SLRC - Earnings call transcript Q4 2021

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Operator

Thank you for standing by and welcome to the Q4 2021 SLR Investment Corp. Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]. to Co-CEO. conference like Gross, to now and Chairman would hand over the Michael I ahead. go Please

Michael Gross

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

Richard Peteka

to, merger, SEC. please our our required results obtain of call things, condition. would associated like and broadcast a I guarantees Corp., our today’s Corp. statements closing, amount website XXX-XXX-XXXX. from webcast timing performance, SEC our to remind the everyone disclosures time among and actual made or statements recorded. Please results Of realizing note results of prohibited. forward. likelihood call performance Michael. any other the differ course. website distributions, made Comments of those filings, specifically amount us Audio and the not going At at and with today’s COVID-XX. involve future may will your of guarantee financial by indicative any are SLR by result customary include and press time in Statements risks or Board will future in and our future and our including Investment are to regarding call or on relate or impacts this SLR condition call savings no note information. number and do results to a update that attention today’s I’d back reflecting as not forward-looking Co-CEO, described are synergies of that future Past merger strictly to of operating future merger, forward-looking including benefits past determined not uncertainties, and of forward-looking to of turn like the Corp.’s call visit This later of available our the performance to timing which of financial number webcast and of the release. payment Please future of unauthorized performance latest our and timing statements release statements, and is factors, respect dividends be to Thanks, at the form amount To materially and from like a that the are events constitute conference to the SLR of being copies with dividends distributions www.slrinvestmentcorp.com. forward-looking undertakes conference ability are in of may unless call and any our is press the from Chairman Gross. which the the Investment a These I that financial any in duty on being they webcast Directors. our thereof, or this dividends be replays with anticipated Investment call to as the today, call the disclosed so Investors also Michael the earnings would filings in expected our tab law. time, property payment views or current of to

Michael Gross

of and continued which been of and The and activity, portfolio economic of the has XXXX joining private pipeline originated for thank originations levels record you quarter Rich. backdrop equity growth Thank for translated of our robust. year. us. a leveraged billion fourth culminated investments, for SLRC $X.X you the net into Good very Against morning much, finance having of the rebound record

This originations. of growth. Net million $XXX third portfolio December share highly recent quarter our most generating one year years. while is We’ve XX the ended asset During originated the per remain able quarters quarter, selective been we was $XX.XX. investments to of value new in active strong for following fiscal

fourth of from disruptions our Thus muted. SLRC had seen quality portfolio upper income chain tied $X.XX nonaccrual. earned impact supply companies been largely quarter consequences and invasion inflation of Ukraine, Overall, focus no investment only operations on portfolio economic are to as investment of credit with we US their the XXXX, economy. share. of in the resulting have of sectors, portfolio effects the far, Russian per with one in companies Due our net the remains company’s our For market middle on the strong rising defensive the

closely however, value XX, account comprehensive economic into in investment of our portfolio, over monitoring XX% crisis. are, the this SLRC was December with takes fair was of portfolios impacts loan evolving of senior subsidiaries portfolio’s the which loans finance We to XX% investments. invested specialty of secured At allocated

above expectations. Our acquisition most performing is finance commercial recent Kingsbridge

a finance the at December X.XX net to lowest utilization levels from following specialty pandemic. represents progress increase the our portfolio other At leverages XX, net low. its The pandemic other rebuilding and challenges. debt-to-equity continue trough from in stimulus debt-to-equity when during X.XX induced September to re-grow SLRC’s XXXX point compared times COVID our its subsidiaries portfolios Our government times XX, resulting leverage hit

basis $XXX The basis credit quarter, credit facility. points. pricing a $XXX reduction in was The from fourth until facilities basis to million two LIBOR our to to and the credit extended was points amended XX of facility grid secured plus expanded XXX the amendment points XXXX. million years we During by senior includes XXX December

senior on unsecured million are The weighted this XXXX, $XXX significant due due the XXXX, XXXX rate Through notes this that of notes a interest private a the interest May. with placement. we X.X% In unsecured company’s of long-term in flexibility. of January QX together have unsecured $XXX Additionally, have the weighted million average issuance $XXX senior the million unsecured $XX of million reduction the amendment enhanced rate senior issued X.X%, rate. $XXX lowered of due of issued in our senior X.X% financing XXXX average average notes January million unsecured a from notes we

investments deploy and low breadth available modest to cost lending across investment to means our towards capital The forward, earnings we that growth drive strategies see meaningful portfolio strategies. to growth. our growth from expect need of our verticals Looking only we our

