HOUSTON, Aug. 9, 2023
/PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM)
("Stellus" or the "Company") today announced financial results for
its second fiscal quarter ended June 30,
2023.
Robert T. Ladd, Chief Executive
Officer of Stellus, stated, "I am pleased to report strong
operating results for the quarter ended June
30, 2023, in which U.S. GAAP net investment income of
$0.49 per share and Core net
investment income of $0.51 per share
covered the regular dividend of $0.40
per share. Our portfolio grew by a net $4
million to $881 million at
fair value and the loan portfolio is currently yielding 11.4%, on
average."
|
FINANCIAL
HIGHLIGHTS
($ in millions, except
data relating to per share amounts and shares
outstanding)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Three Months
Ended
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
Six Months
Ended
|
|
June 30, 2023
|
|
June 30, 2022
|
|
June 30, 2023
|
|
June 30, 2022
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Net investment
income
|
$10.41
|
$0.49
|
|
$6.17
|
$0.32
|
|
$19.48
|
$0.95
|
|
$11.69
|
$0.60
|
|
Core net investment
income(1)
|
10.79
|
0.51
|
|
5.62
|
0.29
|
|
19.66
|
0.96
|
|
11.37
|
0.58
|
|
Net realized loss on
investments
|
(0.31)
|
(0.01)
|
|
(0.35)
|
(0.02)
|
|
(0.28)
|
(0.02)
|
|
3.11
|
0.16
|
|
Net realized loss on
foreign currency translation
|
(0.01)
|
-
|
|
-
|
-
|
|
(0.05)
|
-
|
|
(0.01)
|
-
|
|
Total realized
income(2)
|
$10.09
|
$0.48
|
|
$5.82
|
$0.30
|
|
$19.15
|
$0.93
|
|
$14.79
|
$0.76
|
|
Distributions
|
(8.66)
|
(0.41)
|
|
(6.64)
|
(0.34)
|
|
(16.61)
|
(0.81)
|
|
(12.11)
|
(0.62)
|
|
Net unrealized
depreciation on investments
|
(6.30)
|
(0.31)
|
|
(4.29)
|
(0.22)
|
|
(10.54)
|
(0.51)
|
|
(8.01)
|
(0.41)
|
|
Net unrealized
depreciation on foreign currency translation
|
(0.02)
|
-
|
|
(0.04)
|
-
|
|
(0.02)
|
-
|
|
(0.04)
|
-
|
|
Provision for taxes on
unrealized appreciation on investments in taxable
subsidiaries
|
(0.07)
|
-
|
|
(0.16)
|
(0.01)
|
|
(0.14)
|
(0.01)
|
|
(0.18)
|
(0.01)
|
|
Net increase in net
assets resulting from operations
|
$3.71
|
0.17
|
|
$1.34
|
0.07
|
|
$8.45
|
0.41
|
|
$6.56
|
0.34
|
|
Weighted average shares
outstanding
|
|
21,231,979
|
|
|
19,543,117
|
|
|
20,509,995
|
|
|
19,530,509
|
|
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(1)
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Core net investment
income, as presented, excludes the impact of capital gains
incentive fees and income taxes, the majority of which are excise
taxes. The Company believes presenting core net investment income
and the related per share amount is a useful supplemental
disclosure for analyzing its financial performance. However, core
net investment income is a non-U.S. generally accepted accounting
principles ("U.S. GAAP") measure and should not be considered as a
replacement for net investment income and other earnings measures
presented in accordance with U.S. GAAP. A reconciliation of net
investment income in accordance with U.S. GAAP to core net
investment income is presented in the table below the financial
statements.
|
|
(2)
|
Total realized income
is the sum of net investment income, net realized gains (losses) on
investments, net realized gains (losses) on foreign currency, and
loss on debt extinguishment; all U.S. GAAP measures.
