Earnings call transcript Q2 2023

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Operator

Thank you. Good morning, and welcome to Logan Ridge Finance Corporation's Second Quarter Ended June 30, 2023 Earnings Conference Call.

An earnings press release was distributed 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

Investment Good quarter our Officer XXXX morning, today second Jason by to Chief joined and our earnings Financial call. Chief Roos, Patrick welcome Schafer. I'm Officer our and

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

over strongest two been continuation Logan like performance has date on since by XXXX I start trajectory XXXX. middle of to since took was the that the of largely of quarter Logan a to ago, quarter and managing second company Ridge’s the highlighting the we years just

Partners will Patrick Jason the brief exposure prepared through limited clear Logan's legacy the and decline, platform its reflected As financial has more by to highlights results. mind, shortly. been I today to and remarks which has few Credit With keep my and benefit increased BC detail in continued will that a on key credits provide to portfolio has to and shareholders originated been to company's equity exposure has

on Directors Since compared financial early quarter. $X.XX approved XXXX, bringing increased strong each to the the it share, back per of quarter. to we've and quarterly we've as an Board share $X.XX quarterly First a in and the dividend foremost, of the distribution, company's it turned result XX% per last increase performance,

X% prior value asset was up to the $X.XX this quarter. as share, or compared net quarter, Our per

investment power legacy enhanced income, we reworked million success which non-yielding into share of monetizing driven quarter. the the positive portfolio $X.XX refinanced our our per this straight fourth and net for XXXX income earnings or $X of had the amounted generating redeploying structure in we've illustrates that portfolio, and the reported We names. quarter capital by to trend This

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

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

repurchasing established March. shares Finally, that continued share was late under repurchase during in the quarter, program we our

for aggregate As $XXX,XXX, of share. June shares an XX, approximately NAV approximately cost by which XX,XXX was of accretive we approximately to per had repurchased $X.XX

Looking to ahead, optimistic prove we of attractive the private continue to we a believe And that for remain XXXX. be very half second credit vintage. XXXX will cautiously

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

Patrick Schafer

Ted. Thanks

of As Logan's million This to the June $XXX.X companies was approximately $XXX.X to the XXXX, approximately XX million portfolio of fair with portfolio exposure with companies. compares value value XX quarter. of fair prior in portfolio XX

capital. we quarter, the During to second deploy continued judiciously

had value sales, and investments, of and made diversification million quarter. approximately million is increased the more million fair repayments $X.X deployment the approximately a a for approximately Specifically, to the of even ago, in resulting $X.X companies as company in $X.X growth portfolio XX year net $XXX.X impressive, Logan's and of portfolio with company Compared just million.

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

prudent to advisor, lender of ensuring a you have underwriting de-risking extremely company's with consistently market. this to advantage disciplined your the appointed selectively Initially we've investment serve as now portfolio we as demonstrated and were capital. look since on As friendly laser remains been thoughtful we focused take and

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

obligations portfolio This collateralized excluding weighted from compares of investment to annualized debt This loan by as portfolio our strong relative approximately at of XX.X% value average and is fair income which a yield non-accruals represents of XX.X% total with a the which our quarter. prior of quarter. our during performance decrease the portfolio the in largely prior debt portfolio quarter, driven to the equity

first to XX.X% basis value on debt and XX.X% March fair a of floating of of XXXX. and respectively as debt of represented XX.X% our a compares March portfolio of Further, basis, on of investment on of cost as XX.X% portfolio as to value value XX.X% XX.X% XX fair respectively, bearing interest our cost June our XX.X%, debt This at XX, respectively. of portfolio and and XX rate portfolio first XX XXXX, and As XXXX. fair was a our XXXX, representing a total of as lien compared and June value basis, cost XXXX XX lien total at and June XX.X% fair

The of XXXX. portfolio respectively quarter, on fair basis of XX.X% by the XX, quarter. the of portfolio which performance our non-yielding is value of on to equity cost Again, a This and XX.X% the during of relative value portfolio as in the June as increase XXXX. strong largely and basis XX, March represented our to equity compares book and XX.X% prior fair the cost portfolio the and a XX.X% determined

Moving on to non-accrual status.

