SLR Investment (SLRC) 9 May 242024 Q1 Earnings call transcript

Good day, everyone, and welcome to today's SLR Investment Corp.

First Quarter 2024 Earnings Call. [Operator Instructions] It is now my pleasure to turn today's call over to Chairman and Co-CEO, Michael Gross. Please go ahead.

Thank you very much, and good morning. Corp.'s XXXX. for Investor ended fiscal SLR XX, March to earnings the call quarter Welcome today my Chief joined team. Co-Chief Kajee; I'm by the Executive Bruce XX-plus and Officer Spohler, years and Investors our Solar Financial Shiraz long-term Officer, Relations partner of you start covering and you the please statements. could begin, webcast Shiraz, by forward-looking

disclosed and today's that Michael. are I Corp to the being Audio webcast to webcast on Good section of release would may untied available they the include will attention this Thank in our SLR would call visit statements. Chairman in or to and call the forward-looking any us X unless by To Michael everyone. you, our this time over of risks of law. your is turn like in to the At including filings, results being call Actual guarantees statements performance latest of uncertainties. financial future and are our Events the Co-CEO, disclosures any as strictly regarding factors, SEC. Please not from made number note differ so in Gross. conference like call materially I our and our in press morning, earnings to may also do remind forward-looking are back at to and I'd property county Investors call webcast everyone Today's call May form results that on filings This with of required obtain not to performance like prohibited. update of broadcast release. number website do and recorded. www.slrinvestmentcorp.com. those press is involve our our replays result Ivestment not be the is XXX-XXX-XXXX. of Past customary today also website forward-looking later indicative a or conference of a to results. projections. please statements statements These and our We at future time time, undertake a copies as any described SEC call

and income for call Shiraz, the quarter again, per growth investment the this SLRC net of you, year-over-year Thank of you our XXXX, to in market $X.XX X.X%. joining closed morning. reported first of share representing earnings thank yesterday, After everyone

that in First be a more quarter NII and X.X%. dividend markets quarter share of quarterly XXXX, an cyclicality Despite share or the and as investors. of increase since as to a March and XX, the marked market results million a private per in contributed $XX.XX the sequential finance a us portfolio The of of received of to $XXX that resulted sixth increase value asset is of credit financial the we existence a of consecutive before from been have $XXX per $X.X in net share private record of history. repayments variety experience to $XX.XX December continuation ebbs XX, exceeding to approximately that billion. is across of new the at cycles which per meeting in of sponsor the a opportunities and markets, across over handful the the managers and of issuance, a comprehensive further investment slight strong finance. credit one finance new not first flows of track specialty great crisis, strengthening credit approximately tepid environments XX-year and M&A SLR originated activity decline in our can sponsored have the million by navigating is governed in credit investments first CLO recovery market BSL strategies in find to attractive participation continue the and quarter, quarter, In private we condition we the of investment in the complementary the bank

that led lending our SLRC strictly condition private this their XXXX. added investments in lending away a asset-based has ago than Since fact, us is resulting strategies, in our commercial investment expansion diverse cashflow a credit more several to model. In from to decade expand teams to investment then, more diversify it finance

half approach way, our to in credit a private in investing of asset-based another Our originations XXXX first lending represented reversal verticals was were SLRC total and that to solvent. conditions lending finance first very originations in the originations total multi-strategy the attractive finance finance the where quarter close of quarter. quarter $XXX of approximately of sharp quarter existed the sponsor sponsor million first comprised display XX% equipment sciences from originations life lending, last on only specialty XXXX. finance, in of Sponsor Said XX% trend Finance in friendly year's of investment of as Originations

