SLRC - Earnings call transcript Q2 2021

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Operator

Good day and thank you for standing by. Welcome to the Q2 2021 SLR Investment Corp. Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. advise conference be being Please Instructions] that is today’s recorded. [Operator to I Michael conference CEO. would Instructions] hand Gross, now and today, [Operator speaker like the your over Chairman to ahead. go Please

Michael Gross

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

Richard Peteka

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

Michael Gross

thank you you, Thank us. for and Rich. morning Good joining

Net cash over U.S. allocated our the of our second income We to specialty loans finance in investment of fair quarter a of resiliency of and net value increase investment the representing XXXX and has offer XXXX. XX% protections segments over per invested At Against XX% the the For XXth, robust XXth was prior share June of market and structure for quarter more was and finance was the portfolio and which $X.XX by the first earned the asset comprehensive activity. reflected to our senior investments. specialty investment a economic sponsor yields. verticals upper of consistent our pickup on $XX.XX the climate, rebound middle first-lien economic M&A of backdrop share large our our portfolio’s SLRC market conservative June secured attractive in continued the activity favorable value a businesses resurgence with quarter punctuated middle per fee attribute secured modest underwriting, to loans quarter. portfolio and focus flow ended

half levels in markets of tax financing record of some dry the activity of to and future XXXX. -- amounts finance private supportive potential second equity structure powder U.S. changes record to expect We the drive deal

as a seeing significant debt-to-equity of at end. X.XX We post-quarter commitments remain correspondingly modestly times levered net increase are We investment June in XXth.

investment of an much our our The better certainty $XXX a in up are these of and its speed deploy new to seeing future we cost us forward, financial execution. investment flow sponsor we to the scale the protect advisor financing continue of strategies. of investments cash disruptions. lending ability of hold $XXX And to business capital capital to to low for increase seeking we and desire participate financings, economic event SLRC’s across market given lending million attributed to Looking towards size our of believe to in middle available upper expect in companies enables would million are which direct of positioned

pledge capital modest Our growth flow of to means earnings as companies fund to specialty investment need from working collateral meaningful also our initiatives. more look teams growth see only obtain strategy vertical and breadth each that growth. portfolio increased to drive deal finance to to we seeing are The

time, to sizable over within net leverage times. third target Rich portfolio Peteka the I’ll call our the accept we quarter highlights. to pipeline, through SLRC’s Given our the of in third our this to take quarter quarter growth X.X back times turn X.XX bring to you CFO, At second range

Richard Peteka

XX asset across per facilities fair $X.XX $XXX.X Investment companies from of XXth, industries million of XXX million value the XXX When a from capital to Financing over $XXX available Kingsbridge, XX, $XX.XX per XXXX. in available market or industries. has leverage earnings XX, has value Solutions, was times Equipment Corp. compared SLRC’s company XX, $XXX.X with on share at Investment sheet share, that future March million Michael. XXXX, At at SLR across million portfolio to of growth. compares fund portfolio together of At XX, to XXXX, $X.XX $XXX balance Corp.’s facilities, at non-recourse debt-to-equity. value net outstanding, June June with X.XX you, in net June investment SLR March Thank SLR XX XXXX. and debt This Credit or capacity companies SLR market credit the credit a billion fair portfolio considering company’s had billion $XX.XX

the for months ended for months Expenses XX, months three March compared XXth, ending the June versus $XX.X three XXXX, the the gross $XX.X three totaled for XXst. million gains net in XX, income P&L, for of for $X line, million a totaled $XX.X to net company the million net to June first average compares for $XX.X ended $X.X investment ended XX, XXXX, three versus Moving XXXX. the months of company’s the the $X.XX and million million ended $XX.X Below share, per or share million XX, Accordingly, XXXX. the $XX.X to for XXXX. months $XX.X three totaling increase This average income gains the three XXXX. the three June company of compared per $X.XX investment average per total per March the to for unrealized average the XX $X.XX months million million realized XX, and months million had or assets quarter ended March $XX.X net net fiscal million share the unrealized quarter, or increase Ultimately, second realized a three had months operations XXXX. of resulting or $X.XX from March for June share ended ended the for

turn our XXXX Board payable October Finally, I’ll over XX, of of our QX that, X, September Co-CEO, And share, per declared XXXX, Directors on $X.XX distribution XXXX. Bruce with floor of a Spohler. shareholders to the record to on

