Earnings call transcript Q1 2023

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Operator

Thank you. Good morning, and welcome to Logan Ridge Finance Corporation's First Quarter Ended March 31, 2023 Earnings Conference Call.

An earnings press release was distributed earlier yesterday after the close of the market. A copy of the release, along with a supplemental earnings presentation is available on the Company's website at www.loganridgefinance.com in the Investor Resources section and should be reviewed in conjunction with the Company's Form 10-Q filed with the SEC.

As a reminder, this conference call is being recorded for replay purposes.

uncertainties. conference of contain and future number risks today's are statements, involve that of guarantees not performance and note call forward-looking may which a Please or results in Actual the of results number including filings the factors, described of materially with may from the a forward-looking as SEC. a differ statements result in Company's those those

Officer; Chief Finance Chief and Director President Officer. on call Corporation; Roos, Speaking Jason Officer, today's Schafer, will Executive be and Chief Financial Logan Investment Ted Ridge Patrick Goldthorpe, of

With of to to that, ahead, turn the Ted Goldthorpe, would now I like Finance go call Chief Logan Please over Executive Corporation. Officer Ted. Ridge

Ted Goldthorpe

Good quarter XXXX morning, first to and our earnings call. welcome

our As Jason Financial Officer, our Patrick mentioned, by Roos; Schafer. I'm joined Chief Chief today and Investment Officer,

remarks, our Patrick detail Jason additional and date opening investment to walk provide through financials. on will will my the activity Following

to XXXX. first much established To that of half a open, of of very during the continuation highlight I'd earnings trajectory XXXX second was like the the quarter

on metrics that We With optimistic shortly, like market a navigating. are currently more continuing to Jason Patrick we are provide quarter. key the to our strategic XXXX and would despite for few detail and mind, challenging from while cautiously in the I are priorities highlight execute

XX% had non-yielding results portfolio our third was the $X.XX driven capital income-generating portfolio, per into investment structure success of reworked share. I XXXX income share quarter first monetizing to legacy earnings net enhanced by positive NII. one the of or million of million power rotating our we've demonstrate quarter and previous from quarter NIMs. believe the quarter and our the Further, Our $X.X was this up $X.X compared as first per or to consecutive $X.XX the

$X.X Deployment with leaving for million the and deployment repayments remained and sales, $X.X net of us with million. million in $X.X investments positive new quarter

in of the quarter XX consisted investments of As end, companies. portfolio

$X.XX dividend of the in the per per an to financial at performance of Directors approve to month. to $X.XX quarterly Board improved the end previous Our quarter the company's from increase share share paid allowed the be in

XX, on the XXXX, under shares approved March million repurchasing repurchase Finally, $X we program. share began recently

XX, NAV levels. was March per demonstrates this for $X.XX of shares share X,XXX which to the the for trading accretive approximately at cost of program XXXX, have $XX,XXX, by potential Logan an and As have we company's can Ridge stockholders repurchased current benefit aggregate

reminder, March XX, a XXXX. expires As program on the

Logan July look We our of are significant the Ridge Mount quarters. proud forward the We progress in management over made company's the Logan of updating of XXXX. turnaround to you we in coming back the adviser in took success as on story since investment continued

believe Looking of XXXX, Logan the to continue capitalize well rest arising opportunities environment. forward positioned that from the is we to credit current to Ridge on

company's capital continue power wider and and efficient from balance more to the will on returns asset its the earnings further the in of a structure increase to maximizing very compelling our interest shareholders. class rates increase Current spreads short-term make large total risk-reward We perspective. focus sheet to

the turn Investment will call over our to Schafer, Officer. I Chief that, Patrick With

Patrick Schafer

Thanks, Ted.