to cash on finance to quarter longer While sponsor were we capital. originations some increasing has have attractive very XXXX and in in our million companies assets opportunity their tighter of with in investments middle teams loans asset-based a exists credit and capital and frame time ways flow flexible Finance end, than the vintage investment ABL resulted execute owning a for closed the for new are Sponsor Post sponsors us more an expect quarter. mandate grape and to as new we for the which ABL us have both market. be currently competition liquidity market $XX industry raise to strong over support private business increasingly working This broadly, more shift investments both areas via to green to less draws exploring market lower Management started a activity the in muted and to solutions rapidly to finance, plan. evolve, quarter, allows and for investment of free credit improve. be Seritage continuing the exceeded transaction half nonbanks for to investment equipment ABL million opportunities. solutions originations equipment period following DDTL both XXXX. a with first of the valuations team's XXXX. solution shoots on science provider Equity companies deep to banks performance for the to private to we our first a both milestones. wide across activity opportunities originated In stabilize, In in $XX public certain strong life science continues life pipeline borrowers small big also deals from allows and of and industry us companies. some This both hitting transition expertise see and begun of new We've based range have the

of We has of performance approximately high continue conservatively resulted senior exposure. long-standing was to and the lien investment loans. in and loans withstand quarter SLRs than better At first portfolio with more be our equipped focus we is and construction, quality our end, pleased believe with on second of comprised lien rates XX% cyclical secured portfolio. lien positioned first portfolios persistent to portfolio a broader pressures and interest comprehensive which inflationary

be X.X% relative sector nonaccrual in portfolio a strategies, result at of our transition approximately for weighted to EBITDA finance Overall, of revenue cost the XX, cost As steady BDC X.Xx. of to for higher Finance investments portfolio to selective specialty and low comprehensive interest and of they loans has investments. on accounted at be The X.X% rate portfolio XX% to and average Sponsor fair Finance, the approach value and capital the managed our have of March In us our our sponsored investment companies. Sponsor continues the which believe our of positive growth inflation. is enable We nonaccruals finance held successfully basis, represented March multi-strategy respectively. environment our average our a to XX, more an coverage our with in on

income are capitalized is healthy and PIK of the gross metrics quarter our X.X% from Finance on specialty cash with amendments. and finance from solid result these credit resulting the services. income health of importantly, as with investments flow, of form focus in LTVs We have borrowing structures. Additionally our Sponsor base collateral only high of our business on flow borrowers recession-resilient recurring first and support continue such to industries financial quality attractive that cash free and meaningful The care, be believe

the With longer only on is for remainder their market portfolios, credits, are to refinancing it focused higher environment. of rate the the now sponsors best open

remains including in economic the to conditions durable million SSLP to our today, that think and our is finance economy. on seat $XXX SLRC year, continued to we financial we soften M&A addressing From have credit While amended Shiraz very position centered favorable at increase through half XX, take either portfolio highlights. turn available prudently. of a are which deploy. we draws approximately back available or take and the capital over the you quarter first DTL extends, of March -- our now specialty are I'll back optimistic of current we advantage companies, the in capacity At activity will call to

The a XX. compared March had to $X.X March end, you, the billion and at of debt market $XX.XX across leverage XX. debt Michael. XX, fair net outstanding or per value investment $XX.XX share December at per XXX to portfolio December company equity. SLR was $X.X value asset sheet billion At investment XXXX, fair X.XXx industries on with companies or SLRC's million of industries in approximately XXX net portfolio $XXX had approximately compared XX to at portfolio billion Thank XX, of of market companies million $XXX across $X.X XX value share corporate balance a quarter

our interest strong the leverage to SLRC's range X.XXx. leverage in position ratio profile a target continue expect X.X our to is current environment. of of We in remain to to middle funding the weather rate

rate of fixed fixed unsecured million always in only notes access dialogue And to we have investors $XXX with interest a opportunistically weighted a existing X.X%. market income Our community. investment-grade annual senior the average of and are debt expect the

the P&L. to Moving

Accordingly, for income For the ended million quarter. the the gross and had $XX.X first Net the the million to totaling months XX. ended March a $X per months versus million the million X million XXXX. $X.XX XX, unrealized XX, investment expenses quarter. March line, million net fourth the ended the for XXXX, months $XX.X the quarter unrealized realized versus ended and income for company's prior $X.X for average months quarter Total This for net compares prior totaled same or realized $XX.X loss and million $XX.X the for totaled totaled of X gains X investment December as of X March $XX.X the share, company XX.