Bruce Spohler

first-lien portfolio specialty highly at as strong portfolio as performance verticals. upper finance thesis market our to across in the SLRC’s just portion cash significant mid billion borrowers in supports Rich. flow capital investing structure At to of our well under our you, loans top of and encompassing XXX XX loans collateralized underwriting to a was non-cyclical end, of borrowers the exposure Thank our industries. diversified, quarter allocating $X remained industries,

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

investment unfunded quarters. at of which down future expect be to we In end, $XX million addition, had drawn outstanding quarter commitments in we

let of finance, invested upper million. at our flow provide our XX% across portfolio $XXX flow market focus of each SLR our on investment quarter an mid EBITDA with borrowers XX our portfolio. consistent SLR approximately investment average or $XX with an larger approximately cash The cash total We average was $XX million, borrowers. on portfolio end, of me million cash was Now, update our flow of sponsored verticals.

During We quarter, $XX funded of was commitments $XX experienced flow investments. new of the $XX new and repayments cash second which made existing we million in into million million.

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

in capacity with sponsor few to not on participate the sizes, broader each lenders SLRC each of these be the SLR just transaction, for Given preference without platform. financings the would communities hold a partnering able large

its in flow to are We committed borrowers which lines investment drawn for grow used are transactions At fund quarter we end, to credit acquisitions. commitments, to to SLRC we offer opportunity and expect existing acquisition had covenants. future be financial prudent increasingly a quarters. establish future These by of cash unfunded that down delay with million $XX of credits draw

seeing flow also deal our in cash protocol robust quarter. new third grow this expect this We’re meaningfully and during to segment activity

X.X%, prior yield level below loans for asset flow slightly cash Our quarter. the was

At let asset to weighted representing the SLR XX% was the approximately $XXX portfolio prior of XX.X% Now, me was XX.X%, million, compared asset-based Credit portfolio. for to lending, average turn yield The Solutions. our quarter. end, asset-based lending total quarter level

$XX quarter, approximately loans funded of million. million $XXX of have the new repayments we During and

robust. pipeline is the Looking lending forward, asset-based in

of competency exploring core For the solutions team example, active financing this the following challenging and rate XXXX. are an alternative at retailers actively

of million. quarter the cash Credit Solutions a paid $X.X For SLRC dividend

me Leasing, turn Kingsbridge platform. Corporate our let Now to

our assets pleased diversified investment portfolio now the into originations setting. At are Credit portfolio in and of strong an a results. end, by exposure quality highly quarter invested totaled were large during portfolio the million leases and borrowers. that per performing, of investment leased remains months quarter XXX% average of obligor. are extremely are with the $X.X approximately grade We million, second The in funded nine Kingsbridge the Kingsbridge majority of $XXX with with was portfolio

is SLRC million For loan the quarter, on interest which $X.XX the prior from $XX the Kingsbridge equated $X on was to million. include to Kingsbridge, income in $X.X pay yield for a from the we million annualized our just over Kingsbridge an increase quarter. gross second XX.X% When dividend into the This cost. million, quarter

Equipment Now, our business, our sheet, including our let subsidiary well as turn me directly balance on both financing Finance. to Equipment as Equipment SLR our held as in reminder, Finance, Finance

of investments second quarter million. Equipment of on million quarter, was exposure At million. loans totaled million. Finance total their invested just for portfolio this end, the and For portfolio, was $XXX approximately borrowers yield $X had XX% It and $XX across represents quarter $XX invested XX%. of XXX portfolio first-lien the the class XXX% an second the asset are strategy average under our with of repayments

from second in has Equipment portfolio. million. portfolio For year been our income of last performance has the rebound year that this this activity totaled the economic investment and quarter, The continued supportive of started Finance $X

seeing their equipment and the pre-COVID return to valuations credit borrowers levels quality are We of improving.

on team the Our currently is focused portfolio. growing

total, update this me of average totaled over $XX with XX quarter of our of consisting just let an on this Now, portfolio an borrowers comprehensive portfolio. million. represents life provide our million, XX% end, investment portfolio $XXX science In At business.