In have opportunities. addition, we tuck-in an platform acquisition of active specialty new finance pipeline and

have only As in on and with the shareholder closing subject announced of and an number several we to in conditions. long-term with combined company, with recommendation and company into I’ll transaction agreement Partners, strategic approval SLR surviving consisting value the which make acquisition. reasons, Capital should of sense special few of been SLRC benefits. the The opportunities the Board scale also has for the managed independent We’ve growth as SUNS shareholders to customary SUNS unanimously highlight company both now. December, a SLRC by a of and approved for the provide entered of for directors SLRC The SUNS, SLRC of will Directors create of merge greater committees

and XX, enhance expected investor liquidity, the would billion interest markets. of total company billion and coverage, combined is of and larger the greater have garner with capitalization provide of $X.X approximately net that equity additional trading debt assets market a to institutional As access December to assets research company’s and $X.X

fee Capital scale fee investment a been income X% the step leverage. contractual to to approximately on commercial Based asset at on expect basis agreed net large SLRC’s X.X XX, for more reduction time, finance purchases. of in SUNS’ on as X.X% manager the SLR down place. we translating of in investments leverage accretive business net cost XX greater manager expected expand reduction base only share. to opportunities portfolio times annual voluntarily resulting balance debt additional fees, investment December remain the SLRC, increase savings the and SLRC’s permanent interest gross management combination efficient to will The base be should from of for the financing to per diversification, the is to XXXX, savings, to closing drive point of Upon will growth. base Partners, the forma combined the expected sheet assets slight and has would income well combination entity set include reduced as pro X.XX% that from X Over advisor and Additionally, leverage to have gross above assets. The X opportunity investment

anticipated NII faster larger grow company it scale a back either Importantly, Peteka, than standalone share. the that financial the allow to the our and or fourth would and to highlights. this to is combined capital Richard be you through net to potentially basis over call SUNS investment base the achieve SLRC should income on to generate CFO, I’ll higher time, per At quarter take able turn

Richard Peteka

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

Moving to the P&L.

for XX.X gross September totaled For of Senior the three three the million for totaled Corp. quarter’s XX, this December X.X merger XXXX, expenses with investment costs ended months the million compares months million Investment to were this one-time ended Expenses September three SLR XX, XX.X XXXX. XXXX XX, for in months and the million ended December Included versus million associated months XX.X income XX. ended the three with XX.X

SLRC’s compared XX.X manager months realized average company three for of fourth months XX.X our per for or million up, had ended compares in $X.XX unrealized year per ended in due average expenses $X.XX million the the fiscal months increase a three X.X average the totaled resulting had net or incentive three X.X $X.XX these totaling quarter of and X.X the losses the from its by per the XXXX. net million This our income XXXX. Ultimately, average ended the quarter the a incurred the to for shareholders. XX. million December the XX, September share, XXXX share Below XX. net versus third unrealized the increase net Accordingly, effectively September line, to $X.XX by for and realized Importantly, XX.X company to million not fee net were XX, months share investment per million December or or ended company’s – catch three for assets for and losses of operations net the of

Finally, to distribution on our payable XXXX. share, Board X, per of record XXXX of on of shareholders a Directors declared April March $X.XX XXXX XX, QX

merger monthly distributions SLRC’s Directors the proposed Bruce of call Senior Following with the instead of I’ll to with closing Investment Spohler. declaring intends that, Board our turn the of begin over And Co-CEO, Corp., to SLRs quarterly.

Bruce Spohler

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

the exposures the to $XXX in and spread to At LIBOR, blended maintain to despite yields these on maintain were flow weighted end, were industry Notably, our decrease second cash while XX%. least assets compression. exposure loans, verticals, XX% XX% asset portfolio, lien. our full X risk in or consisted fourth loans, the largest able only roughly was year our lien risk. Total half was continue Of lien software. finance yields By the to on repayments portfolio with At scale, a flow second investment were were X recurring roughly X.X% we’ve second over X% originations weighted investments. borrowing million. million Our based cash rating diversified basis. $XXX asset our over actively been year-end, able invested under of for healthcare representing senior was around level asset sciences, level focusing commercial based average of lien X.X% rating risk average year loans, with first At was we’ve second recent X and invested of and reducing yield life amount the in services, financials, lien end, to XX% secured quarter be of been the and and X just

of we at outstanding approximately $XXX we had million to addition, year-end, In expect quarters. in commitments unfunded future fund which