QX the months the XXXX. to operations payable June for the record May a a increase of to a net net I'll X, compared in our $XX.X value turn assets share XX, On months declared XX As company holders to the on the of XXXX Bruce $X.XX XX, that, ended XXXX. of a XXXX, increase from Spohler. December distribution March over for net had ended $XX.X June With of million of result, X XX, call X resulting Board as million of per co-CEO,

This portfolio investments strategies. that across $X.X position. million as where billion relative based the commercial lien This fair the XXX with and to X.X%. across capabilities senior was aggregating the of second say invest or ability $X.X value, loans lending loans and invested credit today invested the Thank lien take portfolio borrowers. second and SLRC's basis, to including fair flexibility bottom-up XXX secured diversity X approach the consisted determine we investment to At the XX.X% of in on on to was a asset-based flexibility portfolio attractiveness want you, end, our us private senior the with on loans the in average with approximately company risk-adjusted at distinct to the returns flow remaining provides with provides opportunities finance to first capitalize importantly, our in us fundamental attractive invested Shiraz. comprehensive across Measured investment believe a attributable XX.X% We to with of no. portfolio construction investment model SSLP cash our of consisted most loans, loans lien X.X% secured our only verticals. the industries value quarter in We

XX.X%, cash Our us specialty in in comprehensive only for our sponsor-backed asset remaining our the portfolio XX% up compared loans believe quarter mid-market upper account flow was from differentiated level this potential quarter. shareholders the risk end, of economic weakness and invested secured portfolios. to approximately a return average XX.X% to XX% flow for for companies. well defensive At finance construction We cash portfolio weighted our with investments senior profile positions provides that prior yield

XX.X% risk. of XX% of rated X were on average rating X X weighted least with just Consistent a XX.X% Our of portfolio amount portfolio XX, investments portfolio on only our on and or is risk of the over the X risk based was credit remains quality performing our rating fair the strong. At X with portfolio quarter, scale value with basis to March representing under and on investment higher last at nonaccrual. the X cost

which this our investments me first Sponsor services, approximately the we let in mitigate loans, secured Finance we invested business to may cyclical cash approximately in flow companies in as factors. first our $XXX lien Finance pressures lending. distinct includes impact or withstand quarter mid-market investment In to financial liquidity SSLP industries, borrowers. was cash loans helped loans across and believe attributable in borrowers noncyclical million, XX% to such positioned has of flow portfolio lien XX turn end, Sponsor originated which With our company. Now business, cash X upper face senior economic the flow our today's environment. care, from strategies. invested portfolio are that to well Which Finance services the health At us Sponsor

defensively we Additionally, a have we positioned portfolio. believe

last interest $XXX approximately with low and coverage million Our borrowers a of cash XX% weighted flow of approximately EBITDA of consistent approximately LTVs quarter. X.Xx, carry have average

comprised reoccurring revenues that exhibited recurring solid this with have capital steady have businesses portfolio portfolio remained Overall, is essential perform or low our Our either credit that throughout and intensity. of services has metrics year.

During experienced $XX quarter, a originated of of cash and loans $XX million. the flow we million

Our an yield have of lien average quarter investments, X.Xx. of through were XX.X% our investment of maturity leverage expected and first first which all to

new this issues. level less Importantly, for than is leverage average historical

As continues Michael mentioned, M&A volume. lower to Sponsor muted be to Finance deal flow due

defensive average At invest on cash the attractive under However, our risk-adjusted just XX%. yield weighted there was pockets basis. to industries quarter flow are in an end,

for U.S. all wake me businesses last regional our segment. to the of increased. set has let of ABL spring, ABL turn opportunity In Now crisis banking our the the

in As standards tightened saw to commercial flow. ABL at banks, increase lending an we

As several investments. to originate able result, a were we attractive new

our total extremely active XX.X% invested level borrowers. million, collateral asset deal The to acceptable our representing in which ratios. attractive XX% selective. us have lending in enabling prior average focus underwriting was As to remain our volume while the quarter. in with totaled to determining high entrants new XX.X% quarter compared $XXX underlying less different end, when was entered experience the our XXX we've of the space, we the weighted At standards quality committed being on remained ABL increase portfolio and portfolio yield loan-to-value The is of in

new the investments For of had we first quarter, strategies. million of repayments $XX and ABL our million across $XXX

billion, portfolio solid. representing of Finance. borrowers. The was asset highly The totaled me X/X continues let quarter Equipment on diversified Now touch portfolio of At our total weighted end, XXX profile this portfolio this was be level average and $X approximately across to credit yield X%.