the the unlevered million level $XX one of included to million, generated amortization been second committed of over million $X $XX totaled IRR. repayment and team investments, which quarter, which XX% of which $XX has funded. asset investment the Repayments During new million,

are borrowers cash have of quarters. adjusted may and unfunded increased solid fees activity. available the benefiting science During typical, churn started us to on portfolio lines, higher income is a quarter industries. at which activity year, upon Across commitments, and associated yield grow all lighter portfolio the reaching The quarters. for to certain is In focusing have which a XX%, Increasing we companies this will that driving more our to middle activity flow realization over year. consistently fees which and At finance able sponsor this cadence loans loans end, these provides to environment get throughout portfolio our themes repayments defensive weighted larger over current reflective years, including more portfolio drawn seen asset of next average of occurring as growing we market uptick was science and portfolio any portfolio continuation by a first-lien SLRC’s cash flow, become excludes origination rebound in seeing experienced success This in of -- to our assets, a continue is alongside companies over returns more a had than new the our on growth. portfolio life represents million earnings. life investments of few our may be normal tighter milestones. just we’re quality These few life and acquisition attractive been risk other SLRC pandemic, the The recurring this investment $XX to warrants. and the of specialty opportunities that SLRC’s the to portfolio find and opportunity remainder number conclusion, classes, and investment great economic structures fund our are attractive volume committing our with of last science

range third pipeline, sizable quarter net this we to our expect bring growth target our leverage to within X.X our X.XX. Given

to the let Now Michael. call me back turn

Michael Gross

across Thank verticals. investment earnings optimistic of set you, Bruce. about growth the are In closing, our we our each opportunity potential and

opportunities. With in flow, science capital overall full and vertical investment cash our we’re recovery modest Financing growth. investment the of our upon Corporate strategy The means addition Leasing, spend into on SLRC’s ABL, attractive meaningful each focusing activity in breadth and footing, available Equipment economic lending swing in aggregate will portfolio that to life can portfolio solid

still businesses These of financing flow year, with of positioned direct combined smaller early opportunities, and to most of to over we’re to the deploy tailwinds greater to that as companies. amounts more which sponsors advisor innings believe financial dry we also in investment investors access markets. syndicated substantial proven than capital prefer powder We the lend runway industry with record larger debt scale should market has benefit through investment SLRC better our middle as cash upper last are protect

is including incentive income up, dollar accretive catch Now returns. that fee we’re every incremental shareholder of to highly

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

fund lending strategies. leverage, of investable industry over this adds continue capitalizing to million ultimately on to we science platform. and anticipated investment private In July, completed in of healthcare that life has flow, dividend. billion ABL and $XXX covering our its we investment believe initial over income capital net closings fund, healthcare lending portfolio, the experience commitments to across announced returned our they With -- advisor the grow deep fully strength in for will equity cash $X As have our

which its or Senior within this an to healthcare of can pipeline strong. full is hosting SLRC results our steady call platform SUNS. of the XX handle healthcare plus investments SLRC targets, At portfolio on benefits stream more increase healthcare can providing $XXX morning, diversification its has quarter which originated industry we continue to balance Our sheet. to for a addition of opportunities healthcare of enables Investment capital new second we’ll The Due million, investments Corp. of o’clock the diversification platform SLR fund private into solutions the SLR earnings be and invest. than

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

Operator

of with question first The Instructions] line [Operator from Bryce the comes Hovde. Rowe

Bryce Rowe

come you good ABL from question it a the vertical? third like frame morning. should the sponsor activity. curious projected sponsor activity wanted just Appreciate of mix finance the of the third quarter here. of finance, possibly sounds portion up and the and Good taking to but how in about think try will Bruce sciences the life we It Thanks. to quarter Michael business, terms

Michael Gross

Yeah.

we a think smaller I expected flow, be heavily this to weighted both it’s as active, more ABL. you know, quarter well cash as towards as sciences but strategy. Life

driven activity magnitude cash there ABL across will the strategies. pipeline. think it flow current actually and more wise, be in by is But of all just terms level I the of So

Bryce Rowe

-- helpful. a maybe in ABL $X.X portfolio And investment remarks And some strategy, you on a robust comprehensive a to dividend obviously, in follow-up that the of noted The That’s then quarter. the you prepared of the talked down the a about, perspective here around wanted Okay. from was to vertical. pipeline. million equity

that, pipeline into that maybe we the what we as fundings. versus previously? So about and guess, been, BDC, about being think converting million I coming to should the How think dividend that, $X had $X.X million robust that

