HOUSTON, Nov. 7, 2023
/PRNewswire/ -- Stellus Capital Investment Corporation (NYSE:SCM)
("Stellus" or the "Company") today announced financial results for
its third fiscal quarter ended September 30,
2023.
Robert T. Ladd, Chief Executive
Officer of Stellus, stated, "I am pleased to report solid operating
results for the quarter ended September 30,
2023, in which U.S. GAAP net investment income of
$0.47 per share and core net
investment income of $0.49 per share
covered the regular dividend declared of $0.40 per share. Our portfolio grew by a net
$5 million to $886 million at fair value and the loan portfolio
is yielding 11.5%, as of September 30,
2023."
|
FINANCIAL
HIGHLIGHTS
($ in millions, except
data relating to per share amounts and shares
outstanding)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Nine Months
Ended
|
|
September 30, 2023
|
|
September 30, 2022
|
|
September 30, 2023
|
|
September 30, 2022
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Amount
|
Per
Share
|
|
Net investment
income
|
$10.82
|
$0.47
|
|
$7.19
|
$0.37
|
|
$30.30
|
$1.42
|
|
$18.88
|
$0.97
|
|
Core net investment
income(1)
|
11.16
|
0.49
|
|
6.90
|
0.35
|
|
30.81
|
1.45
|
|
18.27
|
0.94
|
|
Net realized gain on
investments
|
0.60
|
0.03
|
|
1.55
|
0.08
|
|
0.32
|
0.01
|
|
4.66
|
0.24
|
|
Net realized loss on
foreign currency translation
|
(0.02)
|
-
|
|
-
|
-
|
|
(0.07)
|
-
|
|
(0.01)
|
-
|
|
Total realized
income(2)
|
$11.40
|
$0.50
|
|
$8.74
|
$0.45
|
|
$30.55
|
$1.43
|
|
$23.53
|
$1.21
|
|
Distributions
|
(9.27)
|
(0.41)
|
|
(6.64)
|
(0.34)
|
|
(25.88)
|
(1.22)
|
|
(18.75)
|
(0.96)
|
|
Net unrealized change
in depreciation on investments
|
(13.80)
|
(0.61)
|
|
(4.80)
|
(0.25)
|
|
(24.34)
|
(1.14)
|
|
(12.82)
|
(0.66)
|
|
Net unrealized change
in depreciation on foreign currency translation
|
-
|
-
|
|
(0.01)
|
-
|
|
(0.02)
|
-
|
|
(0.05)
|
-
|
|
Benefit (provision) for
taxes on unrealized depreciation (appreciation) on investments in
taxable subsidiaries
|
-
|
-
|
|
0.03
|
-
|
|
(0.14)
|
(0.01)
|
|
(0.15)
|
(0.01)
|
|
Net (decrease) increase
in net assets resulting from operations
|
($2.40)
|
($0.11)
|
|
$3.96
|
$0.20
|
|
$6.05
|
$0.28
|
|
$10.51
|
$0.54
|
|
Weighted average shares
outstanding
|
|
22,824,221
|
|
|
19,545,935
|
|
|
21,289,880
|
|
|
19,535,708
|
|
|
|
(1)
|
Core net investment
income, as presented, excludes the impact of capital gains
incentive fees (reversal) and income taxes, the majority of which
are excise taxes. The Company believes presenting core net
investment income and the related per share amount is a useful
supplemental disclosure for analyzing its financial performance.
However, core net investment income is a non-U.S. generally
accepted accounting principles ("U.S. GAAP") measure and should not
be considered as a replacement for net investment income and other
earnings measures presented in accordance with U.S. GAAP. A
reconciliation of net investment income in accordance with U.S.
GAAP to core net investment income is presented in the table below
the financial
statements.
|
|
(2)
|
Total realized income
is the sum of net investment income, net realized gains (losses) on
investments, net realized gains (losses) on foreign currency, and
loss on debt extinguishment; all U.S. GAAP measures.