|
|
PORTFOLIO
ACTIVITY
($ in millions, except
data relating to per share amounts and number of portfolio
companies)
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
June 30, 2023
|
|
December 31, 2022
|
|
Investments at fair
value
|
|
$881.7
|
|
$844.7
|
|
Total assets
|
|
$901.8
|
|
$898.2
|
|
Net assets
|
|
$308.3
|
|
$275.8
|
|
Shares
outstanding
|
|
22,557,904
|
|
19,666,769
|
|
Net asset value per
share
|
|
$13.67
|
|
$14.02
|
|
|
|
|
|
|
|
|
|
|
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Three Months
Ended
|
|
Six Months
Ended
|
|
|
June 30, 2023
|
|
June 30, 2023
|
|
New
investments
|
|
$46.5
|
|
$87.7
|
|
Repayments of
investments
|
|
(38.4)
|
|
(44.3)
|
|
Net activity
|
|
$8.1
|
|
$43.4
|
|
|
|
|
|
|
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As of
|
|
As of
|
|
|
June 30, 2023
|
|
December 31, 2022
|
|
Number of portfolio
company investments
|
|
93
|
|
85
|
|
Number of debt
investments
|
|
79
|
|
73
|
|
|
|
|
|
|
Weight average yield of
debt and other income producing investments
(3)
|
|
Cash
|
|
10.9 %
|
|
10.3 %
|
|
Payment-in-kind
("PIK")
|
|
0.4 %
|
|
0.4 %
|
|
Fee
amortization
|
|
0.4 %
|
|
0.4 %
|
|
Total
|
|
11.7 %
|
|
11.1 %
|
|
|
|
|
|
|
Weighted average yield
on total investments (4)
|
|
Cash
|
|
10.3 %
|
|
9.7 %
|
|
Payment-in-kind
("PIK")
|
|
0.4 %
|
|
0.3 %
|
|
Fee
amortization
|
|
0.3 %
|
|
0.4 %
|
|
Total
|
|
11.0 %
|
|
10.4 %
|
|
|
|
(3)
|
The dollar-weighted
average annualized effective yield is computed using the effective
interest rate for our debt investments and other income producing
investments, including cash and PIK interest, as well as the
accretion of deferred fees. The individual investment yields are
then weighted by the respective cost of the investments (as of the
date presented) in calculating the weighted average effective yield
of the portfolio. The dollar-weighted average annualized yield on
the Company's investments for a given period will generally be
higher than what investors of our common stock would realize in a
return over the same period because the dollar-weighted average
annualized yield does not reflect the Company's expense or any
sales load that may be paid by investors.
|
|
(4)
|
The dollar weighted
average yield on total investments takes the same yields as
calculated in the footnote above, but weights them to determine the
weighted average effective yield as a percentage of the Company's
total investments, including non-income producing loans and
equity.
|
Results of Operations
Investment income for the three months ended June 30, 2023 and 2022 totaled $26.6 million and $16.1
million, respectively, most of which was interest income
from portfolio investments.
Operating expenses for the three months ended June 30, 2023 and 2022, totaled $16.2 million and $9.9
million, respectively. For the same respective periods, base
management fees totaled $3.9 million
and $3.7 million, income incentive
fees totaled $2.6 million and
$0.0 million, capital gains incentive
(reversal) fees totaled $0.0 million
and ($1.0) million, fees and expenses
related to our borrowings totaled $8.1
million and $5.5 million
(including interest and amortization of deferred financing costs),
administrative expenses totaled $0.5
million for both periods, income tax totaled $0.4 for both periods and other expenses totaled
$0.8 for both periods.
Net investment income was $10.4
million and $6.2 million, or
$0.49 and $0.32 per common share based on weighted average
common shares outstanding of 21,231,979 and 19,543,117 for the
three months ended June 30, 2023 and
2022, respectively. Core net investment income, which is a non-U.S.
GAAP measure that excludes the capital gains incentive fee
(reversal) and income tax expense accruals, for the three months
ended June 30, 2023 and 2022 was
$10.8 million and $5.6 million, or $0.51 and $0.29 per
share, respectively.
For the three months ended June 30,
2023 and 2022, the Company's investment portfolio had a net
change in unrealized depreciation of ($6.3)
million and ($4.3) million,
respectively, and the Company had realized losses of ($0.3) million and ($0.4)
million, respectively.
Net increase in net assets resulting from operations totaled
$3.7 million and $1.3 million, or $0.17 and $0.07 per
common share, based on weighted average common shares outstanding
of 21,231,979 and 19,543,117 for the three months ended
June 30, 2023 and 2022,
respectively.
Liquidity and Capital Resources
As of June 30, 2023, our amended
and restated senior secured revolving credit agreement with certain
bank lenders and Zions Bancorporation, N.A. dba Amegy Bank, as
administrative agent (as amended from time to time, the "Credit
Facility") provided for borrowings in an aggregate amount of up to
$265.0 million on a committed basis.
As of June 30, 2023 and December 31, 2022, the Credit Facility had an
accordion feature which allowed for potential future expansion of
the facility size to $280.0 million.
As of June 30, 2023 and December 31, 2022, we had $171.5 million and $199.2
million in outstanding borrowings under the Credit Facility,
respectively.
The Company issued 2,309,521 shares during
the three months ended June 30,
2023 under the At-the-Market Program ("ATM Program"), for
gross proceeds of $32.6 million. The
average per share offering price of shares issued under the ATM
Program during the three months ended June
30, 2023 was $14.10. The
Advisor agreed to reimburse the Company for underwriting fees to
the extent the per share price of the shares to the public, less
underwriting fees, was less then net asset value per share. For the
three months ended June 30, 2023, the
Advisor reimbursed the Company $0.4
million, which resulted in net proceeds of $32.5 million, or $14.38 per share, excluding the impact of
offering expenses.
Distributions
During the three months ended June 30,
2023 and 2022, we declared aggregate distributions of
$0.40 and $0.34 per share, respectively ($8.7 million and $6.6
million, respectively). Tax characteristics of all
distributions will be reported to stockholders on Form 1099-DIV
after the end of the calendar year. None of these dividends are
expected to include a return of capital.