value companies. portfolio fair XX, $XXX.X million $XXX.X of approximately approximately and XX the portfolio to fair of the consisted million This quarter in of $XXX.X XX, As March and prior portfolio value of with approximately as of companies our portfolio XXXX, March fair a XX XX XXXX. value a was with compares million companies of

investment more value the Partners by of originated half at than XX% assets company's invested platform. portfolio was of the Credit or XXXX, As XX, March BC fair in

deploy continue to we quarter, judiciously first the capital. During

million of the of Specifically, in for approximately $X.X the company made quarter. resulting and approximately deployment approximately and $X.X had investments million repayments sales, million in $X.X net

environment to we taking as of we in lender-friendly is disciplined selectively market. take shaping this since demonstrated continue up deal volatile consistently have what to advantage a highly we over As management, be very be

average to Moving of annualized composition. of fair This value obligations our of represented the had excluding a which quarter on debt total portfolio at and fair weighted collateralized approximately weighted XX.X% our end, XX.X%, obligations. a from approximately value investment of with loan and portfolio XX.X% yield represented debt prior the and portfolio at income to yield non-accruals our total income portfolio, non-accruals annualized average from of as collateralized XX.X%, loan portfolio compares At quarter. investment excluding

our a of respectively, respectively. quarter fair This and XXXX, and XXXX, March portfolio first and value fair on total cost and value on fair of XX.X% to as total XX.X% basis, value and XX, of debt XX.X% a compares first XX, on Further, lien cost respectively, the as our represented of prior XX, debt representing XX.X% basis, of portfolio and portfolio XX.X% our cost basis, a XX.X% March as of XXXX. and ended December total lien

cost March represented and equity cost respectively, XXXX. portfolio Further, fair on value of of portfolio portfolio and on value XX.X% of of XX, XX.X% as of on a December and fair the XX.X% XX, basis XX.X% XXXX, and XX.X% and compares a This the XX.X% the of XXXX. basis, as non-yielding to as basis the fair and and cost value portfolio March a XX,

non-accrual to on Moving status.

subordinated note quarter, status. non-accrual in the moved Bucks, we our to During Lucky investment LLC

debt X.X% March engaged on as million, respectively. had of of to $XX.X all We value a be to fair cost million amortized we or of aggregate portfolio on have with with work constituents X.X% the XXXX, continue pathway cost XX, been two at respectively an value, investments forward. fair $XX.X and and non-accrual and and investment Accordingly, constructively actively and

portfolio's million a status million, fair with respectively, portfolio and company value quarter investment $XX.X one fair as and and X.X% of This representing of cost X.X% compares respectively. the of and $X.X cost the prior non-accrual value, on to

Jason. turn the Now I'll call over to

Jason Roos

Patrick. Thanks,

March Turning results XX, to the ended XXXX. our quarter financial for

ended to For XX, the income $X.X to million $XXX,XXX March quarter and of quarter $X investment as total the compared quarter first the by by or million increased XXXX, XXXX. prior increased compared

non-recurring equity well the rates. as was and as increase originated result $XXX,XXX Credit proceeds to increase prior non-yielding increases XX, The XXXX, of the income rates. March as driven base in from an quarter in the to well received assets quarter increase Partners the base portfolio was compared primarily compared as platform BC of by The fee primarily interest-earning exiting redeploying by a ended

Total XXXX primarily operating of of base the Total first quarter interest expenses financing a the first XXXX, smaller fees of as a expenses lower costs. capital lower management the and lower result for and decreased to to as increases of XX, as financing and $X.X operating cost of XXXX expense general result to expenses quarter March to company's quarter compared ended in lower in interest by to rates. primarily a XXXX, for the result increased and a $XXX,XXX compared higher million $X.X as of quarter million fourth administrative portfolio the due of and due

ended XXXX, in for first non-recurring or XX, investment Again, and reported we a previously, third million. quarter net quarter the investment which $X.X to included income or marking this investment share investment of our million prior compared per a loss was quarter to company the which net of company items. the per the substantial $X.XX reported positive investment $XXX,XXX was net for $X.XX Accordingly, net quarter March as income. for the Moreover, turnaround for per the $X.X $X.XX quarter complete share net or highlighted share, XXXX, $XXX,XXX consecutive of compared income the income is a of improvement of

by XXXX. Our the $XX decrease asset share million investment of as realized accretive was effect XXXX, The on fourth XXXX of the end value to and the program. the share income and XX, of dividend net net basis quarter, of share in per on $XX.X or share per repurchase or $XX.XX payment quarter as was excess of per offset unrealized our losses portfolio March March $XX.XX partially due compared a the XX, during primarily to the million at

in had cash platform. million quarter as deployment end, as capacity cash and Credit by unused as Partners originated and well company the of Finally, $XX.X BC the for equivalents of available million borrowing investments $X.X

will over With back the to call that, Ted. turn I

Ted Goldthorpe

you, Thank Jason.