SLR an on The mid-market provide or on portfolio, our me has and borrowers. million, flow our each approximately focus of let comprehensive our XX flow update sponsored was $XX cash Now $XXX which investments invested with XX% cash of our of portfolio investment finance; sponsored larger million consistent verticals. upper approximately EBITDA average is was the borrowers. across

During the industries, originated fourth drove flow a the of cash and fourth software, financial health compelling of $XX existing in investments. across quarter, million new opportunities services We quarter our and set originations. care,

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

over financings co-invest demonstrates commitments grown of platform SLRC. partnering these with SLRC benefit to of a investment, for investments opportunity solar covenant was of with establish for -- I’m without its packages. have platform’s not average cash larger the our able ability the be the year not the term We’ve transactions At also by fund sizes, given would broader end, our SLRC capacity on a just alongside preference weighted to transactions. all would investment commitments which issued draw in offer SLR grow with to existing a communities’ lenders, sponsor which are large the to couple These to the financial sorry, flow late just acquisitions. participate increased to each future of our XXX for yield to million speak portfolio be prudent borrowers Recent and credits the Given X%. over loans,

this financing lending credit portfolio asset-based had Now, and XXX year level let The XX.X%. XX% of XXX under new million. to makes Therefore, total across portfolio back. asset average XX our attractive fourth monitor based yield end, or In asset during borrowers. million, our million cyclicality At this of business weighted counter was distinct and me quarter, to Credit periods portfolio XX of platform. vertical when of partner to tend solutions. turn originated pull the a approximately we collateral just investments ability Solutions’ repayments this stress banks an of provides broader assess economic to it was

capital significant has working lending We’re capital also strategy as seeing greater our businesses finance well demand as growth that from for commercial team in expertise in.

paid the Solutions prior cash Credit with X.X SLR consistent dividend quarter, the of For quarter. a million

let our Now, turn Kingsbridge. me business leasing to

majority performing per million XXX and lease the by an grade just with sectors, health borrowers. with with We’re remains quarter exposure At during in of assets was portfolio of the Kingsbridge total now sectors, million, average over Credit care portfolio investment which a diversified over our a over the year funded leased steady. into XXXX of technology, end, three leases and a obligor. just This being year results. XXX% investment highly of end, and include equipment origination Kingsbridge and there’re industrial are portfolio were strong thrilled at quality across year

quarter, dividend to interest annualized consistent of to Including million a our SLRC, gross generated Kingsbridge XX Kingsbridge X.X of loan the the XX.X% prior paid equating the quarter million. in with quarter, the investment fourth on and million, on yield X.X income For was for fourth costs.

expand expect result We pipeline. as portfolio Kingsbridge a during of sizable their to XXXX, see

XXX borrowers fourth in asset included an balance end, weighted with our As our of This these of me first those the Finance, sheet exposure invested just repayments was reminder million. your X.X%. our are was XX represented are XX Finance equipment purposes. tax turn equipment of across over financings invested Equipment just in and Equipment a let as subsidiary yield efficiency X directly under to totaled held different on Reminder, the held The level quarter million. investments million XX% SLR comprehensive for our average segment had XX and total asset average finance well of Now class portfolio At portfolio. finance million In lien. as XXX%

investment last just continued our been of that half under rebound fourth in activity portfolio. year finance quarter, performance finance equipment and started comprehensive second year across supportive million. our economic into the the this of income throughout The was has the of During X in equipment

return pre-COVID credit of the borrowers. quality equipment are and the We valuations underlying improvement seeing levels to in

Our portfolio just year. team XX totaled portfolio expects our Sciences, end this over year to million grow Life this consisted of at XXX borrowers.

yet All committed of asset represent Life million XX% and repayments loans of during class that during at of expectations quarter, million. amortizations quarter. which our new originations, of portfolio, Life underwriting. the was the the team in this our are comprehensive exceeding time XX over Science fourth investment gross Science borrowers currently of relative XXX to contributes XX million totaled XX% income

the During is experience portfolio lighter typical class. churn pandemic Science are asset for that Life this

normal loans repayments fees recurring As it had which At benefit and more a is at we year will unfunded are reoccur reaching from income start million more XXX other Life commitments available milestones. borrowers and see end, realization SLRC earnings. to quarterly with cadence, certain associated the Science more for consistently become upon

expect We to drawn future growth in Life our fund Science of quarters continued be to these portfolio.