Recent Portfolio Activity
The Company invested in the following portfolio companies during
the three months ended June 30,
2023:
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|
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Company
Description
|
|
Investment
Amount
|
|
Instrument
Type
|
|
Add-On
Investment
|
|
April 3,
2023
|
|
EH Real Estate
Services, LLC*
|
|
Offers residential
property brokerage, title & settlement, and
property and casualty insurance brokerage services to
home buyers
and sellers
|
|
$
|
570,279
|
|
Senior Secured – First
Lien
|
|
Add-On
Investment
|
|
April 13,
2023
|
|
ADS Group Opco,
LLC*
|
|
Designer and supplier
of impulse products and merchandising
solutions to retailers.
|
|
$
|
88,733
|
|
Equity
|
|
Add-On
Investment
|
|
April 13,
2023
|
|
Tower Arch Infolinks
Media, LP*
|
|
Advertising placement
partner for small to mid-sized publishers
|
|
$
|
1,093
|
|
Equity
|
|
Add-On
Investment
|
|
April 14,
2023
|
|
BLP Buyer,
Inc.*
|
|
Distributor of lifting
solutions
|
|
$
|
1,729,958
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
229,010
|
|
Equity
|
|
Add-On
Investment
|
|
April 17,
2023
|
|
Axis Portable Air,
LLC*
|
|
Air conditioning,
heating, and air quality equipment rental company
|
|
$
|
1,893,610
|
|
Senior Secured – First
Lien
|
|
Add-On
Investment
|
|
April 27,
2023
|
|
CompleteCase,
LLC*
|
|
Provider of online
uncontested divorce solutions
|
|
$
|
66,667
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
111,409
|
|
Equity
|
|
New
Investment
|
|
April 28,
2023
|
|
Impact Home Services
LLC
|
|
Residential, garage
door, electrical, and plumbing services provider
|
|
$
|
5,936,899
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
310,844
|
|
Equity
|
|
New
Investment
|
|
May 1, 2023
|
|
RIA Advisory Borrower,
LLC
|
|
Provider of Oracle
software implementation services
|
|
$
|
6,000,000
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
243,467
|
|
Equity
|
|
Add-On
Investment
|
|
May 11, 2023
|
|
Archer Systems,
LLC*
|
|
Provider of mass tort
settlement administrative solutions
|
|
$
|
3,500,000
|
|
Senior Secured – First
Lien
|
|
Add-On
Investment
|
|
May 15, 2023
|
|
ArborWorks Acquisition
LLC*
|
|
A professional tree
care firm
|
|
$
|
15,515
|
|
Equity
|
|
New
Investment
|
|
May 22, 2023
|
|
Equine Network,
LLC
|
|
Provider of content,
information, tech-enabled services, and hosts
competitions for the U.S. equine industry
|
|
$
|
5,008,219
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Delayed Draw Term
Loan
Commitment
|
|
New
Investment
|
|
June 5, 2023
|
|
2X LLC
|
|
Provider of outsourced
digital B2B marketing-as-a-service
|
|
$
|
5,500,208
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
589,496
|
|
Equity
|
|
Add-On
Investment
|
|
June 7, 2023
|
|
EH Real Estate
Services, LLC*
|
|
Offers residential
property brokerage, title & settlement, and
property and casualty insurance brokerage services to home
buyers
and sellers
|
|
$
|
589,365
|
|
Senior Secured – First
Lien
|
|
New
Investment
|
|
June 30,
2023
|
|
Craftable Intermediate
II Inc.
|
|
Hospitality focused
back-of-house management and automation
software platform
|
|
$
|
10,083,715
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
626,690
|
|
Equity
|
|
Add-On
Investment
|
|
June 30,
2023
|
|
Impact Home Services
LLC*
|
|
Provides of garage
door, electrical, and plumbing residential services
|
|
$
|
269,859
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Existing portfolio
company
|
|
|
|
|
|
The Company realized investments in the following portfolio
companies during the three months ended June
30, 2023:
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Proceeds
Received
|
|
Instrument
Type
|
|
Full
Repayment
|
|
June 14,
2023
|
|
Data Centrum
Communications, Inc.
|
|
$
|
15,679,110
|
|
Senior Secured – First
Lien
|
|
Full
Repayment
|
|
June 30,
2023
|
|
DTE Enterprises,
LLC
|
|
$
|
5,134,219
|
|
Senior Secured – First
Lien
|
Events Subsequent to June 30,
2023
The Company's management has evaluated subsequent events through
August 9, 2023. There have been no
subsequent events that require recognition or disclosure except for
the following described below.