Michael Gross

a That’s question. great

know, quarter-to-quarter assets, booking As it’s this what’s of upon year the pretty vertical to vary of be the short but the generating your when based prepayments. course duration tends bit quarter-to-quarter, a a you you’re little over can been consistent, variable

to So we out. smooth try this

to I moment assume for upon what think seeing. this is level a good the we’re based

Bryce Rowe

the of and scale more to within M&A platform at one and Okay. private opportunities? sizes being million. average you’ve lending flow sponsors kind of for go larger And up equity the within active more things, kind hold that me, maybe increase the expect investment vertical more given cash looking you’re The on then of side of to $XX noted that the maybe companies

Michael Gross

flow, we liking market small, what you out in it mean, for cash the given do hold were the other of in back niche frothiness not cash we been pre-COVID. moment. a we What Coming know, de-emphasizing us. maybe because really historically it’s to saw, It’s if had helpful like, a our -- for strategies. step COVID, Yes. I size flow, the

that on abroad away our healthcare, financial capital between cash lender. sectors sponsor that services, staying backed XX% tend focus stable, business free flow industries services, portfolio. have not from high to intensive software, a generative, flow of We’re very We cash been

we’re during have in be activity not we’re those prove therefore cash So flow. investment credit and PE the on And well COVID sectors so both incredibly as sector side, well resilient as lot themselves a performing every more and there on within to been side. seeing the

our So because have down that’s increasing, driving take SLR, million within borrowers make the a not to to relevant what’s really platform platform And taking so investment are we to exposure holds the of increased want activity. up million, and able yes, but our be to holds. to scale $XXX the only do we $XXX

in So within exposure go we and we’ve to point our those to years. to increase the hold expect groups for core and that have proven where investing to your industry up themselves resilient sector, been be

Bryce Rowe

Appreciate That’s for time. me. your it Okay.

Michael Gross

you. Thank

Operator

from line with [Operator KBW. Instructions] of comes The question Lynch Ryan next the

Ryan Lynch

morning. I have today. one question just Good Hey.

have size on keeping well and really several last your which guys commitment serve include of you verticals, any all that diversification the business years, at additional of net different in COVID, of a portfolio translated, to you hasn’t job about raised the lending out that the X% diversification BDC, relevance, which of SLRC. also while growth years just all quarterly portfolio lot to is outside increase Over portfolio. portfolio of Kingsbridge the and post-COVID SLRC, total and no you allows during much into growth a funds guys the been been There’s of has the outside organic acquisition, have asset your the provided there your growth really COVID translated side obviously, really that at growth building prior done been great grow hasn’t building really but out platform net post-COVID, in across hasn’t so portfolio two to there’s of lending

going platform, strong get portfolio can you to question you as said a generate that why the past? if is you consistent -- what seen in to leverage But is And have a expect for to quarter your I change I quote the going is, growth versus assume And range. pipeline the we’ve answer So targeted would be, the net there’s significant know organic forward? yes. within in the case, third that and and my to what data

Bruce Spohler

nail on the head hit extent you the own your question. answered to think I and some So

that themselves, importantly, grown adding verticals have in are Ryan, as many tends M&A such don’t by verticals and appreciate some duration in headwind we very capital repaid of the assets us the as short bring flow transactional, face table that and very your to we you loan. asset perform, invested cash having by Once stable, years, these followed you business of driven less have that so exits, for are And We classes, transactional, get many the verticals. of on these to

a is Kingsbridge great So example.

grow lender We you for we As we business permanent know, capital. $XXX deployment then number of grows. years, a over had late last million will a of been on platform a deployed view year, that brought that as that as

but Now the grower, the average consistent a proven. importantly, are that years. a already eddy are high And is growers. long steady it’s five duration those not It’s assets there transactional, less duration it’s

here headwinds we try your of to permanent facing that’s grow of is churn so piece question. those a And as of constant that portfolio to deployment less kind the

have at as it, of I So number think we we to which verticals look grow. through a

on to we and in We hand, cycle, at that’s of growing on we well-positioned same prudent them know Again, one given have yet, obviously we of the As on but seeing and also time the are now, feel the climate right time them for ourselves count and growth capital segments feel across adjusted are to is economic coming We of based you returns. you, as a foundation, there view COVID Michael stable in growth we’re to is as strong I like you But incredibly there the we’re lending, credit time. seeing all telling growth. now don’t the we allocators best that they mentioned, offer grow where are a think risk incredibly of portfolios. out nirvana. repaid that get the right all in

Michael Gross

Yeah.