are SLRC’s finance our conclusion, activity themes, investment continuation The Life addition, pipeline origination we investments In of has operating portfolio flow quarter defensive able increasing of team existing in of This in a returns which assets investment and attractive at activity to seeing is this cash strategies, portfolio success year. which new investments new cost. economic the reflective portfolio fuel lien a fund also sponsor first market increased future fees that this committing is At provides risk-adjusted a also XX% The fourth specialty solid call Michael. companies attractive just In in this represents more over opportunities continue by focusing alongside to the to average we Across grow of sectors, our of and Science number to market warrants. great under excludes environment growing are I’ll expect opportunity a acquisitions activity. the our weighted yield where middle any growth of delayed year. robust rebound opportunities. turn to facilities, we’re This get quarters. time, our us tighter and structures portfolio for draw back current and to this our loans

Michael Gross

sponsor quarter particular, In Thank finance a on Bruce. in for SLRC. our capitalized industries. year set culminated of the core closing, fourth our team a you, origination strong strong opportunity In

and about opportunity investment across set our optimistic earnings potential each growth are the of We verticals.

investors financial lend SLRC’s larger tailwinds a runway SLRC better sponsors recovery to and debt footing, amounts leasing, economic as markets. most greater than solid These which swing combined investment the have cash the in and capital we Life steady investment We protect would smaller positioned over on are deploy coming With portfolio Sciences in of early direct portfolio deploying our that additional prefer on the attractive market full and scale flow to Across span we’re industry believe in growth continued equipment still and the ABL, powder, year cash activity seeing companies. which our upper with are middle we to into our investment to syndicated of we innings more with dry as into benefit focused access flow, business record opportunities. which are should financing corporate choose to advisor origination translate proven financings quarters. last opportunities, substantial investment capital strategies,

in scale Life benefits our cash for flow, the advantage Science Additionally, ABL we verticals. and are reaping

SLRC preservation, and merger to value the now SUNS their is companies ease sheets As in per of merge shape increase that believe companies overlap excellent this greater portfolios. we and income balance scale, resulting capital increased the Co-CEOs for in focus time ability quality, directors in given to their independent comments, investment two bodes will deliver believe our healthy well expected the both with investment our of and net opportune merger. mentioned portfolios and as have share. We and that opening Bruce are knowledge synergies and today, integration which believe of benefits of the strong credit the I through the proposed shareholder from and my I, advisors’ Both

of can mailed submit and proxy our Additional typing was by merger shareholders. details Investment provided earnings site, to encourage also o’clock morning, number for the to XX common about the that you merger support. materials fourth vote. We or call XXXX your Senior At www.proxyvote.com to you hosting Corp found support can the your the SUNS. the by be appreciate an going voting we’ll stock. We Once control on of in results issuance be this quarter for the the SLR

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

Operator

First Instructions] [Operator with Hovde. Rowe Bryce from questions

Bryce Rowe

how balance Bruce, for just built certainly you build from the see basis, it leverage, thanks. for the Any about of sheet not looking Great, two, strong the quarterly see a how about out? like as over, or leverage say, on and kind nice balance do Good specifics sounds year think next in morning. you let’s build playing but the sheet here pipelines thoughts to are Michael to continuing think it potential and continued sheet leverage to increases. balance

Bruce Spohler

Yeah, you I imagine if always, there’s can as think moving a here. couple of parts

talked pro at the but nothing really merger, all, SUNS, impact X.XX in as about, materially. down larger of year the would close given end for there. it to of SLR forma doesn’t being leverage terms we X.X at with impact on than The go SLR potentially First the meaningful leverage

getting don’t drawn visibility towards can X.X but we is to to we’ve year, the to So on middle we end. quarter. year. made, path activity, would X that end the our up reminder, commitments that goal on unfunded And that targeting of the be of We’d this repayment upper getting just a have see range, I end those as firmly which obviously be if the upper end the SLR’s target a upper in of to our think end leverage range, by

Bryce Rowe

me, Okay, couple coming dividends finance build noted, specialty thinking one for then you COVID, see lower the statement are the more portfolio’s maybe as back up. the that’s income volumes about them, starting during helpful. and some that of from And saw the verticals. to A

you dividend the few to kind of of Just about bit specialty from you those of those verticals, those curious see think Thanks. coming how dividend finance what a a build rebuild here? a little kind maybe in in need to for streams -- a do