Investment Portfolio
The Company invested in the following portfolio companies
subsequent to June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Company
Description
|
|
Investment
Amount
|
|
Instrument
Type
|
|
New
Investment
|
|
July 7, 2023
|
|
Madison Logic,
Inc.*
|
|
Provider of B2B account
based marketing services
|
|
$
|
394,767
|
|
Equity
|
|
Add-On
Investment
|
|
July 12,
2023
|
|
EH Real Estate
Services, LLC*
|
|
Offers residential
property brokerage, title &
settlement, and property and casualty insurance
brokerage services to home buyers and sellers
|
|
$
|
501,846
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Investment
|
|
July 31,
2023
|
|
EHI Buyer,
Inc.
|
|
Provider of design,
engineering, installation, and
maintenance services for building management
systems
|
|
$
|
6,111,343
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
3,055,671
|
|
Delayed Draw Term Loan
Commitment
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
617,801
|
|
Equity
|
|
New
Investment
|
|
August 2,
2023
|
|
Compost 360
Acquisition, LLC
|
|
Organic waste recycler
and producer of compost,
mulch, and engineered soils
|
|
$
|
9,595,100
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
4,096,741
|
|
Delayed Draw Term Loan
Commitment
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
250,761
|
|
Equity
|
|
New
Investment
|
|
August 3,
2023
|
|
Morgan Electrical
Group
Intermediate Holdings, Inc.
|
|
Provider of commercial
electrical services
|
|
$
|
4,439,439
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
2,864,154
|
|
Delayed Draw Term Loan
Commitment
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
356,800
|
|
Equity
|
|
Add-On
Investment
|
|
August 4,
2023
|
|
TradePending OpCo
Aggregator,
LLC*
|
|
Provider of vehicle
trade-in and merchandising
intelligence solutions for auto dealerships
|
|
$
|
2,473,227
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
687,007
|
|
Delayed Draw Term Loan
Commitment
|
|
|
|
|
|
|
|
|
$
|
325,379
|
|
Equity
|
|
New
Investment
|
|
August 7,
2023
|
|
The Hardenbergh Group,
Inc.
|
|
Provider of temporary
professional staffing of
Medical Services Professionals, external peer
review, consulting and physician leadership
solutions
|
|
$
|
10,501,898
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
Revolver
Commitment
|
|
|
|
|
|
|
|
|
$
|
434,504
|
|
Equity
|
|
New
Investment
|
|
August 8,
2023
|
|
Green Intermediateco
II, Inc.
|
|
Cyber-security focused
value-added reseller and
associated service provider
|
|
$
|
11,170,252
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
$
|
500,000
|
|
Delayed Draw Term Loan
Commitment
|
|
|
|
|
|
|
|
|
$
|
271,401
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Existing portfolio
company
|
The Company realized the following portfolio company subsequent
to June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Company
Description
|
|
Proceeds
Received
|
|
Instrument
Type
|
|
Full
Repayment
|
|
July 31,
2023
|
|
NuSource Financial,
LLC*
|
|
Provider of technology
integration
and installation of Automated Teller
Machines/Integrated Teller Machines,
maintenance services, and security
solutions
|
|
$10,984,910
|
|
Senior Secured – First
Lien
|
|
____________
|
|
|
|
|
|
|
|
|
|
|
|
* Existing portfolio
company
|
|
|
|
|
|
|
Effective July 1, 2023, the
ArborWorks Acquisition, LLC term loan and revolver were placed on
non-accrual status.
Credit Facility
The outstanding balance under the Credit Facility as of
August 9, 2023 was $187.2 million.
SBA-guaranteed Debentures
The total balance of SBA-guaranteed debentures outstanding as of
August 9, 2023 was $322.7 million.
Distributions Declared
On July 14, 2023, our Board of
Directors declared a regular monthly distribution for each of July,
August, and September 2023, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
Ex-Dividend
|
|
Record
|
|
Payment
|
|
Amount per
|
|
Declared
|
|
Date
|
|
Date
|
|
Date
|
|
Share
|
|
7/14/2023
|
|
7/28/2023
|
|
7/31/2023
|
|
8/15/2023
|
|
$
|
0.1333
|
|
7/14/2023
|
|
8/30/2023
|
|
8/31/2023
|
|
9/15/2023
|
|
$
|
0.1333
|
|
7/14/2023
|
|
9/28/2023
|
|
9/29/2023
|
|
10/13/2023
|
|
$
|
0.1333
|
Conference Call Information
Stellus Capital Investment Corporation will host a conference
call to discuss these results on Thursday,
August 10, 2023 at 10:00 AM, Central
Time. The conference call will be led by Robert T. Ladd, Chief Executive Officer, and W.
Todd Huskinson, Chief Financial
Officer, Chief Compliance Officer, Treasurer, and Secretary.
For those wishing to participate by telephone, please dial (888)
506-0062. Use passcode 810825. Starting approximately two hours
after the conclusion of the call, a replay will be available
through Thursday, August 24, 2023 by
dialing (877) 481-4010 and entering passcode 48865. The replay will
also be available on the Company's website.
For those wishing to participate via Live Webcast, connect via
the Public Company (SCIC) section of our website at
www.stelluscapital.com, under the Events tab. A replay of the
conference will be available on our website for approximately 90
days.
