $X loans. and By loans. asset first able asset-based were resulting providers were consisted actively Total issuer financials, flow been X.X% the our only of of total cash quarter million Of healthcare we’ve were maintain while these to loans loans million XX%

In addition, unfunded quarters. of in we approximately outstanding, which investment we expect to had fund future million commitments $XX

borrowers. our me million first our finance verticals. quarter mid-market quarter comprehensive Now each flow cash was flow update $XXX loan the average on The At new of SLR larger an approximately focus the was our or loans provide let over XX% of sponsor consistent with of $XXX cash cash flow portfolio. portfolio business. EBITDA during on our made end, million upper

we approximately quarter, of first had approximately which $XX We portfolio resulting funded. million cash the of repayments flow million During were cash million. million in commitments net experienced growth of of $XX $X $XX flow

flow cash of sectors. in during the a new the draws from mixture primarily delay investments in existing investments, came quarter credits and insurance Our healthcare and

been Michael of scale own to sponsor broader companies. flow the lien underwrite able in upper platform SLR to As investment take mentioned, advantage first mid-market positions of we’ve cash to larger loans the

lenders the in the few without sizes, each support able sponsor a Given platform. broader participate be large these community’s to hold with their would of with of SLRC investments preference SLR partnering not for financings the in

SLRC contributions. cash roughly delayed draw in for fund to stepping the acquisitions. X.X% with the financial future At investment raised duration By flow existing existing and companies many covenants in into to quarter. These that increasingly the with facilities credits facility yield loan transactions to is committing was shorter and loan by to flat maturity equity established an are sponsor of its grow weighted offer yield prudent are with prior a We opportunity incremental the average portfolio enhanced. instances, OID, term

Credit to SLR turn Solutions. our let me Now asset-based strategy,

portfolio. portfolio quarter loans compared a XX.X% our loans senior senior was balance million, is of to asset-based combination yield over weighted vertical reminder, directly The prior sheet. a Solutions, ABL of as representing just totaled XX% the the portfolio secured comprehensive As end, well quarter. our of average SLR At Credit secured of $XXX held the as XX.X% our on

approximately which quarter, During quarter funded IRR repayments an $XXX contraction of of repayments the during the two level approximately first of sizeable ABL new we driven million million. investments, $XX by of loans generated unlevered was Portfolio first asset X.X%. and had

Looking this strategy is robust. forward, in pipeline the

to continuing pace, example, our an core solutions of explore challenging a following are For last retailers, financing at a team competency year. ABL alternative increased

During cash SLR the Solutions quarter, million. Credit $X dividend a paid of

Kingsbridge. Now turn let Corporate our Leasing me to business

highly of credit The Kingsbridge during Kingsbridge steady. quarter of At proceeding We ownership our strong the smoothly. are now integration originations quarter is of the end, million into with and quality over six per by remains average the portfolio approximately XX% funded and borrowers. invested exposure diversified lease months the obligor. an were of portfolio leases of approximated assets and The leased XXX% million is portfolio in $XXX performing investment-grade was $X.X portfolio

quarter, into paid first dividend Kingsbridge interest $X.X Kingsbridge, investments gross our the a to SLRC. for the Kingsbridge from million secured loan senior When we our in million on was the include For million of $XX quarter. $X.X income

We the expect income assets a that this in platform. combined of consistent investment million approximately $XX of across generate debt equity blended specialty yield finance will our cash with Kingsbridge gross produce XX%, year, other and and SLR approximately

those of and directly of investments average the million. investments. first as quarter-end, on from portfolio an was investment loans, lien XX%. our Equipment of quarter, portfolio, for million as held Finance million. the SLR of at weighted purposes first borrowers full Now including on just over repayments across balance approximately $XXX let asset reminder Finance yield XXX assets exposure is average This and asset level portfolio XX% had to company quarter-end, class Equipment represents $X portfolio. In our $XX the approximately as held these a comprehensive Comprehensive started totaled The enact the Finance XXX% and are income over the equipment into Finance last with certain performance continued portfolio investments. activity the the Finance, has invested business, been At in subsidiary just first of sheet, approximately rebound SLR portfolio included Finance, this the and The balance in well invested hold quarter quarter loans wholly-owned $XX million. our efficiency of that tax those Equipment million. that sheet supportive of me economic held our in totaled Equipment turn Equipment Equipment $X

regrowing equipment levels turned their now We to credit attention their the returned valuations are quality improving. pre-COVID towards seeing has team and The portfolio.

touch nearly let of consisted XX% investment At million, of our total XX% Life million. just for me finally, $XXX XX with our loans Now lending borrowers investment portfolio business. just $XX science gross our of totaled end, income portfolio life and science the average of on quarter. quarter an over represented over our

the Repayments quarter, the the the of million from $XX million team portfolio prior which $XX flat During committed during totaled million the quarter. $XX was quarter. leaving funded

during generated level IRR. was the which asset an team XX% repaid science life Our gross on one investment quarter,

As additional part the of recognized SLRC a million $X.X repayment, fee through income.