months companies During non-accrual XX there portfolio no ended added June status. new the three to XXXX, were

security lien add an LLC. first status, Lucky to additional non-accrual However, Bucks, we did Logan's loan term to

of of and fair and aggregate As were XX portfolio of with portfolio companies and X.X% on the fair fair and amortized at cost XXXX, This cost X.X% non-accrual two June and million respectively. as X.X% the portfolio with quarter, respectively, cost fair a status companies value, value portfolios respectively. of compares $XX.X million of two cost and value the million had X.X% to investment we prior of respectively, an investment $XX.X and and $XX.X value $XX.X million non-accrual on representing

Jason. I'll over And turn the call to

Jason Roos

Patrick. Thanks,

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

For by to compared the flat $X.X quarter quarter the XXXX in Logan of same to generated quarter investment million year. compared and prior income, $X.X million the the which prior of second was increased was primarily proceeds earning non-yielding an platform, increase driven originated the in as interest rates. assets Partners from The as redeploying by well base received equity Credit increase exiting into portfolio BC the by

interest operating XXXX, average compared as expenses of approximately $X.X in XXXX credit during financing Total the a due as period. by facility for $X.X second first result to the quarter slightly of of million million expenses on outstanding increased the XXX,XXX quarter to borrowings our higher higher and primarily to

current again, quarter financing expenses, general and offset by also higher XX,XXX, management the Compared expenses interest in in fees to administrative second driven higher by of expenses administrative XXXX, fees but partially service were lower period. the and approximately by

the investment complete income for net quarter to $X.XX loss turnaround for was compared net a and Our the which quarter company fourth million investment positive of $X share, income or of XXXX, a per of the consecutive $XXX,XXX. investment the second marking quarter net reported

as $XX.X share Our million X.X% as $X.X June per share as net $X.XX XX end of basis, increase $XX.XX representing of was share share representing of first $XX.X June quarter a a compared at the value per to On of of asset was XX, net or the XXXX. the per quarter asset million X% value compared per prior net XXXX million. asset value to increase or as $XX.XX XXXX,

of to highlight increase The accretive increase net increase was like that net net the asset and net the company's our of and to share share the prior driven value to quarter-over-quarter on asset in million, portfolio per or XX in share compared repurchase per asset of year X.X% XXXX the the effect between X.X%. investment I'd XX, buyback income difference the during asset of excess in value program, value net the by X% increased basis the in the is effect unrealized net on asset the May million X.X value net realized share gains by our accretive a compared of value quarter, program.

in is per effect a XXXX. per share and per dividend received company per accretive the The earning or net buyback year the effect value increase $XX.XX the during accretive the portfolio to relative out was driven repurchase of shareholders basis, our asset and as realized the the share X.X% on its prior X.X% basis share, a the on gains net the from and the On value net December program. share between of unrealized by Logan increased difference quarter program. XX X.X% Again, by asset the from share $X.XX

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

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

Ted Goldthorpe

during made just Why we open the the before proud turn the XXXX. Jason. the the your of to value the of over But quarter don't now of forward we're shareholder progress Q&A. increasing continued you, for look year. call continued you we've Thank Shareholders for we're through very second And that, I half any I'll support, thank for and back questions. operator the up call

Operator

first is Thalmann. the floor line Ladenburg The comes questions. Your Nolan open question [Operator Instructions] Christopher your with now from of for

now is line Your open.

Christopher Nolan

Hey for Q over increase driver guys, Q? dilute the what was the in count, share

Jason Roos

have share had the you the so in effect it. quarter. we should Oh, got Well, increase diluted? an program, buyback anti-dilution It’s had for

to EPS you're diluted year if it. last to issued feature that is the had conversion the we So, that referring related debt to a

Christopher Nolan

particular appreciation driver? of driver equity Got you. And a fair then, values? the what there the Was was for

Patrick Schafer

largest strong quarter. and relatively they the The a one portfolio mostly company very one continued to company, completed continues performance. acquisition And driver Degree. during company But accretive very it's was very, Nth Yes, in driven called just well. it's form the

Christopher Nolan

the for unrealized there question loss then And final driver a this, if me appreciation? but well is, realized the as as particular Great. missed pardon was the I

Jason Roos

Yes.

And CLO as CLOs. quarter, portfolio on in result some had impairment we markdowns equity portfolio that took this this some on it. those of So, a

So, predominantly realized that CLO. is loss

Christopher Nolan

Got you.