About Stellus Capital Investment Corporation
The Company is an externally-managed, closed-end,
non-diversified investment management company that has elected to
be regulated as a business development company under the Investment
Company Act of 1940, as amended. The Company's investment objective
is to maximize the total return to its stockholders in the form of
current income and capital appreciation by investing primarily in
private middle-market companies (typically those with $5.0 million to $50.0
million of EBITDA (earnings before interest, taxes,
depreciation and amortization)) through first lien (including
unitranche) loans, second lien loans and unsecured debt financing,
with corresponding equity co-investments. The Company's investment
activities are managed by its investment adviser, Stellus Capital
Management. To learn more about Stellus Capital Investment
Corporation, visit www.stelluscapital.com under the "Public (SCIC)"
tab.
Forward-Looking Statements
Statements included herein may contain "forward-looking
statements" which relate to future performance or financial
condition. Statements other than statements of historical facts
included in this press release may constitute forward-looking
statements and are not guarantees of future performance or results
and involve a number of assumptions, risks and uncertainties, which
change over time. Actual results may differ materially from those
anticipated in any forward-looking statements as a result of a
number of factors, including those described from time to time in
filings by the Company with the Securities and Exchange Commission
including the final prospectus that will be filed with the
Securities and Exchange Commission. The Company undertakes no duty
to update any forward-looking statement made herein. All
forward-looking statements speak only as of the date of this press
release.
Contacts
Stellus Capital Investment Corporation
W. Todd Huskinson, Chief Financial
Officer
(713) 292-5414
thuskinson@stelluscapital.com
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
|
|
|
|
|
|
|
|
|
|
June 30, 2023
|
|
|
|
|
|
(unaudited)
|
|
December 31, 2022
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Non-controlled,
non-affiliated investments, at fair value (amortized cost of
$922,796,573 and $875,823,177, respectively)
|
|
$
|
881,666,450
|
|
$
|
844,733,638
|
|
|
Cash and cash
equivalents
|
|
|
14,924,382
|
|
|
48,043,329
|
|
|
Receivable for sales
and repayments of investments
|
|
|
207,077
|
|
|
718,794
|
|
|
Interest
receivable
|
|
|
4,638,649
|
|
|
3,984,409
|
|
|
Other
receivables
|
|
|
25,369
|
|
|
34,245
|
|
|
Related party
receivable
|
|
|
883
|
|
|
—
|
|
|
Deferred offering
costs
|
|
|
—
|
|
|
1,100
|
|
|
Prepaid
expenses
|
|
|
309,747
|
|
|
667,267
|
|
|
Total
Assets
|
|
$
|
901,772,557
|
|
$
|
898,182,782
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
$
|
98,771,216
|
|
$
|
98,549,692
|
|
|
Credit Facility
payable
|
|
|
170,229,321
|
|
|
197,685,281
|
|
|
SBA-guaranteed
debentures
|
|
|
308,519,553
|
|
|
307,895,195
|
|
|
Dividends
payable
|
|
|
3,006,969
|
|
|
—
|
|
|
Management fees
payable
|
|
|
1,865,589
|
|
|
7,150,407
|
|
|
Income incentive fees
payable
|
|
|
3,176,395
|
|
|
2,464,408
|
|
|
Capital gains incentive
fees payable
|
|
|
—
|
|
|
569,528
|
|
|
Interest
payable
|
|
|
4,783,098
|
|
|
4,640,841
|
|
|
Related party
payable
|
|
|
775,794
|
|
|
1,060,321
|
|
|
Unearned
revenue
|
|
|
221,711
|
|
|
320,675
|
|
|
Administrative services
payable
|
|
|
407,265
|
|
|
356,919
|
|
|
Income tax
payable
|
|
|
782,358
|
|
|
1,175,373
|
|
|
Deferred tax
liability
|
|
|
206,049
|
|
|
61,936
|
|
|
Other accrued expenses
and liabilities
|
|
|
702,211
|
|
|
475,593
|
|
|
Total
Liabilities
|
|
$
|
593,447,529
|
|
$
|
622,406,169
|
|
|
Commitments and
contingencies (Note 7)
|
|
|
|
|
|
|
|
|
Net
Assets
|
|
$
|
308,325,028
|
|
$
|
275,776,613
|
|
|
NET
ASSETS
|
|
|
|
|
|
|
|
|
Common stock, par value
$0.001 per share (100,000,000 shares authorized;
22,557,904 and 19,666,769 issued and outstanding,
respectively)
|
|
$
|
22,558
|
|
$
|
19,667
|
|
|
Paid-in
capital
|
|
|
315,823,482
|
|
|
275,114,720
|
|
|