I on we that other but is of finding we to The new if and function. we that’s don’t opportunities different today, active in have but model all active can’t that’ll step in can’t kind generate mean, And happened, for growth we desire, and likelihood other an to attractive are us. of be predict our dedicated and color have that’s when adding we’ll capital platforms, something kind factor a which pipeline is, you given team of our line in experience funded as which is, requires, permanent layers Bruce’s of a a business returns. point

Ryan Lynch

you follow the Okay. you -- to growing? you want area holds more sub-debt some and that? get -- get economic time you cash understand I it’s guys up an what those sort would quarters you get can would in viewing guys been several cash basis add of that quarter-to-quarter of where have that originations and to, seeing see an SLRC early mean, annual area be are SLRC be prior COVID, to an guys where to guys that small that I because is opportunity those an lumpy? given you are certain were to over origination which numbers know that guys guys would mean, I of like flow recovery like now basis, on today see or out because you flow to of as and can you quarterly I What What out can to get and guys you a said. specifically as quarterly that grow, last on lending they like think fairly do Where to then sort the holds? you

Michael Gross

to again, point, be to it predict hard can’t your Look, it’s lumpy, repays.

constraints that up. will the $XXX place doing team. hold million, facilities million we putting XX go the is powder makes SLRC to the million. on don’t same any opportunity facility, if do probably are or close do for whatever $XX in because cash size going up, that facilities, put originating our sense. budgets we’ll If we we’re We a flow around we $XX take [ph] average more see Our With dry hold

So the question opportunity provide don’t it’s to say. best can We different in a hard show like risk and budgets quarter really is you what vertical, here and we guidelines all with we and sit have answer, verticals. we’ll the each it’s to more these invest because

Richard Peteka

sponsor, think that’s is, And one our healthcare are PE go finding to venture of businesses an from Ryan think solution They particular that we’re out solution. the asset-based is Increasingly, the into were may that’s noting we that is the community dominated agnostic. where loans. I by points They’re best in firms. worth team issuer sponsor a owned sourcing firms by stage migrating historically earlier life science capital a

sourcing is broad network But our we an those by of venture be all and the But well his with versus life origination don’t terms doing to lend team by it We do the our The They’re entrepreneur. middle our of, So one don’t strategies. products. we of corporates. versed head for thing. And there segment grow the versus ABL science what all way. we U.S. us, capital business is, book originations owned in may capitalists book is how do may then be it mentioned, the underwriting within these And owned specialized we look owned and at by is definitely out across Michael it, verticals. that based market may offering be expertise a is as sponsor, our book. team

at are for just given looking borrower. return We adjusted best risk a the

side multiple it’s ways to U.S. the So risk underwrite a different strategy. borrowers. corporate by mitigation It helped has having risks us on obviously for

Ryan Lynch

kind deemphasized now that totally cash that emphasize was we I starting past flows the of the Yeah. economics more to got guys focusing was given where I are reason seems the in understand area cycle. that like on an approach, Yeah. in one the you that and

So…

Michael Gross

Yeah.

Ryan Lynch

… all appreciate That’s the discussion today. for me.

Richard Peteka

Thank you.

Michael Gross

you. Thank

Operator

The next line Dodd with Raymond of James. the from Robert question comes

Robert Dodd

fund. -- flow just be flow for you characterize base robust your I larger, sounds you for on outlook. cash the going pipeline activity chunk Hi, It of I the mean, kind healthcare that asset both I on shrinking. good used focusing obviously, cash like with to may healthcare Obviously, obviously and it’s that think Crystal Again, along guys. side as of be those a robust healthcare forward. been asset-backed,

mean, maybe the margin, asset-backed future. but at a I in that for of at asset-backed healthcare, has could flow market healthcare there I dynamic is towards it dynamic the pointing on? away fund cash in going away And from you kind near now? shift retail grow where go from been right there there the raised shift in market why mean, is is healthcare? a any the would You’re to the

