CION Investment (CION) 9 Nov 232023 Q3 Earnings call transcript

Good morning, and welcome to CION Investment Corporation's Third Quarter 2023 Earnings Conference Call.

An earnings press release was distributed earlier this morning before market opened. A copy of the release, along with the supplement earnings presentation, is available on the company's website at www.cionbdc.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.

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

Executive Franz, call today's Chief Reisner, Corporation's President be Speaking Officer. Officer; and on Bressner, Keith will Gregg Officer; Financial CION Michael Investment Co-Chief Chief Investment and

Please to to Michael over with And go Michael. the ahead, turn that, I would call Thank now you. like Reisner.

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

Gregg results. Gregg by members Keith today remarks, with Keith we as including After joined the will Co-CEO, other I'm results, to investment our mentioned, will quarter open of quarter I today and the will activity well as our of detail my our As and an overview additional call call management, senior during financial will Keith's third Mark provide Gatto. questions. prepared review our on start

reported a $X.XX asset and third and had an this our year-over-year. net net a value As credit we of XX.X% X% increase to share, XX% strong over of income resilient an continued strong very morning, increase we saw per quarter-over-quarter which quarter-over-quarter quarter, profile,

income outperform continues per $X.XX dividend. our investment share net Our of to

As

addition third a to previously we for and the be We expect share in did of keeping we year, two the last year-end announced. in declare a supplemental dividend previously declared special base steady to fourth to dividend $X.XX for be special both would position dividend a dividends our while dividend, supplemental per quarters. now. The

non-accruals income other within transaction restructured on origination year-over-year transactions. per balance up fees, rate loan other of driven assets, and from the the sequentially, income prepayment from investment Our floating of XX% $X.XX is reversal and features and our net by portfolio yield-enhancing higher interest and XX.X% share

around X better fell indication quarter. on portfolio of our even credit credit performance, the the Perhaps to of from names X.XX% X% previous looking book ratios a X that X interest is favorably which resilient non-accrual our level compares a performance, benchmark percentage down and Our portfolio coverage have remains when has an many peers. quarter-over-quarter. company percentage delivered XX% of or value, remained at risk-rated X.XX% rated consistent as portfolio, of ratios or Furthermore, our at fair the other of we higher, of favorable BDCs. at the again, our risk to portfolio consistent leverage

on certain of A the will On Israel investors, million this additional we unsecured notes bilateral rate further. note floating a with Series closed million unsecured issued financing side, rate upon quarter. which in successfully $XX $XXX yesterday, touch Keith just floating institutional And large

to net leverage pace the secured, to quarters. us naturally us program of favorable X.XXx, the us completion to matches vintage continue dry the of of assets our buyback of unsecured our methodically of increase allows our take ample on and in flexibility target to provides advantage share the coming powder percentage investments, towards XXbX-X of leverage predominantly debt increase to these The our relative and to rate nature financings our increase allows floating

a at themselves. end, opportunities quarter that basis increase conservatively X.XXx, At should still anticipate as present coming we on now were quarters in levered net but

the our and an value to illiquid dividend in owed our a well increased $XX.XX, in program from to asset net $X.XX book. Our as outearning share part repurchase as increase share marks

per at total of repurchased million. average for an During $X.X $XX.XX amount share, repurchase price shares, XXX,XXX QX, approximately we a of

QX, be $XX.X the shares the repurchase continue repurchased end place the amount of a quarters. in for our intend the in shares, active program million of a to through August have total total and million repurchase to of in We coming we of since beginning X.X put repurchasing XXXX

lending I buying focused on to wanted the business entrants a turn over companies, new a I model, of segment has the thoughts. albeit Gregg, cap with somewhat Direct to support lot become finish sponsors commoditized, some large Before call of to proven market. with the

market of perceived deeper cheaper which liquidity. BDCs sizes share. traditionally due Most market Going game win companies million. borrower-friendly the middle Those to with have defined limited companies, average to loan historically who to of and lent to is was name an tranche as more that those $XX access alternatives deal EBITDA syndicated and

$XXX The million be $XX bigger is EBITDA. different participants a the tune less seeing few focus now the borrower-friendly. all new better, private into traditional flown market With loans now million short The EBITDA emphasizing scale tended we're to same middle capital a far that is on ago. and credit, years

from the that market that banks, thing of are to proud to of their stick histories. record BDCs EBITDA with truly market we long-term believe have middle track ecosystems sticking we our to continue and million. believe are are We from deviations don't that in focus we is investment very median and knitting engaged true portfolio BDCs companies. The investors share served, well have not taking While $XX.X our established middle-market bad the lending

conservatively billion X-basis-point rate We our middle-market lien predominantly years loss loans, proud we diversified highly senior we have can believe to demonstrated drive first annualized are of investing loan over rate. secured have assets, levered. while predominantly In shareholder being and in XX by that remaining $X.X returns floating we achieved a