look first of to XXXX, of we made forward the continued We the the support. rest your the year. you are progress proud during of and continued for quarter we have Thank

This questions. the for turn concludes I and operator over the our any now prepared will remarks, call to

Operator

of Your question Thank Nolan you. first [Operator the from Christopher Thalmann. today Landenburg line from comes Instructions]

is Your open. line

Christopher Nolan

guys. Hey

run is it dividend, level? that dividend Given increases quarters, should are forward, quarter comments first the momentum EPS we at expect further earnings the current to that results good going and rate say given a the fair cover] remains where in coming [easily assuming see to the the

Ted Goldthorpe

to would EPS Hey, is Ridge Logan changes that can Chris. or I mean in line items swings we quarter-to-quarter. have How very issue certain the are big say, yes. you? Yes. with small in NII lead I

dividend as a decrease. earnings to forward I substantially intention increase we certainty a increase to risk our earnings. is lot want dividend than the trajectory with we the of the be our a So I but and of increases, dividend more prudent grow have the around higher of relatively mean over time think to continue dividend is

Christopher Nolan

changing of a this your Great. what some investments? say And given does of I terms would exit ability operating environment, question be, that guess follow-up equity in these to legacy

Patrick Schafer

Yes. Chris, it's Schafer. Patrick

continues – slower. think environment look, the So be to I remains

in names lot elongated instances, think to are minority do in number relatively rotating a different a respect. be holder. small we out. active of I some So In said, That we it a continue about equity of

own catalyst one-off opportunities kind in in and it instances. would But to So our there say are general. unique certain elongates kind kind create try certainly of of that process of I

Ted Goldthorpe

with obviously is I'd these And there thing I not agree all not been bad. but working They're this everything only upside to is on hard we've Patrick said, some – other of portfolio. also The positions. some say super

an doing having they're these impact – we're that positions of less of because some actually impacted well by things pretty now. are are So

and upside across to puts it. is there takes So portfolio, some but that

Christopher Nolan

any may. third to Is plan question, a credit if And than raising use [indiscernible]. I facility the rather the

Patrick Schafer

a broke you up Chris. So little bit,

think is leverage were baby in to plan facility as of new a opposed to to if capital. were be or the we were net credit a if bond to I use something increase we our you or terms in our of issue deploy asking

fact, that the was is then question yes, of a facility. sort your I million think $XX number. It's intent answer be our if that the would – behind headline in

So the we capacity as potentially we incremental potentially well could there, million and future. not could as $XX in still well, that investing million, that upsize an on have committed, but of upsize $XX

Christopher Nolan

That’s Thank for you. Okay. it me.

Operator

next Martin question Your Instructions] Steve comes with the line from Slater. [Operator of

Your line is open.

Steven Martin

guys. Hi,

Ted Goldthorpe

Hi, Steve.

Steven Martin

the you may or comment not before on anticipation quarter-to-date? activity any you know of Can happen the And what end quarter? may

Patrick Schafer

portfolio Yes. today, of think here our I material nothing would would topical. we happened in I be that kind say of where that's sit there's kind

kind companies to portfolio number with exit on, mentioned Chris, of I legacy specifically things that just there’s try to As positions. a of before, we're and working different some

to near where relative we're some think today term, hopeful little medium things will think transpire the to bit I them. those we a of any premature probably but of sit I in it's mention

Steven Martin

got Great. what you at had of that that I some some have And what end you – maturities pushed know and out, maturities the generally in during about? XXXX. Is talking you're XXXX

Patrick Schafer

correct. That's Yes.

Steven Martin

extend they're to market? thing get you you’d So the marked the the mature terms if if – them it up you companies, had wouldn't get be to so you and have – world worst back in closer

Patrick Schafer

situation "market though generally relative rates", dependent, our they're are of the to the there best in mean is situational I on some yes. company yes, dependent speaking, and interest but what but position

Steven Martin

Okay.

impact static change? over the portfolio on pending three interest if the would your that if doesn't income? the balances change, roll months, Clearly, what through, last pretty don't are all is investment that that expense your increases be rate Given debt the