|
|
PORTFOLIO
ACTIVITY
($ in millions, except
data relating to per share amounts and number of portfolio
companies)
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
Investments at fair
value
|
|
$886.3
|
|
$844.7
|
|
Total assets
|
|
$912.0
|
|
$898.2
|
|
Net assets
|
|
$318.1
|
|
$275.8
|
|
Shares
outstanding
|
|
24,125,642
|
|
19,666,769
|
|
Net asset value per
share
|
|
$13.19
|
|
$14.02
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30, 2023
|
|
September 30, 2023
|
|
New
investments
|
|
$51.9
|
|
$139.7
|
|
Repayments of
investments
|
|
(34.8)
|
|
(79.1)
|
|
Net activity
|
|
$17.1
|
|
$60.6
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30, 2023
|
|
December 31, 2022
|
|
Number of portfolio
company investments
|
|
96
|
|
85
|
|
Number of debt
investments
|
|
83
|
|
73
|
|
|
|
|
|
|
Weighted average yield
of debt and other income producing investments
(3)
|
|
Cash
|
|
10.7 %
|
|
10.3 %
|
|
Payment-in-kind
("PIK")
|
|
0.4 %
|
|
0.4 %
|
|
Fee
amortization
|
|
0.4 %
|
|
0.4 %
|
|
Total
|
|
11.5 %
|
|
11.1 %
|
|
|
|
|
|
|
Weighted average yield
on total investments (4)
|
|
Cash
|
|
10.2 %
|
|
9.7 %
|
|
Payment-in-kind
("PIK")
|
|
0.3 %
|
|
0.3 %
|
|
Fee
amortization
|
|
0.3 %
|
|
0.4 %
|
|
Total
|
|
10.8 %
|
|
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 in the Company's common stock would
realize in a return over the same period because the
dollar-weighted average annualized yield does not reflect the
Company's expenses 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 September 30, 2023 and 2022 totaled $27.2 million and $20.1
million, respectively, most of which was interest income
from portfolio investments.
Operating expenses for the three months ended September 30, 2023 and 2022, totaled $16.3 million and $13.0
million, respectively. For the same respective periods, base
management fees totaled $3.9 million
and $3.8 million, income incentive
fees totaled $2.7 million and
$1.6 million, capital gains incentive
(reversal) fees totaled $0.0 million
and ($0.6) million, fees and expenses
related to our borrowings totaled $8.0
million and $6.4 million
(including interest and amortization of deferred financing costs),
administrative expenses totaled $0.5
million and $0.4 million,
income tax totaled $0.3 and
$0.4 million and other expenses
totaled $0.9 and $1.0 million.
Net investment income was $10.8
million and $7.2 million, or
$0.47 and $0.37 per common share based on weighted average
common shares outstanding of 22,824,221 and 19,545,935 for the
three months ended September 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 September 30, 2023 and 2022 was
$11.2 million and $6.9 million, or $0.49 and $0.35 per
share, respectively.
For the three months ended September 30,
2023 and 2022, the Company's investment portfolio had a net
change in unrealized depreciation of ($13.8)
million and ($4.8) million,
respectively, and the Company had net realized gains of
$0.6 million and $1.6 million, respectively.
Net (decrease) increase in net assets resulting from operations
totaled ($2.4) million and
$4.0 million, or ($0.11) and $0.20
per common share, based on weighted average common shares
outstanding of 22,824,221 and 19,545,935 for the three months ended
September 30, 2023 and 2022,
respectively.
Liquidity and Capital Resources
As of September 30, 2023, the
Company's 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 September 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 September 30, 2023 and
December 31, 2022, the Company had
$162.3 million and $199.2 million in outstanding borrowings under
the Credit Facility, respectively.
The Company issued 1,567,738 shares during
the three months ended September 30,
2023 under the At-the-Market Program ("ATM Program"), for
gross proceeds of $21.9 million. The
average per share gross offering price of shares issued under the
ATM Program during the three months ended September 30, 2023 was $13.97. For the three months ended September 30, 2023, net proceeds of $21.6 million, or $13.76 per share, exceeded net asset value
per share, excluding the impact of offering expenses.
Distributions
During the three months ended September
30, 2023 and 2022, the Company declared aggregate
distributions of $0.40 and
$0.34 per share, respectively
($9.3 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 September 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
|
|
Add-On
Investment
|
|
August 11,
2023
|
|
Data Centrum
Communications, Inc.*
|
|
Provider of
point-of-care patient engagement and marketing solutions for
pharmaceutical companies.
|
|
$
|
52,919
|
|
Equity
|
|
Add-On
Investment
|
|
September 22,
2023
|
|
NINJIO, LLC*
|
|
Cybersecurity awareness
and training platform
|
|
$
|
14,470
|
|
Equity
|
|
Add-On
Investment
|
|
September 25,
2023
|
|
Tower Arch Infolinks
Media, LP*
|
|
Advertising placement
partner for small to mid-sized publishers
|
|
$
|
1,093
|
|
Equity
|
|
Add-On
Investment
|
|
September 28,
2023
|
|
TradePending OpCo
Aggregator, LLC*
|
|
Provider of vehicle
trade-in and merchandising intelligence solutions for auto
dealerships
|
|
$
|
53,625
|
|
Equity
|
|
*Existing portfolio
company
|
The Company realized investments in the following portfolio
companies during the three months ended September 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
|
|
Full
Repayment
|
|
September 1,
2023
|
|
Vortex Companies,
LLC*
|
|
Provider of trenchless
services and products to restore and repair large diameter water,
sewer, and industrial pipe infrastructure.