Michael Gross

But value? it the if rarely key collateral, because assets order -- liquidation healthcare Kingsbridge. very is a Actually really asset-backed lending, get as is in ABL -- sector, SUNS, the grew thesis. the is which rest underwriting -- have the back we over they one we to asset to just do goods focused the -- No. healthcare of And is our of source are that repaid. kind we based is is finished have them, SLRC both know segment, through platform. our sell number the on They don’t liquid healthcare how at this in sister healthcare sector and receivables, much need liquid you here thesis always at case. inventory our financing, their the to the We BDC in active and to retail -- of But very for have is is I Equipment they underwriting been Finance based those That’s what but group then do of which asset as clarify. well

increasingly So the retailers you only, been and COVID they retail as survive business to and years brick-and-mortar to in can going as well through between not started segment active coming got has always as imagine headwinds roots, their plus core it’s ago, online coupled been figure less how this lockdowns, out XX back environment. as been with how of but a it’s businesses, their

and been consistent. So very there it’s they’ve active pretty been

Robert Dodd

the Equipment, -- on -- Is which know that and to word Equipment I obviously, Kingsbridge, that steady luck, those now. trying to be use I one there -- use chain then call Got how any Separate, can for segments to it. that? issues at two or we buy it our said, you mean, didn’t related -- But not on is very you. Got that to you that or us but obviously, Thank origination mean, a color comes supply it. the moderate that’s near-term. anyway. side, when expectations more in looking grow, other And chain sorry out robust the right ahead. go relatively looking and supply often give two, sounds good you what

Michael Gross

No. Yeah. That’s a good question.

Kingsbridge clarify, by to equipment point equipment investment borrower. been Finance have mission segment really larger just borrowers supply affected So for for critical disruption. both segments Leasing, and is your to Corporate Equipment small is The chain grade

they’re our So delivered again, is orders, those cases equipment year. pushed next in getting and don’t been have the but till fundings off some until occur

because time driven transactions than deliveries. back, both kind driven, the it, of of Stepping winning over but steady CapEx a itself is from clearly here. hopefully not rather thinking pipeline, their a will itself internal what And segments timing to and to of are back that huge growth, they we good business, supply not and Stepping are out, or drip is So, sitting want acquisitions. need lease. quarter-to-quarter. those those are buy borrower down and those volumes do and This has sponsor lead delayed is issue funding correct chain M&A what it’s smaller

our the why growth, from is but that ABL. the cash that’s asset comments and are the So not class of flow asset not as nature driven M&A in different classes growing, such their terms they’re of tempered

Robert Dodd

Understood. Understood.

contrast maybe two it. taking orders word are delivery So kind what -- the robust if areas, even equipment supply How your and things? of those level you the be qualitatively of right pipeline of out point, your isn’t near-term between now different available moderated would yet? to interest would may on draw like how there, like But the the deliveries coming but the you chain, describe in the kind with outlook orders

Michael Gross

looking are are people obviously growth so to level, strong, say capital fund out it’s COVID strong. coming to would at the I of need Strong, deploy business their and equipment

Robert Dodd

Got you. it. Thank

Michael Gross

segments these just real thing are only those amortization I monthly two the on would say classes. quick But payments is, asset other

steady loans. slow, of those steady but headwind have So you of always a amortization

you a deal So, unlike of Leasing. cash always repayments, until is drip here and that’s flow amortization of where nature of drip have steady repaid, there’s very growth Corporate a little the the steady

Robert Dodd

you. Thank Understood.

Michael Gross

you. Thank

Operator

next The question of Landenburg. with comes from Mickey Schleien the line

Mickey Schleien

Good morning, Michael and Bruce. Hope you’re well?

Michael Gross

Good morning.

Mickey Schleien

appreciate But I lending is terms the flow about at segment. levels. don’t want cash morning. to hearing levels, I but not, that tighter even want in follow-up, dead than you’re least the pre-COVID I’m on just are I I general excited want probably to -- if beat pipeline, that, at Good yeah. everything horse. to a pre-COVID

opportunities attractive opposed something as flow So the you dislocated market platform to months more in providing ago? six solar or lending, is was nine there very that certain what today, available in that’s a about cash months are

Michael Gross

market, let to the on the of Mickey. Bruce step the comment but So, again kind current just back, terms I

year and spreads big as the we said, little was time, capital better. protection. no was in then around out there call back missing thing But So that team a and last sat winding see down loans this yeah, we’re terms we still

were this year, last out spreads first that what is the second And out put and really past at the market were and and reward. up those were well, did taken were the pick be which the minute spreads were then quarter so, tightened, we happened. Loans we markets that spreads on right faced loans asymmetrical quote-unquote, attractive If tightened. at done did widening called would because with summer, risk in