Bruce Spohler

is do forecast on a there. because a opposed challenging line equipment, solutions look the good have growth there it’s therefore, Yeah, I are -- just more see earnings portfolios short those you end dividend financing, because of The little well business particularly to equipment out, and if course at backlog businesses. that asset the tend think them you and a credit at but about leasing, looking the a to think equipment as is basis streams. try the as a period. in finance, in over repayment those We we hopefully, to really financing There’s quarterly some consistent businesses, and of straight expect both because the know, by not leasing duration the XX it as month as in to the do class underlying a bit year smooth we short do duration and a

portfolios. they’re, near So think as that do the grow in term less those think we but to I there’re I likely continue opportunities,

some to has unfortunately, and supply aside fund pipeline so actual capital committed but purchase leasing delays strong of finance very note, borrowers, to getting equipment the been it’s had the the the such and not more yet equipment they chain corporate the in that our an need release. as funded, Just business given

you’re additional ever that over the of of you, mentioned, delivering to our are outset, strongest Michael If purchase. tell there. they’ll as were mentioned pleased we’re system, going time it’s call, expectations on work growth at the pipeline see the at very some this had. they And, starts we original through to So the they they’ve

something as to of to I that revisit it’s end upside think So we going I think closer there’s get we’re the but the year.

Bryce Rowe

I’ll step the great. answers. back. Okay, I appreciate

Michael Gross

time. Thank you your for

Operator

Mickey next Your question Schleien a from Ladenburg. comes with

Mickey Schleien

feel morning, ability the service want feel ask increases talking rate about revenue their tight Good labor that to with margin and the and given Yes. to borrowers’ Michael. markets is and your you how trends, about about? debt Bruce how costs, rising I their input do the you potential and Fed

Bruce Spohler

that’s question. Yeah, great a

there. I is think, look, definitely the pressure

seeing not borrowers are to this it coming way a P&Ls in but big into expecting yet, the our of year. We’re we

think, thesis as across but I and our we’re based the our that can appreciate, yes, debt, its you to our assets. of liquidity liquidation the look businesses, if ABL cash to the service for you look flow, blessed they is P&L on segments, underlying value underwriting

thing of norms the one so do were we’re bit we investments rate coming mitigate hurt margin importantly, and hedge free going that coverage, by being to and best us expect that Our casual and used but about businesses year, of to to to is interest flowing sectors cash dollar in think think feel gives this off the have have too. flow defensive come b, one, coverage, two substantial traditional last first one cushion, particularly And still that, we floating more from do be no pressure Life to in expect. three you sectors; that defensive, Science when from can free and a try we’re a, we constantly guy lien, that’ll themselves seeing the equity pressure of we are to it, interest there, cash additional one that to maybe high in back fact then, funds VCs you where owners. I the a, a where The business is

businesses, really in see pressure, particularly margin the inflation to personality come don’t not in in, most have it other your terms early personnel, to staffing for that in impact material the we’re charges, raw our manufacturing, that margins. segments, But up So and where you goes again, we we days. see are starting of pay input that some of that for and service attract ability of would

Michael Gross

Yeah.

our portfolio of only and is it you aren’t concentrated industries as of is in XX% -- know, in really that affected. cash Importantly, cash flow today, those our

think question think yield that’s like who or debt, equity, a a I secured ourselves. owners who’s than unsecured think private a I high a lot senior own equity levered buyers who I someone bond of that’s that lender worry greater for them own much

Mickey Schleien

Yeah, I Michael. appreciate that,

question noticed on generally which but in background quarter follow-up trends, us to moved the valuation I of drove the valuation? on do physical has one down therapy secular that borrowers down there some just it’s from segment, its give PPT I and strong what’s in know past, management and quarter. me, down that, what you up Just so going was could

Bruce Spohler

Sure. question a Yeah, our point your strategic question. of area, on It which dominant footprint to that’s a therapy. thesis. initial the I very prior perspective, business a great is New is your York from so a attractive in that unique to Tri-state follow was underwriting has metropolitan That and think physical part

invested, in margins. impacted have is physical We a side, being country. around see ours, reflecting ATI been staffing costs by definitely pressure and this that therapy a And increased you some we of being longtime the business on supporter as know, other businesses on the

activity business rehab Obviously, up flowed in to physical elective It nicely. have tried etc, certain we one therapy been has a here. that and during needs that to you held our is after surgeries reflect Revenues COVID. mark So need from. injuries,