available little our commitments $XX fees normal repayments pandemic, at more the to that as During churn, investments life consistently science At portfolio associated experienced delay are the realization certain quarter more draw SLRC recurring and million earnings. and income benefits very start these end, reaching had existing becomes cadence, a other borrowers upon milestones. occurring with of

warrants. We that continuation over portfolio The activity a investment fees during portfolio and quarter of to life yield driving expect our the quarters. success costs conclusion, In these some and drawn science last this first in the of the of represents be was years. themes have future over been XX% the portfolio at few weighted just excludes average SLRC’s

our increased activity. of are flow, quarters. verticals, in rebound we loans on quality the cash by investment delay Focusing economic uptake lien of we new all increasing assets, structures which following seen alongside get of Across activity returns than growing origination draw over and specialty a the defensive a in attractive we first is investments have larger middle-market to companies seeing risk number fund of volume portfolio in finance and facilities, quarters. adjusted sectors, sponsor reflective including opportunities and committing tight The where cash flow investment

of pipeline market The the the platform. In addition, seeing current across is great from opportunities efforts this SLR development business its provides larger a grow portfolio and to environment attractive opportunity we’re SLRC year. a for

turn the me to let Now Michael. back call

Michael Gross

quality, our the In XXXX all Bruce. to and set we verticals. a of across terms first of year you, quarter growth, our the investment portfolio’s start Thank of that closing, credit believe was in great the opportunity earnings

in With opportunities fully investment ABL, modest investment remain full in to investment cash flow, growth. activity all in deploying breadth we each span swing, leasing vertical focused verticals. The attractive to overall venture, of portfolio addition capital strategies, on across SLRC’s portfolio meaningful life the on which footing, financing at recovery of and economic equipment and science in solid our aggregates

to net As I through target that incremental the relative debt-to-equity. under catch-up levered mentioned earlier, now every dollar to is at X.X X.X we’re remains of incentive X.XX times to income fee accretive returns of shareholder our highly SLRC times.

access ample which cost growth. to capital portfolio have We to fund low

we dividend. to continue we the return covering NII fully the to will As grow portfolio, believe

protect We innings prefer direct financial syndicated should we record and our which lend, access runway, position Corp. over combines In we’ll liquidity sponsors we’re industry more of and early portfolio, our Investment the SLRC as markets. hosting with positioned market upper debt position, powder of businesses as this in or earnings defensively capital deploy advisor for smaller set. investment on than larger see dry call substantial last at Senior morning scale SLRC confident companies be to SLR also conclusion, amounts the benefit greater believe still choose opportunities, QX year’s proven SUNS. financing Later is to investment strong These results the in of to with investors investment better XX:XX, are. middle tailwinds an opportunity of to the SLRC team

morning. open questions? clients’ we its for provide line vehicle see continues Operator, could SLRC’s and ability to senior enhance We deal of please secured traditional meet to ability teams’ to this this for flow. benefits origination thank through the capital proposition And your our continue value middle-market to Our our financing time you you needs.

Operator

from Raymond Tjaden from Matt James. Instructions] [Operator comes first Your question

Matt Tjaden

taking appreciate the and morning time. Good

start up expect quarter-over-quarter, bump good settle to technical SOAG First and dividend First how surrounding income to a of off, give so on, you can in coming over asset kind the should [ph], kind of color any two questions dividend we income that quarters.

Michael Gross

Great Yes. question.

on gift So keeps We’ve that’s giving. been years. the invested for that several there

is Just lease more expect portfolio much aircraft. to It long memory of We from down. don’t refresh your winding that.

have, as been upper return We it’s IRR of been in an basis. the an mentioned, a I incredibly on years of investment for number attractive in teens it and

that we have vertical haven’t a little of but couple that expect coming, we a more in been bit runway we the past for same investing So now. years in the don’t because

So it’s a runoff. a of bit

Matt Tjaden

follow-up lines. I on helpful, to income as the That’s Okay. guess, other that, a

little to a think fee that science obviously, item you out. of where So loan, I to you give a elevated, kind on life success said Any line can related a we settle out? when expect on normalizes that would commentary

Michael Gross

So over to is time last assets. way year point, not generated a average look because nature It’s was much line guess was your line because there I depressed no, just unfortunately, to the period. on life best that that assurance. of of that’s at science those the really That year’s

So we than the news typical within to churn tend assets, good two duration is which in years is life accelerating. is have that science longer

portfolio science as has of in last over of at more over portfolio the look So consistently not It’s on life recurring. the to quarterly expect But see a really the hard that a that. couple course it number to recurring. growing It’s a do we we But you it’s pick year been expect basis. episodically and years. that, of it’s of the more context

Matt Tjaden

I’d kind for is last Fair some per what COVID one upside? still to high of $X.XX fair upside current Again there’s Or share of for on kind to in and there Based per the marks? level. based And value NAV calculate about fair your just potential over value a book, enough. embedded recovery cost cost. basis, high me, level NAV on kind share of is on then more

Michael Gross

think there’s Yes. We do some.

bit fair a demonstrated resilient quickly verticals the of specialty also rather just invested we’ve resilience. came sectors have bit think the that for back of that been COVID together I a us with it of because fair in, finance

quickly. little back there a rather more we is but bit to yes, So go snapped

Matt Tjaden

That’s it me. Appreciate Got it. time. the for

Bruce Spohler

your Matt. for Thanks questions,

Operator

continue. There Instructions] [Operator time. questions please at this further Presenters, are no

Michael Gross

are involved to we’ll Corp., for half talk much with for an SLR this very hour. Investment those time your morning. And Senior you of Thank you you

Operator

This call. concludes participating. today’s conference for you everyone Thank

may You now disconnect.

SLR Investment (SLRC) 6 May 212021 Q1 Earnings call transcript