diversified middle-market robust, have senior that high-quality capable deal We unique and originating consistently companies. is funnel of to sourcing our investments secured demonstrated true

in focus increase grow than in have earnings sponsors, We that superior portfolio financing of incremental markets often that continue and unsecured to to higher believe we methodical, risk quality the portfolio profile companies investments to very investments. versus our and our secured. manner We portion successfully much other first with portions of equity of a accessed our have strategically the return predominant a BDCs on with provide institutionally-backed through a higher lien

we At the and of positions. had in QX, secured portfolio loans equity XX.X% our XX.X% senior end of in

very a coupled Our investing robust us portfolio deal BDC that and singular good This, pipeline, by our or our financial feel benefits not conflicted team's strategies and on third competing from and about focus support is our sheet with going results balance our sponsors. quarter EBITDA a or products, forward. distracted from position growth conservative the fact and makes equity

that, now Gregg. With the turn over I'll call to

Michael, everyone. Thank morning, and good you,

Our pass-through higher investment from clear and syndicated where yield-enhancing other diverse embedded a our benefited net assets, direct floating the rates lien with credit direct private the market amendment between first income the we of There premiums our large-cap from loan markets portfolio. interest prepayment and QX of a combination focus. distinction and remains fees, origination provisions strategically primarily

direct as remains with consistent robust, sourcing The is private with our are strong. we transaction remains sector private what which experiencing direct our lending platform

seeing we highly investment which for We direct selective. many opportunities, are remain

is We the have groups. in capital capacity lender tack-on acquisitions the incumbent conjunction in or of increase an seen refinancing debt required particularly what additional as opportunities, beyond with

at In first addition, acquire tranches from lien not to restructurings, existing loan maturity continue par issues lightly exchanges disruptions the discounts suitable benefited changes, due we in have for syndicate extensions, syndicated technically-driven syndicated ratings are such to which we to where the market, substantial or loan as holders.

selective are from valuation into relatively in transactions. particularly ultimately U.S. We where our circumstances to being and have with resulted dynamics closed are consumer, investments the These subdued, developments. of QX cautious activity closing gaps converted respect global light of QX. of planned number with have lengthy several slipping a negotiations and to remains not still highly remain seen in we as M&A recent we new investment

our and to now portfolio Turning investment QX activity.

During our in opportunities higher focus yielding QX, loan and first sourced we directly on syndicated both continued markets. lien lightly the

drive valuation higher-yielding in opportunities, where distress, focus on to targeted such refinancing the expect of as remains investments roles processes on restructuring Our that the the illiquid markets have or active lightly the syndicated we investments. in

of purchases quarter, for as [indiscernible] lead have new for Avison XXX- upsizes David's we completed first [indiscernible] the Bridal, first Genius. we the roughly and Holdings exit financing acquisitions architecture and the syndicated and Young, of the lightly Fluid the criteria. attractive term and and mix to tranches increase Work investments acquisitions and of syndicated direct Gold Overall, Single our During co-lead arranger lightly investments, loan an XX-basis-point in sponsor seen arranger meet of incremental tuck-in lien for spreads to such year-over-year direct Metal Hill Control that our for direct finance a investment financings discounted lien

in made across portfolio new XX $XX funded. investment was and companies, million These QX, million secondary opportunities. commitments existing three of investments $XX direct across new and which During we diversified were

funded of We $XX previously a also of commitments. unfunded million total

Bowes sales DMT, DIP had investments Analogic repayments Services and for Pitney the consisted quarter, Tricks, of Group. repayment which primarily We totaling the full and $XX Williams of Connect, Fusion in Industrial to loan Surface million our the

investment net $X As increased funded quarter. activity a the during million by result,

successful and David's from quarter restructuring bankruptcy We of non-accrual Bridal at worked non-accruals decreased X/XX/XX to with as David's approximately result of the Bridal the of lead from our David's fair management America July. at where X% removed emergence business, the in value this to Bank status Bridal we X.X% of from at X/XX/XX. Our

result are Bridal. a transaction, majority of of secured As lender the David's and a owner now equity we

industries bankruptcy investments remaining with We receive as quarter. the added we senior and loan. first was in full majority issuers. the and remains the to to highly amount to the Industrial sale company, the the estate. Williams expect from new that remaining one residual of Overall, of Industrial, loan added DIP diversified bankruptcy portfolio term time portfolio of amount of our non-accrual our We nature received period over of from across Williams Williams lien this residual extended are in repaid We repayment loan the an secured defensive XX% non-accrual,

over I'll Keith. now turn the call to

good Okay. and everyone. Thank you, Gregg, morning,

of solid premiums our fees rates, LIBOR SOFR our yield-enhancing As reported within in Michael activity, performance, and features an investment another other we driven generated and increase by mentioned, portfolio. quarter from investment prepayment quarterly

to net was quarter, the $XX.X $XX Total share, as investment million During an $X.XX or QX $X.X reported quarter, second reported million in XX%. increase income compared an second per to $X.XX increase $X per was $X.XX share. million, during income or the of as quarter, investment $XX.X million, million million or of the per share during or $XX.X compared