as ‘XX, that last then coming we the why you point, late pullback that back. the which seems During some saw COVID of recovered. cover, your back was deferred. marked year, lot lockdowns, business is up again, be Omicron to picked It a hit, saw to in And

from as dense you in their falls but that is So assets, rather that rate but value the therapy, for staffing up I investor revenues there’s for floating surgery know, the do equity particularly than market, and first population a are to post capital that think several only and in lien other also lead metropolitan watching that, across terms is again, hospitals there given a held junior of margin not investor, But fallback where definitely strategic presence physical we’re elective real surgeries New area or themselves pressure recovery, the as need. York nicely, would costs. these trips

here, drivers pressures have think demand we’re So we’re do recently. going we but see on the I to very some focused margin

Mickey Schleien

there selling to a more -- in just else? acquisitions would do in and up, a follow interested PPT, they up more think doing roll it’s sponsored, or making is be on they would assuming you someone be I’m sponsor the Bruce, interested

Bruce Spohler

soon to they’ve think know too but both. done I it’s

is more perspective strategic acquisitions. we we the like positioned, in it, know. and soon we’d to so we sit sell where Either value, make structure, capital Our we’re comfortable like where they we’re whether like too the way,

few years. be been of I over some years for think here, have next because will there a developments the they invested couple

Mickey Schleien

me Appreciate your morning. for Thank that. it you for That’s time. this

Bruce Spohler

you, Mickey. Thank

Operator

Thanks.

JP next question Morgan. comes from Melissa with Your Wedel

Melissa Wedel

Good taking morning. Hi. Appreciate my questions today.

flow something else hoping decline was trends there, equipment particular. driven yield. to given that touch understanding being the on Is of compression in I seeing notable -- driven quarter-over-quarter a or First, that finance, yield more sure I’m is by -- happening? cash quarter-over-quarter and in happening what’s and decline to you’re there sort make the a spread Wanted

Bruce Spohler

change, a is significant good flow accelerates reality a the number which been as that the cash new loans get there’s return. quickly, cash think know, don’t you ‘XX. in of investments I although flow, out have cash flow repaid put And we rather in Yeah, our

So to expected yield on maturity basis, to a expected higher underwrite that maturity not basis. to yield a but the is reporting yield a we we’re yields yield than to

leaving our obviously, came flow cash ‘XX, haven’t seen the few is on haven’t healthcare, for rather than have we back seen a organic financial stories the held to help just moment, to have returns, because and acquisition we we compression, aside, So be financial services, very who and services, for industry reporting tends where large, software, much focus years. groups have But and gross really by with recurring accounting really deals drive our much last to the core looking that to the business in we and over market, step there. sponsors and and nicely compression up invested spreads

few that years, a really looking we recent on just expand side, that abated finance And have strategy but seems to we as haven’t definitely equipment much So our we the the saw the seen last to are compression aside ‘XX. footprint. in pressure over from

is help We’re our to finance lower we’ve risk borrower business, which some scale has bit our so us lower doing and that equipment that of as equipment small mitigating been little know, expanding to fancy bring is of larger a finding because cyclical part we’re finance attractive there. of the sector, critical mission that yes, some bit lower a investment the you there leasing, which assets yield our adjusted lower that portfolio, a corporate to yielding risk, cyclicality by, from equipment is net equipment assets include but borrowers, basis, the pretty footprint a risk investments. apart grade lower that little yielding borrowers returns, are against on It is platform one as

Melissa Wedel

Okay, so helpful. that’s really

like sounds finances, -- especially, you of based sort of equipment strategy, first yield recent maybe off will, in So given levels. outlook, we stability if should some your the it

Bruce Spohler

Yes.

Melissa Wedel

Okay.

also the teleconferencing a Okay. on hoping bit have like a was down services. might quarter. to hoping one, I I there update was of update. an get mark It been get on during looks American an to Thanks. that

Bruce Spohler

question. Great Yep.