Patrick Schafer

on mean I'd I again, of of of really where still right. hasn't low that continued little that, kind and say this and kind just things like churn been relative a newer have like end bit kind And probably in I the in we portfolio kind rate our lot terms new the of fees of call That's is and think movement. of in protection any because have of we the things a OIDs assets portfolio. there momentum

from on fee a kind end perspective. still of general we're think relatively the low I So

that sort and obviously in out be high probably an the stuff benchmarks we're say with taking loan kind mentioned, of rate I But that, it's kind environment, mentioned, LXXX loan. But dramatic. you yes, the on. obviously positions from outside as you a bit an correct. material little relative then grading – state of, of exiting a some again, replacing anything like a But as Steve, a that's portfolio in LXXX generally with goes from run of static think yes, portfolio any with an fair in there without change that. things that Again, that income There's wouldn't of to from increasing

Steven Martin

Okay.

that You And Portman. feel time? I be on the how want and you discount comment cost? – about might How comment much do of to to you it on over know on recoverable mark-to-market

Patrick Schafer

Yes.

and of a we So you Y a recoveries. run asking, in and you're where X can We general, perspective. from – say, didn't percent follow we I run that. about default that. – didn't we feel do fair portfolio on and percent value marked say up I can we guess rates the good specific I pretty have math would would

As Ted of continue well. to some picked the companies mentioned, I very on portfolio side mean, those perform equity

long-term So positions. pretty we But about the sit is do good certain upside and today, marks. where a we some think there we feel

half a it this like again, And at portfolio is least is of new. bit newer relatively or little

that date So has. portfolio it quite the you the Portman other doesn't have Ridge mark-to-market referenced impact to same

composition. different bit little a they're So

we I that on same follow did the portfolio. So that best other probably now say with up right we the is and can can analysis

Steven Martin

you. Got

one marked as give of – positions old equity you as over positions anything me down much assume because couple have, equity else? I the Just Yes, last second. the that's somewhat. environmental the And quarters,

Ted Goldthorpe

I Yes, Patrick said. what it's think

– think unfortunately, – don't don't I think – I thematic. it's don't I that think it's I environmental. it's I think don't

I it's situation-specific. think

things. each So through company different going is

I good, it's broad broad portfolio. Some some like came where just math there's just And – think a don't a – across we're that's out. bad. don't seeing I I "slowdown" a the think the think like

the are very I and think valuations, what think, the takes outcomes. puts company-specific I on around

and facing headwinds. are some some some post-COVID, are others better, like doing much again, So

Steven Martin

Okay. The buyback? not great particularly there – that buyback, we've X,XXX is it's commenced. number? a that something the inhibited shares It's was meaningful

Jason Roos

Yes.

seven blackout up buyback opportunity in March. us of I was because be opened days you'll think the pleasantly window QX surprised when timing, the for the possible quarter it in basically, in because

now shares March the window, of we blackout continue think, day but XX, shares to day. the QX, we'll and back were in program put place actually while I we back has were between, been outside was that So first it buying in buying be a each

Ted Goldthorpe

Yes.

obviously, we're quarter only we're bought only we quarter, not stock – in obviously. mean than first one bought in more we and only Okay. we the done second – we're of I just quarter yet, the the – in

Steven Martin

you. Got

You're using it's the XXbX, automatic of somehow? so sort

Patrick Schafer

Correct.

Steven Martin

Okay. leverage you about And ratio, the right the – your leverage how gross net? now, do feel ratio in

Patrick Schafer

our good. of end think X.XX pretty I'd I at That portfolio We of we're said, the bit of X.X. a feel [indiscernible] Logan lower composition the again, sort say to of little general range is equity. heavier

investments. side want new that generally. of lighter a on that capital make be kind see of I we would to again, So to new little market, feel bit expand about in leverage we the also, think kind the we comfortable increasing sorry, opportunities But range of to as rate

Steven Martin

Got it. Alright. lot. Thanks a

Patrick Schafer

Thank you.

Operator

for Q&A our call the for to closing Ted I concludes This today. turn Goldthorpe back remarks.

Ted Goldthorpe

our when today, thank and to everyone we again Well, attending and August for all announce results. in Thank you, day. much very have we good you quarter to second a speaking forward Great. you look XXXX

Operator

today's conference call. This concludes

disconnect. now may You

Logan Ridge Finance (LRFC) 11 May 232023 Q1 Earnings call transcript