Total distributable
(loss) earnings
|
|
|
(7,521,012)
|
|
|
642,226
|
|
|
Net
Assets
|
|
$
|
308,325,028
|
|
$
|
275,776,613
|
|
|
Total Liabilities
and Net Assets
|
|
$
|
901,772,557
|
|
$
|
898,182,782
|
|
|
Net Asset Value Per
Share
|
|
$
|
13.67
|
|
$
|
14.02
|
|
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
three
|
|
For the
three
|
|
For the
six
|
|
For the
six
|
|
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
|
|
June 30, 2023
|
|
June 30, 2022
|
|
June 30, 2023
|
|
June 30, 2022
|
|
|
INVESTMENT
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
25,662,895
|
|
$
|
15,658,018
|
|
$
|
49,071,499
|
|
$
|
30,774,969
|
|
|
Other income
|
|
|
922,122
|
|
|
451,027
|
|
|
1,588,865
|
|
|
828,480
|
|
|
Total Investment
Income
|
|
$
|
26,585,017
|
|
$
|
16,109,045
|
|
$
|
50,660,364
|
|
$
|
31,603,449
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
$
|
3,865,588
|
|
$
|
3,705,053
|
|
$
|
7,600,690
|
|
$
|
7,197,766
|
|
|
Valuation
fees
|
|
|
46,422
|
|
|
30,029
|
|
|
193,495
|
|
|
169,617
|
|
|
Administrative services
expenses
|
|
|
466,378
|
|
|
466,903
|
|
|
928,342
|
|
|
941,221
|
|
|
Income incentive
fees
|
|
|
2,603,004
|
|
|
—
|
|
|
4,727,839
|
|
|
—
|
|
|
Capital gains incentive
fee reversal
|
|
|
—
|
|
|
(983,575)
|
|
|
(569,528)
|
|
|
(1,025,792)
|
|
|
Professional
fees
|
|
|
169,836
|
|
|
217,404
|
|
|
600,684
|
|
|
529,466
|
|
|
Directors'
fees
|
|
|
93,250
|
|
|
74,500
|
|
|
210,500
|
|
|
171,000
|
|
|
Insurance
expense
|
|
|
121,885
|
|
|
125,890
|
|
|
242,431
|
|
|
250,397
|
|
|
Interest expense and
other fees
|
|
|
8,101,975
|
|
|
5,524,378
|
|
|
15,988,399
|
|
|
10,415,975
|
|
|
Income tax
expense
|
|
|
371,786
|
|
|
426,236
|
|
|
746,549
|
|
|
705,653
|
|
|
Other general and
administrative expenses
|
|
|
331,649
|
|
|
347,656
|
|
|
510,099
|
|
|
559,392
|
|
|
Total Operating
Expenses
|
|
$
|
16,171,773
|
|
$
|
9,934,474
|
|
$
|
31,179,500
|
|
$
|
19,914,695
|
|
|
Net Investment
Income
|
|
$
|
10,413,244
|
|
$
|
6,174,571
|
|
$
|
19,480,864
|
|
$
|
11,688,754
|
|
|
Net realized (loss)
gain on non-controlled, non-affiliated investments
|
|
$
|
(310,588)
|
|
$
|
(352,723)
|
|
$
|
(275,621)
|
|
$
|
3,105,367
|
|
|
Net realized loss on
foreign currency translation
|
|
|
(10,704)
|
|
|
—
|
|
|
(50,616)
|
|
|
(7,350)
|
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
|
(6,295,233)
|
|
|
(4,289,591)
|
|
|
(10,544,875)
|
|
|
(8,011,193)
|
|
|
Net change in
unrealized depreciation on foreign currency translation
|
|
|
(20,323)
|
|
|
(35,754)
|
|
|
(18,449)
|
|
|
(35,754)
|
|
|
Provision for taxes on
net unrealized appreciation on investments
|
|
|
(65,353)
|
|
|
(160,656)
|
|
|
(144,113)
|
|
|
(181,813)
|
|
|
Net Increase in Net
Assets Resulting from Operations
|
|
|
3,711,043
|
|
|
1,335,847
|
|
$
|
8,447,190
|
|
$
|
6,558,011
|
|
|
Net Investment
Income Per Share—basic and diluted
|
|
$
|
0.49
|
|
$
|
0.32
|
|
$
|
0.95
|
|
$
|
0.60
|
|
|
Net Increase in Net
Assets Resulting from Operations Per Share – basic and
diluted
|
|
$
|
0.17
|
|
$
|
0.07
|
|
$
|
0.41
|
|
$
|
0.34
|
|
|
Weighted Average
Shares of Common Stock Outstanding—basic and diluted
|
|
|
21,231,979
|
|
|
19,543,117
|
|
|
20,509,995
|
|
|
19,530,509
|
|
|
Distributions Per
Share—basic and diluted
|
|
$
|
0.41
|
|
$
|
0.34
|
|
$
|
0.81
|
|
$
|
0.62
|
|
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENTS OF CHANGES IN NET
ASSETS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
Total
|
|
|
|
|
|
Number
|
|
Par
|
|
Paid-in
|
|
distributable
|
|
|
|
|
|
of shares
|
|
value
|
|
capital
|
|
earnings
(loss)
|
|
Net Assets
|
|
Balances at
December 31, 2021
|
|
19,517,595
|
|
$
|
19,518
|
|
$
|
274,559,121
|
|
$
|
10,532,594
|
|
$
|
285,111,233
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,514,183
|
|
|
5,514,183
|
|
Net realized gain on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,458,090
|
|
|
3,458,090
|
|
Net realized loss on
foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,350)
|
|
|
(7,350)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,721,602)
|
|
|
(3,721,602)
|
|
Provision for taxes on
unrealized appreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,157)