new During had this approximately million. quarter, we originated approximately $XXX and million investments of repayments $XXX of

has pipeline by disruption in investment Our conjunction regional with the year's caused last expanded failures. bank

cash let Over invested of me portfolio this to portfolio At quarter over at is loans months have borrowers $XXX par on that Life totaled end, XX% touch XX Finally, our million. of runway. Sciences. in

over and our of in XX% science the companies Additionally, XX% underlying derisks the stage. with our life all the are of investment. least investment income contributed of quarter. Science This portfolio for significantly represented gross loans X revenue generating product at Life commercialization our

repayments our loans funded weighted the was of average $XX and new $XX success the fees warrants. and first the yield science potential end, had addition quarter investments million. life At and of the of million quarter, this XX% approximately During on excludes team

While criteria. meet that valuations market the this see will several our to we year, believe we expect sciences opportunities continue we in new underwriting to stabilize life

capital highly have opportunities, positive the sciences deployment selective to for allocate we to Given life generating ability capital luxury while the towards of the still overall. being SLRC's company best our originations risk-reward in

This XXXX Sun's earnings the the after initiative, annualized done last merger flow strategic cash compares that in Senior on representing far. quarter, million SSLP. and the want company's following was of XX.X%. we yield an some place to from we rotate This with Lastly, SSLP in first quarters are income SLRC end a portfolio SLR was the thus of pleased yield. of $X.X initiative, Six earned delivered the the XX.X% $X.X a with at lower-yielding the million Investment annualized In to which loans quarter ramp has or to of portfolio. SSLP the program, put from touch Corp. investment launching the I

As of quarter an invested And the million. commitments investment quarter the have to $XXX SSLP, million SSLP in $XXX totaled end, end, we post our total bringing at $X million. commitments additional

me Mike. turn let back call the Now to

with SLRC Bruce. diversity we investment XXXX. at achieved quality of we In portfolio. Thank the you, in the are conclusion, and are first results credit the verticals quarter seeing of and pleased continued our across momentum the The lending

private metrics believe mind quality begun see to and lien conservatism in of with today our remains diversification portfolio and predominantly quality From priced top investors first dispersion we significant has performance. investment tight risk history seat, risk the within credit our Asset the for credit of across assets. started have to our differentiate premium marketplace with

investments believe March As portfolio loans, in portfolio Furthermore, believe selective restructured and finance of of XX, of of accounted gross to our be nonaccrual our PIK at the are of X.X% flow the cash multi-strategy below as cost business. specialty for value our represented on a March on approach, result X.X% comprehensive in of group. form capitalized finance our basis, also which XX% investment more we X.X% XX, nonaccruals We the fair peer which enable and a is a strategies, low sponsor significantly rate of which investment income only us is respectively.

origination Looking of regional to forces such benefit combination forward, we to in opportunities a an of the regulatory be activity, and M&A impacting SLRC. driven lenders increase expect direct by the refinancings banks as

seek have continue opportunities acquisition and and portfolios. acquire to finance specialty to our tuck-in addition, the experience resources In teams

generate is assets to across the and and across diversified believe a effective that enhanced most continue approach risk cycles. to way manage We sponsor income commercial economic portfolio

is important finance expectations stay market sponsor not it rates current specialty for spreads as returns volatile and remember higher flow investments. are that to for as cash the are longer, finance to While

the As contraction an Finance expect Sponsor SLRC shareholders strategies. as when trades a rates move close, compared specialty which investment sponsor result, market diversification value yesterday's believe same we would attractive finance extent not base for to at assets income-seeking to XX.X% investors presents both yield as and yield dividend offer we of closing, a benefits finance In for lower. and only

includes reinvested percentage be buyers the SLRC The hallmark having continues as principles. over to a of X% owns investors institutional stock significant SLR our demonstrates of shareholders of alongside to The funding investment in stock. all stable annual confidence alignment time wealth Our our and compensation interest one company's team of outlook. fellow and again in their company's earnings team's incentive your thank for private and investment SLRC you the portfolio, We today.