expenses expenses expense quarter. expense the higher LIBOR higher $XX due quarter. in SOFR when the the as advisory interest total million compared reflect to increase operating an well rates second fees operating million prior were and $XX in compared to as to On side, Total

shares at of of XX, ratio our the approximately outstanding. end which of than million $X.X equity At total debt-to-equity and net with is quarter, billion $XXX X.XXx, or and At million, of QX. had we debt-to-equity was of X.XXx assets our outstanding the net end slightly total ratio of billion assets the XX.X total debt $X lower net September

quarter. the X.X% share At distribution, the $X.XX of an September to increase due program increases per portfolio or per June nature at The share our $XX.XX primarily in share XX, of our our price XX. per accretive $XX.XX repurchase and NAV to during as share was was increase compared of over-earning the

quarter cash balance liquidity. ended million flexible had short-term a pipeline to $XXX portfolio We assets, an and lower and and a in debt credit strong companies. our in our million investment We with under facilities finance investments additional support strong leverage with the million our $XXX to and over unencumbered peers, and to net servicing over relative further sheet, solid our existing capacity continue $XXX

the X.X%. quarter, was the our average about capital weighted During cost of debt

of we X-month floating a private rate our certain to on closed Michael structure, $X.XX. yesterday, Israeli rated institutional floating investment institutional by certain notes to notes. floating notes terms debt These rate unsecured In as mentioned, plus A notes are equal as due XXXX a follow-on a spread the interest $XX to the And offering pay investors. the with $XXX we October, a investors, the same rate grade unsecured terms notes credit to Series DBRS. of The of at SOFR, million large completed existing in million

debt with floating brings mostly balance two XX% will XX% our aligns After rate financing well It and mix additional now in strength flexibility secured unsecured. sheet to investments. completing these also senior and transactions, and be in our our

to distributions. Turning

the which $X.XX to we paid of quarter, per of base per of third distribution per shareholders includes and During a share. $X.XX supplemental share, a our distributions $X.XX share

shareholders paid on our per X. The declared quarter distribution base XX distribution of to record will announced we on December of December fourth morning, be fourth $X.XX As this quarter share.

quarter quarter, December announced declared paid distribution fourth we to of The for also last be record per $X.XX XX supplemental will quarter. we supplemental shareholders as the on January of distribution share the XX. on addition, fourth In a for

call to I'll that, back Michael some turn the closing for over With comments. Okay.

Keith. Thanks,

is its before we to would like provide our we final the thought shareholders current well that a line, reiterate solid believe As despite CION to message to open market positioned we conditions. returns

we're with ready And that, any to questions. operator, take

of [Operator Instructions] first Hovde from And Zwick Group. with comes the the question line Erik

range target or In on kind of start you first level past to leverage, X% year wanted so, mentioned X.XX%. been kind around or of so. -- of you've a target I and a the

So comfort need think with what see of outlook? market about a frame? target change that the to in just kind about, And would economy, over how you that curious range? if you time Or opportunities, approaching

Thanks, Erik, it's Michael.

always especially So unsecured. $XXX as also we're said, how just leverage. we want million to not And happy the We're between floating. important but that us this this cognizant are rates to to we in were and and That at the wanted in We be where liabilities secured we rates cautious obtain get in mix we've able environment, to unsecured to the X.XXx. of was get and assets, also to time. the match additional only

provided the the figure. the million median you of And just through that initial is as down Got do also kind figures period. I current But indicates XX% that another $XX.X those from at I that the statistics median year about that look one, EBITDA I investment as companies. portfolio ago see noticed it. the EBITDA at are of footnote in the

case, if kind of So companies? smaller some And is reflective I deeper comments, into middle-market growth been? year-over-year average for of said companies. is may portfolio curious commentary be curious, your or kind in you going year-over-year And in the has of prepared your smaller EBITDA targeting of the you companies decline you know if color actual provide one, what over could any the kind that if

Yes.

is this So Erik, Gregg.

we've of a two portfolio EBITDA up. point out earnings seeing and quarter. From is a of single-digit is issues. it I any than names our organic is in number earnings think more that profile. the are reflection held growth EBITDA median there EBITDA an view, over One, We're in

seeing you're names coming is what really names coming in in, So that out. a movement reflection of

did $XXX of million number had we bit. new the of a so $XX that EBITDA. we down over that million EBITDA, quarter, that a exited something platforms And of This couple brought about had

pure more math any So earnings decision. it's than a strategic is or it

this to any are management to at back And like closing there time, over And further no I'd questions. it turn comments. for

Great. and year-end look Well, announce your early interest, everyone. we March thank Thank fourth forward you today. you, to speaking call joined in and who the we appreciate to everyone, when results. you, We our quarter

This concludes teleconference. today's

may disconnect you your Thank at You time. your lines for this participation.