But have recover, money money continued we were loans not faced would put really bad the right. as to for choice we market work, make then COVID as we and So be be if underwater. six to months, and in were did wrong were yeah, with it we those the could was, if we’d we making some and of, regret

And the at being losing of -- months That’s the end light money a seen six can to now. aggressive see make money. in months face few it for the so, it We for be able versus changed. potentially of chose not we’ve we to see tunnel. We

are from terms we still And our getting Yeah, covenants we’re dramatically. so ideal, not the things our in that’s perspective, has but up activity doing. picked are why

picky. incredibly still We’re

billion looking $X We’re to a quarter. out put not

transaction. focused having accept willing on are industries structure to We sponsors are and the in that some

So tend who that owners want companies part lender complicated that of to they’re flexible. where grow be meaning more evolutionary, complicated acquisitive them industries, partners will be and they with and situations, are more kind are and the -- growing,

Bruce Spohler

Yeah.

look life a to is, our business. for that maybe add science think I at best the guess just Mickey. I analogy you moment, to

business science As the sciences in Phase through a are other really But risky stage, earlier play, only companies X, can Phase funding to there’s is royalties, lending investing. we capital. are close and late-stage for life There’s drug preclinical, we commercialization still whole where either late and in life or that X a our an life lot science stage there’s attractive the is get our feel to niche we ways return of it it. less

we I approach similar, play a cash we point, within think very niche as Michael’s flow within is flow. cash to

based cash broad We lenders. flow not are

play the going economic recovery. to not We’re

go to going anything building not into cyclical. We’re sectors,

business SLRC’s services, cash XX% healthcare, financial flow portfolio. We software. have is four That services, recurring industries, of

resilient are and free surprisingly, are And conservative resilient posture, So we’re these last cash our high through cash and year. given very underwriting cycles, flowing very not that flow. are sectors niche within were

well is because that, growth, the healthcare, lot now it’s as think they equity, are as why those tuck-in given insurance now of you of part our portfolio example. great for people in of for businesses that year both brokerage, well it, about a So seeing these sectors, an resiliency we’re acquisitions, as we’re see last performed so poised attracting

bps to turn new of in the wants fund the Mickey, and the These EBITDA go credit point, the understand choose Why, businesses attracting that better, are people But industry it. terms and Michael’s reduction And so, $XXX alongside execution that’s To terms capital, industry, to driving what’s your but which get they’re capital little and of market. structures. company of they they that know. or no it There to them. more can yet and equity the so knowledge little the XX last as These to less borrower the really leverage competition, private point, BSL that we complexity complicated There’s on industry bit go the because sponsor you are of premium. expertise. covenants. certainty with market, the can their borrowers. focused focused want on a you need because grow a from less The and actually is a of last million having price do of is the

resilient. for our lot and industries is looking to what really they’re to the They’re very grow driving themselves lenders equity combination ability flow that’s cash expertise. with of a proven is right a so now be of have attracting And private

Mickey Schleien

that, appreciate Bruce. I

leverage and but to on ago. So spreads tied may say, correctly, covenants if be I’m today the understanding terms the sure terms same or a just levels, we’re better year make two let’s in documents were, to of page, than they are it’s and the pre-COVID that

Bruce Spohler

Well…

Mickey Schleien

what’s within operate that that you you And niches attracting the is in?

Bruce Spohler

just active And more fundamentals of attracting these say to proven a as we’ve capital, XX%. strategy in the the the But are are the in we risk drives is your price and to we sectors. had some then These and COVID. finance always little get businesses our sectors we that very of verticals margin, coming on more better would to are much covenants point, never out bit with and out I fundamentals which can. not. To activity. underwrite or can that and SLRC yielding barbell as specially higher what But get charge blend our that the you

and our a of is activity weightings going our drive flow. terms loan finance X.X% not because X.X%, So or portfolio are strong portfolios to are X.XX% fundamentals high. to it’s the sure the the is X% capital But, or alongside better, especially better, on cash the of but yield whether is the but at yes, balance,

Richard Peteka

bank because X.XX%. that is on are It’s net our also invest grade fixed much funding by incremental given from unused -- loans liabilities are and is what more LIBOR to borrowing we additional fee so rate, today our coming mind are our important facility, in cost today our new for paper, keep our our is, funded

significant accretive it’s decent spreads, earnings on for us. to loans we’re at putting when so And these

Mickey Schleien

this Thank time. your for it it. appreciate for you morning. Understand. That’s me I

Michael Gross

Thanks Mickey.