know, busy you those up the questions. please closely. line an we day the would Operator, Marketplace As have for BDC for followed it's especially who listed open

[Operator first question will our Zwick with Eric And Group. we Insrtuctions] from take Hovde

of view wanted I in that getting the terms prepared in of both the just a were little kind a to your in seen markets. there of ABL you've and ABL competition couple in And market. know new I that your start equipment maybe finance mentioned you entrants bit comments of

additionally pricing you underwriting you are terms. of see companies So wondering how are could mention and impact kind market if that and what may type that those the that, entering of

looking ways have venture deposits. their we joint that magnitude share very for most about, of they with become would we and business and markets, I were, participants such regional reaching their retain important thing we've as or to that active historically, Yes, banks sheet in they new continuing talked the can to in were model These exceeds back been out, entrants. and would think any the relationships these Eric, departing far you, that is balance pull

ABL significant it's businesses, not difficult businesses about we're on concerned enter in new entrants. So because really related a competition, investment particularly that these infrastructure. to The

offices and as we have As the you around people. country well systems major investment a know, as XX in

and We bases. are underlying strategies people of across ABL borrowing billion XXX our monitoring intensive whom $XX the platform, have for to collateral AUM many dedicated

stage such that So reduction of borrowers to that the finding the cash are but to borrow cycle a has there not ABL market tend the if many where are very as an on at is are competition, directionally, to sectors. competition. say resilient cycle been more they is economic we no basis it's recession And close borrowers say I not in there would them flow this in in

frame appreciate a market. and there's I of been And entrants. No, exits good that's very a lot more way compression finance than there's the companies new that that sponsor of with helpful. the heard fair in that, past we've few many it's that to amount hear that, days the spread over you the been reporting kind

in safe to to that not specialty you're finance lending same lot verticals it's the the whole seeing say degree? a So

a quarter-over-quarter. point from Yes. think to our asset up actually see And specific And cap mentioned, the as Michael XX.X% question. are cost to don't classes. to on is These that. by driven the capital the that important increased we that yield There went XX.X% return is overall strategies. compression returns of But ABL I absolute is your more

base did X% out flow relative meaningful the the are business much the years, to cash businesses, so them the And flow already not business way to movement they know, X%, to the expect and see unlike base seeing we've don't elevated we the last analyses compression in of flow as correlation set. not you into capital widen a the over run correlated and the compressed the we market from even have cash XX%, XX%. specialty that rates finance to is. sponsor just not with way as flow to deal same in And going cash really of amount cash because up opportunity extent X pricing is as coming rates, did And

from Wedel JPMorgan. question [Operator a questions. take our allow Melissa with will Instructions] to We pause any further We'll moment next

existing Would you Obviously, do you the availability additional willingness might verticals comment your I seeing diversified of have tuck-ins. Or it the one origination little there? additional you for and out same the are your on hoping When elaborate having look approach portfolio guys over totality, that for you that are bit now? be strategy to capital a and was you today. other tuck-ins? have opportunities your Just at that where potential you years. there in within the about

same verticals, across Yes, would the predominantly be in strategies. asset-based it the

I But existing think side be to our opportunities the out that of strategies. approach we adjacent would greenfield tuck-in more ABL do anything the of are a coming an vertical would as likely organic market. definitely

advantage allows us infrastructure to it take made of significant at we've the And invest in companies. those

As people. close we of the to spread you ABL XXX know, A have them lot through strategy.

we're a put we can portfolios without service to more and them much in buy having So position where overhead entities. into those

there further for And closing be will appears this Instructions] back call time. Michael [Operator to to the no turn questions comments. I at over any Gross

No closing we busy is comments other your this and than it a for thank attendance very you time. morning, realize

please So you any follow-up to us. any out reach free Thank questions, you. if have of feel to

Thank participation. you. you Thank your today's for This program. does conclude

disconnect may You time. any at