|
|
|
(21,157)
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,464,666)
|
|
|
(5,464,666)
|
|
Issuance of common
stock, net of offering costs(1)
|
|
14,924
|
|
|
15
|
|
|
167,655
|
|
|
—
|
|
|
167,670
|
|
Balances at March
31, 2022
|
|
19,532,519
|
|
$
|
19,533
|
|
$
|
274,726,776
|
|
$
|
10,290,092
|
|
$
|
285,036,401
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,174,571
|
|
|
6,174,571
|
|
Net realized loss on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(352,723)
|
|
|
(352,723)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,289,591)
|
|
|
(4,289,591)
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,754)
|
|
|
(35,754)
|
|
Provision for taxes on
unrealized appreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(160,656)
|
|
|
(160,656)
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,643,663)
|
|
|
(6,643,663)
|
|
Issuance of common
stock, net of offering costs(1)
|
|
13,416
|
|
|
13
|
|
|
137,520
|
|
|
—
|
|
|
137,533
|
|
Balances at
June 30, 2022
|
|
19,545,935
|
|
$
|
19,546
|
|
$
|
274,864,296
|
|
$
|
4,982,276
|
|
$
|
279,866,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
December 31, 2022
|
|
19,666,769
|
|
$
|
19,667
|
|
$
|
275,114,720
|
|
$
|
642,226
|
|
$
|
275,776,613
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,067,620
|
|
|
9,067,620
|
|
Net realized gain on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,967
|
|
|
34,967
|
|
Net realized loss on
foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,912)
|
|
|
(39,912)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,249,642)
|
|
|
(4,249,642)
|
|
Net change in
unrealized appreciation on foreign currency translations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,874
|
|
|
1,874
|
|
Provision for taxes on
unrealized appreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(78,760)
|
|
|
(78,760)
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,951,284)
|
|
|
(7,951,284)
|
|
Issuance of common
stock, net of offering costs(1)
|
|
581,614
|
|
|
581
|
|
|
8,289,988
|
|
|
—
|
|
|
8,290,569
|
|
Balances at March
31, 2023
|
|
20,248,383
|
|
$
|
20,248
|
|
$
|
283,404,708
|
|
$
|
(2,572,911)
|
|
$
|
280,852,045
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,413,244
|
|
|
10,413,244
|
|
Net realized loss on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(310,588)
|
|
|
(310,588)
|
|
Net realized loss on
foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,704)
|
|
|
(10,704)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,295,233)
|
|
|
(6,295,233)
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,323)
|
|
|
(20,323)
|
|
Provision for taxes on
unrealized appreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(65,353)
|
|
|
(65,353)
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,659,144)
|
|
|
(8,659,144)
|
|
Issuance of common
stock, net of offering costs(1)
|
|
2,309,521
|
|
|
2,310
|
|
|
32,418,774
|
|
|
—
|
|
|
32,421,084
|
|
Balances at
June 30, 2023
|
|
22,557,904
|
|
$
|
22,558
|
|
$
|
315,823,482
|
|
$
|
(7,521,012)
|
|
$
|
308,325,028
|
|
_______________________
|
|
(1) See Note 4 to
the Consolidated Financial Statements on Form 10-Q filed with the
Securities and Exchange Commission on August 9, 2023 for more
information on offering costs.
|
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the
six
|
|
For the
six
|
|
|
|
months
ended
|
|
months
ended
|
|
|
|
June 30, 2023
|
|
June 30, 2022
|
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net increase in net
assets resulting from operations
|
|
$
|
8,447,190
|
|
$
|
6,558,011
|
|
|
Adjustments to
reconcile net increase in net assets from operations to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(87,741,479)
|
|
|
(142,053,995)
|
|
|
Proceeds from sales
and repayments of investments
|
|
|
44,269,661
|
|
|
58,182,238
|
|
|
Net change in
unrealized depreciation on investments
|
|
|
10,544,875
|
|
|
8,011,193
|
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
|
18,306
|
|
|
35,754
|
|
|
Increase in
investments due to PIK
|
|
|
(1,904,853)
|
|
|
(653,534)
|
|
|
Amortization of
premium and accretion of discount, net
|
|
|