Bruce Spohler

Thanks, Mickey.

Operator

Fargo The of comes Wells Finian Securities. O'Shea the from next question line with

Finian O'Shea

morning. Good everyone. Hi,

Just of disciplined. are that of think, lending to a to flexible. you really that are Michael, to I in them Mickey. opposite then principle be the we discipline, Obviously, willing say I that outlined with that with sort issuers dialogue just follow-on you grow be It way. all the just we’re partners for feels with you’re looking don’t the lending right pretty together want for of not you this Isn’t the growth things credit guys? short and post-COVID, only if now is continue tying like six a presumably you’re full like But cycle, the engage on credit market sustainability in months, rebound the whole the book? in your window with market. of to which of to the willing negative going

most? year yourself So for with perhaps partner how or example, as as when a view you past do that, someone sort contend lending you’re view over do they the you sponsors needed there, that’s of you always given not

Michael Gross

Yeah.

little get just a that’s But granular. more So great to bit question. a

always are we We that lend into. in there sponsors our for sectors

So healthcare if we’re firms. dealing tier healthcare with top PE we’re in the Finian, --

the thin our And as for that get equity, a across XX by companies, with being place probably a than rather We’ll be good them. we diversification with and investing different be money healthcare portfolio with by phenomenal to never We their are XX which sponsors. there through lose thick lender. is sponsors

we’re are core incredibly competencies. consistent, consistent within we our So but

to the basis. don’t playing away than an perhaps, We intensive business your to to retail away on stay recovery. going be is from point ABL We’re we that stay one-off that again, not a try the lender on businesses. We from other do capital is,

resilient So that we’re tend comfortable we who through sectors be spend with and very the are they to the with time active in cycle. sponsors

then, the your we cash other benefit those have obviously, portfolio question. of the of out -- to So activity in what that having And level the and It’s to segments of about is more we’re drive not core flow in sectors. beyond in growth.

Finian O'Shea

presumably. on right Okay. just the about the right Can That’s would looks in front pipeline tell the real seemed of you it’s helpful. small which a that, you on very probably of on optimistic your color you and what any or give pretty you? pipeline, very pipeline, in spread front like And us yield follow-up us

Michael Gross

Yeah. existing It’s with consistent portfolio. the

more We compression what see consistent few of the like last I for over portfolio. across the it’s with we’re haven’t years, I floored that, the moment, say mean, pretty we our time but feels moment, kind really, it’s seeing every at existing

Finian O'Shea

Great. much. so Okay. Thanks

Michael Gross

Finian. Thanks

Operator

question with next line [Operator Bryce Rowe Instructions] comes from of the The Hovde.

Bryce Rowe

Thanks.

Just ask as of balance about the chunk have a in up of notes next a the one you your quick liability just sheet, got structure you due coming you to year. discussion follow-up noted, tied wanted good some about as Michael, fixed right here side left unsecured lot pretty of the guys side you’ve rate

it higher maybe where curious Just level reduce willing kind and the now? notes from revolver the unsecured is of percentage what the appetite would to you level be Thanks. of of take or unsecured is to maintain that and

Bruce Spohler

given I we’d our well. refinance fixed revolver We’d that way and the notes cost more as to that rate of also growing. we’re think bring at down capital like higher to attractive like terms level take of

some terming should out of expect year. due come and So down our of you of notes hopefully that capital usage between that next the the revolver comes cost

Bryce Rowe

it. Bruce. Thanks, Appreciate Great.

Bruce Spohler

Thank you.

Operator

I will Chairman Gross, call back Michael now for turn the over and Co-CEO closing to remarks.

Michael Gross

are who SUNS you those at remarks also speaking to for six thank you closing we in the but time time, and minutes. your No forward to look Bye-bye. Thanks. in of engaged

Operator

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

may disconnect. You now

SLR Investment (SLRC) 4 Aug 212021 Q2 Earnings call transcript