Patrick Schafer

Did it unrealized to realized? from flip

Jason Roos

flip. was of a all portion About it was to a realized related a CLO impairment. of But was flip. that Only $XXX,XXX

Christopher Nolan

it possibly that? ideas anything Yes. looks taking on hit And and your quarter, starting in any or of some like Strategically, terms this. it's to on SBA a you guys stride good are like debt

Ted Goldthorpe

I Yes. it. It's a we've explored mean, good question.

I -- obviously, it's is difficult for for licenses. And think we really BDCs have understanding hard new our get SBIC it's one. to don't really

So, that to able something think one. about, it's think it we'll be I always unlikely is get but we

Christopher Nolan

Got you.

for Okay. That's me. it Thanks.

Ted Goldthorpe

Thanks.

Operator

of next Steven Our comes line question Slater. the with Martin from

open. now is line Your

Steven Martin

Hi again, guys.

-- the buyback first quarter up. The first go the NII is sequentially, as NAV great. increase opposed to great. didn't the was quarter was is where the well, But this this really So year-over-year,

little. is was If investment you that what income. a at progression four, -- you income investment look flat up and increasing And had -- of of slide were expenses slide great a sort

that what was the I what was wondering expect. driver of should and So, we

Patrick Schafer

is things, current for which particularly It's couple Steve, the quarter. a Yes.

two say Let's things, QX fees kind some of it. had in is which non-recurring

out -- investment specifically But called but of I increase as that I strip more So, fee well, $XXX,XXX of kind when of and know income, is there's terms the the you last of quarter area you actually something kind think income. of it quarter-over-quarter in material income. fee strip out out we the in a when there non-recurring

higher-quality stream. So obviously a revenue it's again,

we we secondly, also security an non-accrual. on then mentioned, And as put did incremental

-- So we you kind again, you organically, of are if that, income base. “normalize” when of still to for kind our were growing

two appears factors the are be to those sequentially. So, flat what in biggest

Steven Martin

So, if for to you're something, normalized we ramp about, unusual grow? absent should that third these the and the that prospects QX, and QX items had one continue should is of that you talking expect occurring quarter,

Ted Goldthorpe

right, Steve. that's Yes,

core earnings solid. So are the

you the over You'll strip trend see or that projection last once out few these growth one-time growth items. quarters that

Steven Martin

the Ted, got quarter monetized and like chance or the And any for producing? those more repayments, what can something does of I third question be Okay. asked equities, earlier, deployments, look Patrick, into securities rolled any

Patrick Schafer

where end, something noted Quest, as as large might I can exactly we to honestly, it, area in press well quarter deck, equity position subsequent or it in been monetize we did position I that a million the Yes, have earnings an have $X forget think our debt, but but of relatively Jurassic there.

under-yielding investment XXX received put sort deployer not a at to to to between think call I meaningful, that a obviously, capital being and say, $X.X-ish the net think million a so kind marked about would quarter out And quarter. end like, as would or is again, net receiver, at. but money well depended to at that so, relative general, paydowns. redeploy we that's grand on it our like new it I'd between relatively and what was had But debt expect we in of we expect equity that as of timing be we opposed though, in when I of

for is credit just Again, gestation well, about just a bit Portman as period talked longer private pipeline. as a our in little pipeline,

So just a depending on deployer back of still come as capital. of us, to net this would stuff would when that vehicle we but think

Steven Martin

this I right. you been Ridge got sure missing a little Yes, opposed call dividend I'm on morning crazy It's that. your And on All minutes Logan a sorry to about can Portman? for policy it's different. late. as couple and slightly talk

Ted Goldthorpe

passing with dividend I every the NII feeling on more obviously, comfortable quarter, we're mean, more more Yes, side chopping and coverage. around and wood

a dividend increase continue obviously to So pretty healthy but dividend. obviously, room we the to there's in increase the way,

So negative of the barring rise. to kind we any continue dividend surprises, expect to yield

Steven Martin

All right. Thanks a lot.

Ted Goldthorpe

you. Thank

Operator

the Since no questions call Mr. there Ted turn further back time, you. over are this to Goldthorpe, at I

Ted Goldthorpe

everybody you a our you. joining us end you Thank speaking third you, Thank Great. when want results. look happy much. I to Thank in today. very for we quarter And forward to to summer. very announce everyone, we wish And again to November

Logan Ridge Finance (LRFC) 10 Aug 232023 Q2 Earnings call transcript