(1,360,629)
|
|
|
(1,174,220)
|
|
|
Deferred tax
provision
|
|
|
144,113
|
|
|
181,813
|
|
|
Amortization of loan
structure fees
|
|
|
289,243
|
|
|
272,959
|
|
|
Amortization of
deferred financing costs
|
|
|
221,524
|
|
|
221,524
|
|
|
Amortization of loan
fees on SBA-guaranteed debentures
|
|
|
624,358
|
|
|
589,020
|
|
|
Net realized loss
(gain) on investments
|
|
|
275,621
|
|
|
(3,105,367)
|
|
|
Changes in other assets
and liabilities
|
|
|
|
|
|
|
|
|
Increase in interest
receivable
|
|
|
(654,240)
|
|
|
(28,511)
|
|
|
Decrease (increase) in
other receivable
|
|
|
8,876
|
|
|
(122,781)
|
|
|
Increase in related
party receivable
|
|
|
(883)
|
|
|
(187,132)
|
|
|
Decrease in prepaid
expenses
|
|
|
357,520
|
|
|
226,175
|
|
|
(Decrease) increase in
management fees payable
|
|
|
(5,284,818)
|
|
|
250,828
|
|
|
Increase (decrease) in
income incentive fees payable
|
|
|
711,987
|
|
|
(1,459,942)
|
|
|
Decrease in capital
gains incentive fees payable
|
|
|
(569,528)
|
|
|
(1,025,791)
|
|
|
Increase in
administrative services payable
|
|
|
50,346
|
|
|
13,373
|
|
|
Increase in interest
payable
|
|
|
142,257
|
|
|
259,771
|
|
|
Decrease in related
party payable
|
|
|
(284,527)
|
|
|
—
|
|
|
Decrease in unearned
revenue
|
|
|
(98,964)
|
|
|
(18,860)
|
|
|
Decrease in income tax
payable
|
|
|
(393,015)
|
|
|
(2,544,219)
|
|
|
Increase in other
accrued expenses and liabilities
|
|
|
226,618
|
|
|
637,471
|
|
|
Net Cash Used in
Operating Activities
|
|
$
|
(31,960,441)
|
|
$
|
(76,934,222)
|
|
|
Cash flows from
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from the
issuance of common stock
|
|
$
|
41,448,945
|
|
$
|
420,004
|
|
|
Sales load for common
stock issued
|
|
|
(614,721)
|
|
|
(5,957)
|
|
|
Offering costs paid
for common stock issued
|
|
|
(121,471)
|
|
|
(183,114)
|
|
|
Stockholder
distributions paid
|
|
|
(13,603,459)
|
|
|
(11,064,831)
|
|
|
Proceeds from
SBA-guaranteed debentures
|
|
|
—
|
|
|
43,600,000
|
|
|
Financing costs paid
on SBA-guaranteed debentures
|
|
|
—
|
|
|
(1,061,660)
|
|
|
Financing costs paid
on Credit facility
|
|
|
—
|
|
|
(131,768)
|
|
|
Borrowings under
Credit Facility
|
|
|
37,000,000
|
|
|
89,588,800
|
|
|
Repayments of Credit
Facility
|
|
|
(65,267,800)
|
|
|
(61,940,000)
|
|
|
Net Cash (Used)
Provided by Financing Activities
|
|
$
|
(1,158,506)
|
|
$
|
59,221,474
|
|
|
Net Decrease in Cash
and Cash Equivalents
|
|
$
|
(33,118,947)
|
|
$
|
(17,712,748)
|
|
|
Cash and Cash
Equivalents Balance at Beginning of Period
|
|
$
|
48,043,329
|
|
$
|
44,174,856
|
|
|
Cash and Cash
Equivalents Balance at End of Period
|
|
$
|
14,924,382
|
|
$
|
26,462,108
|
|
|
Supplemental and
Non-Cash Activities
|
|
|
|
|
|
|
|
|
Cash paid for interest
expense
|
|
$
|
14,711,017
|
|
$
|
9,072,909
|
|
|
Income and excise tax
paid
|
|
|
1,139,564
|
|
|
3,132,755
|
|
|
Increase in dividends
payable
|
|
|
3,006,969
|
|
|
1,043,498
|
|
|
(Decrease) increase in
deferred offering costs
|
|
|
(1,100)
|
|
|
74,270
|
|
|
Reconciliation of
Core Net Investment
Income (1)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
June 30, 2023
|
|
June 30, 2022
|
|
Net investment
income
|
|
$10,413,244
|
|
$6,174,571
|
|
Capital gains incentive
fee
|
|
-
|
|
(983,575)
|
|
Income tax
expense
|
|
371,786
|
|
426,236
|
|
Core net investment
income
|
|
$10,785,030
|
|
$5,617,232
|
|
|
|
|
|
|
Per share
amounts:
|
|
|
|
|
|
Net investment income
per share
|
|
$0.49
|
|
$0.32
|
|
Core net investment
income per share
|
|
$0.51
|
|
$0.29
|
|
Reconciliation of
Realized Net Investment
Income (2)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
June 30, 2023
|
|
June 30, 2022
|
|
Net investment
income
|
|
$10,413,244
|
|
$6,174,571
|
|
Net realized loss on
investments
|
|
(310,588)
|
|
(352,723)
|
|
Net realized loss on
foreign currency translation
|
|
(10,704)
|
|
—
|
|
Total Realized Net
Investment Income
|
|
$10,091,952
|
|
$5,821,848
|
|
|
|
|
|
|
Per share
amounts:
|
|
|
|
|
|
Net investment income
per share
|
|
$0.49
|
|
$0.32
|
|
Realized net investment
income per share
|
|
$0.48
|
|
$0.30
|
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SOURCE Stellus Capital Investment Corporation