know, one that we news that I the you if is well. at good -- the it’s yeah, news, is on non-accrual. as good one there’s SUNS non-accrual is, as So unfortunately, the have guess investment

silver a portfolios group the [phonetic] step business you know on asset and as basis. as difficult own third you took investments, into you this lining, And, lender, of both what know, know what you the we bit first in control are and you heading the revolver really told. what the we year, as were is a understanding that on know you’re I quarter. So lender one this say, little of The on would last of is middle a

that and and the at not on hood, granular level. you’re not the every to board, You’re management talking under day,

a control for So we did so take great and position us. that’s

freaks obsessed. control information We’re and

we mapping So a time on focused marked there may already. it had dramatic they’ve it team was months, We thought We it, turning stabilizing we own few got have have group to really by shore liquidity, recovery. may best of the to path divisions, some we’ll They’ve to the not a a liquidity in a XXXX there monetized that’s we It’s there. great there around some some been the working collection have by management out think and selling, business put a be need. impact for monetized know able and for We’ve in recovery. up really where lender the the in growing. of spend may now capital, be been

for the and as marked have as But mark when like one it done I So non-accrual obviously, it’s on is think stand, we we management we been two times need recovery. backgrounds investment good given or the particular, to this assets, down. be, mentioned, orientation, for never past in that’s in optimize to have an We to and our and recovery private taken one. patient Michael of and equity plan team, the in of our put have teams, and the we rest game control where

Operator

[Operator Paul with Instructions] Johnson Next from KBW. question is

Paul Johnson

guys. for morning, my good Thanks questions. Yeah, morning. taking Good

cost as is as yield first maybe or been just my up thereabouts the with a year some two on last coming savings other fee Understanding running the reduction X% around lower of combination ROE. potential So your merger, just books. question guidance But two. potentially base have overall It’s obviously the well the for also on the or low we there. after

to could where trying So following your think the merger? ROE do you to thoughts I’m get your just eventually wondering, get

Bruce Spohler

but yielding finance would has I some Senior, ABL point, to businesses. Yeah, have clarification, just book does The lower cash SLR also specialty some at your yielding question. one high it great flow assets,

close similar assets SLR, cash SLR X%. of just sub having a are SUNS’ to blended XX%, similar am to or SLR it barbells flow, whereas So cash on sorry, balances SLR, their coincidentally, yielding X% the lower They that SLRs yield the – yield is it’s I basis. flow pretty by are

terms that post XX%. the be target, you we across the think I blended something a know, portfolio basis, yield should of there the combined and of think in on merger, as So is thought over no dilution

Paul Johnson

to even Okay, the of rates of higher for verticals, just thoughts good and asset through of inflation, maybe sort curious, expect you to rising -- or And, forward your equipment or how just any I’m pressure maybe how lastly, on asset a hear. impact, That’s those or great. you see flowing do that. values just more leasing Thanks curve an kind you your LIBOR verticals back get prospect and various within funding? those specifically verticals, the demand finance types that on for expect of

Bruce Spohler

great question. Yeah, look,

you floating across verticals, of rate. our majority As we’re know, the

amount including finance on put we just we does rate last lien fixed borrowings, QX first so Equipment all rate there. of asset, verticals We across but have that’s liabilities the fixed QX are hedge a fair and year. assets a the great also in of have

nice they are once of leasing, already replace from those extending leases to equipment depths is leases, with leasing recover which heavy, reliability probably in inflation also over very fixed terms struggling to seeing us. XX% I But equipment of we financing pop been an they’re us, always we’ve equipment So we the in on corporate structure. and seeing borrowers the as extend giving And from a earnings, from we’re they’re values rate, perspective, their COVID. get us new both were because think

there. So well feel hedged we we’re like pretty

Paul Johnson

very that. today. me all helpful. It’s for It’s Okay, appreciate

Bruce Spohler

Thank you.

Operator

Dodd with Your Raymond Robert James. from is next question

Robert Dodd

On level of your is of a for of on just would potential guys. acquisitions an that’s looking that or I elevated pipeline about kind acquisition comment more return the that active at is than mean, looking there. normal normal I I at that made think any capital, return portfolio mean, Kingsbridge, that -- that Michael, Is -- in Hi, you say invested successful of you hopper the opportunities. etc. obviously, on. potentially very is or acquisition, great additional color kind more

Michael Gross

and kind or picked of in was is the like to which done in I the see like we depending XX%, of than situation. finance up. is It’s target say, general, acquisition, division of add-on on business the form generally, now it acquisition, would new specialty could an SUNS. -- something of a on our more credit ROE Kingsbridge, the XX% that definitely the be pipeline active I fourth platform definitely acquisitions And in quarter. So we’ve brand for

companies two to And a separate One size. we’ve excited had of I mean is, buy the when on primarily two that merging it things by it’s about entities, for, is acquirer. the imposed better by that makes constraints, we’re that what us

in So large sort that doing for for million, $XXX it’s million, of market things been on example, too add acquisitions, virtue with it. by cap SUNS, have of $XXX constrained been

assets, from over to billion with combined a X balance much of which acquire we the dollars a as billion sheet greater and over so And a NAV, from. entity have

And have the new specific our that market. finance been lot say but would also, can having out blend very at that very right it’s marketplace business, coming just interested, rationale finance, as commercial is add I so we there’s have historically there broad to, companies, finance potentially to of well one for although now. interest, of a a And leaving the aside we part as strategic would Robert, looking guys our of social to to place. There’s -- pipeline, active that led is as acquisition. where taking number platforms, platforms lender it M&A given a we say, our this merger different know, are I of lending which we’ve verticals you

about. Kingsbridge how that’s So came

added significantly, are million the fairly, who sourcing, but side on over senior to not have of individuals private past our actually We two year. acquisitions, as outstanding loan two XX also sponsor potential well. loans to origination the team We just added this for We’ve years. equity

So I’d our say lending and fairly pipeline strong. our business is

Robert Dodd

quotes like pensively Are portfolio that have of and found these an synergies them things you in your one air you there’s expanded you’ve holes any I as for in it. existing especially potential, terms bring to under don’t I when see, around holes there Got path? has that mean, put mean, like in? sourcing you. Got in be everything like opportunities I these mean, larger it. but Thank you company your verticals, sourcing all this, that. offering there umbrella that

Bruce Spohler

more commercial finance So that’s and businesses learning question. about and we more go. we great keep these niche, a say as marketplaces would I

focused a credit, a of a financing, capital add-on we they that which media, factoring of have extension So, digital as factoring. did SLR in year, competency business of is on working over we an is revolving from core had. also in business last ABL, talked acquisition terms of about but both an already terms lines industry Well, at in Senior, they

niche, these Robert, regional that a So of classes lot make control get mean try number There fourth want many example, I whitespace a gives it businesses. of. finance, we shorter is things, asset think inherent that, the us are industry of is Kingsbridge, to business expansions, new platforms laboratory -- may is estate these to quarter, to there it very we around might we or there especially sciences, to by give us areas are perspective, ways into mitigate lend to can And then it’s expansions, a comfort. some but duration use want prior a use on this is an often we’re cyclicality are existing Michael’s we we what finding are differentiated And building point, something R&D get class, asset assets, sniff focused lower a risk we’re doing a the we fragmented look lot maybe to to of at life that that into to the at I in look that lending investments our to to into where get today, the own opportunities, real from will expansion, get think, we core competency lender leverage not in something into off continue to of. that the finance one have so and I for as of

a, focus Got that with, risk-adjusted b, So, and, it? continue area D&A that our is to be that might consistent on our return we ways an profile.

Robert Dodd

round me, on three. on of comment, Doesn’t math obviously, to go should, a the simple instead can we a the couple it of mean, we the number. But, a be color one about plan Got decision, of a divide here Board to think have is but Any merger, round obviously, any it. after have was for can instead give doesn’t Board XX by members was that. the give you And the monthly on a dividend, to that why I you I --last call. made. One Thank decision you. quarterly.

Michael Gross

purposes, I every say, is we’ll like was have think Rich to not I like just a it. But it to think, that investors of month. call guess of All a a for simplicity it simplifying, it just something different I just aside, kidding was number our schedule the although getting consistency monthly payment would handout increase basis. on a going I

thought might be we a So time good it. it to adopt

Bruce Spohler

to the and And by the divided take current then intend is three. $X.XX it

Robert Dodd

enough. Okay, you. fair Thank

Michael Gross

you. Thank

Operator

from Point. question Alexander Casey Thank you Compass and your comes next with

Casey Alexander

to pipeline about of risk coming a XX, to the the for ask and and I finance -- going acquisitions is minute it about was going ask that’s in I dividend. was Well, lender

questions my answered, have thanks. been So

Michael Gross

that, read you Perfect. We your so are mind. going ask we knew to

Casey Alexander

you. Thank

Michael Gross

you. Thank

Operator

in I’m And showing the not any further queue, sir. questions

Michael Gross

your all of for and, shares, appreciate we voting. we appreciate own again, you those Well support you

whoever to to close on SUNS’ we three call minutes. can So be going merger Thank we’ll is our our you. Bye, talk in and bye.

Operator

this conference you call. participating today’s may Thank for and concludes And you disconnect. now

SLR Investment (SLRC) 2 Mar 222021 Q4 Earnings call transcript