|
|
$
|
10,000,000
|
|
Senior Secured – First
Lien
|
Events Subsequent to September 30,
2023
The Company's management has evaluated subsequent events through
November 7, 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 September 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Company
Description
|
|
Investment
Amount
|
|
Instrument
Type
|
|
Add-On
Investment
|
|
October 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
|
|
$
|
2,281,116
|
|
Revolver
Commitment(a)
|
|
Add-On
Investment
|
|
October 11,
2023
|
|
Impact Home Services
LLC*
|
|
Residential, garage
door, electrical, and plumbing services provider
|
|
$
|
539,718
|
|
Senior Secured – First
Lien
|
|
|
|
|
|
|
|
|
|
13,398
|
|
Equity
|
|
Add-On
Investment
|
|
October 16,
2023
|
|
Equine Network,
LLC*
|
|
Provider of content,
information, tech-enabled services, and hosts competitions for the
U.S. equine industry
|
|
$
|
955,516
|
|
Senior Secured – First
Lien
|
|
Add-On
Investment
|
|
October 19,
2023
|
|
ArborWorks Acquisition
LLC*
|
|
A professional tree
care firm
|
|
$
|
230,769
|
|
Senior Secured – First
Lien
|
|
Add-On
Investment
|
|
October 31,
2023
|
|
2X LLC*
|
|
Provider of outsourced
digital B2B marketing-as-a-service
|
|
$
|
1,448,388
|
|
Senior Secured – First
Lien
|
|
*Existing portfolio
company
|
|
(a) The
Company has full discretion to fund this revolver
commitment
|
The Company realized the following portfolio company subsequent
to September 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity
Type
|
|
Date
|
|
Company
Name
|
|
Company
Description
|
|
Proceeds
Received
|
|
Realized
Loss
|
|
Instrument
Type
|
|
Full
Realization
|
|
October 24,
2023
|
|
Interstate Waste
Services, Inc.*
|
|
Provider of
non-hazardous waste management, collection, and recycling
services
|
|
$
|
389,496
|
|
$
|
(556,629)
|
|
Equity
|
|
*Existing portfolio
company
|
Credit Facility
The outstanding balance under the Credit Facility as of
November 7, 2023 was $163.0 million.
Distributions Declared
On October 5, 2023, our Board of
Directors declared a regular monthly distribution for each of
October, November, and December 2023,
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Ex-Dividend
|
|
Record
|
|
Payment
|
|
Amount per
|
|
Declared
|
|
Date
|
|
Date
|
|
Date
|
|
Share
|
|
10/5/2023
|
|
10/30/2023
|
|
10/31/2023
|
|
11/15/2023
|
|
$
|
0.1333
|
|
10/5/2023
|
|
11/29/2023
|
|
11/30/2023
|
|
12/15/2023
|
|
$
|
0.1333
|
|
10/5/2023
|
|
12/15/2023
|
|
12/18/2023
|
|
12/29/2023
|
|
$
|
0.1333
|
Conference Call Information
Stellus Capital Investment Corporation will host a conference
call to discuss these results on Wednesday,
November 8, 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 468695. Starting approximately two hours
after the conclusion of the call, a replay will be available
through Wednesday, November 22, 2023
by dialing (877) 481-4010 and entering passcode 49413. The replay
will also be available on the Company's website.
For those wishing to participate via Live Webcast, connect via
the Public (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)
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023
|
|
|
|
|
|
(unaudited)
|
|
December 31, 2022
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Non-controlled,
non-affiliated investments, at fair value (amortized cost
of
$941,679,195 and
$875,823,177, respectively)
|
|
$
|
886,338,148
|
|
$
|
844,733,638
|
|
|
Cash and cash
equivalents
|
|
|
19,210,721
|
|
|
48,043,329
|
|
|
Receivable for sales
and repayments of investments
|
|
|
594,726
|
|
|
718,794
|
|
|
Interest
receivable
|
|
|
5,600,021
|
|
|
3,984,409
|
|
|
Other
receivables
|
|
|
60,495
|
|
|
34,245
|
|
|
Deferred offering
costs
|
|
|
—
|
|
|
1,100
|
|
|
Prepaid
expenses
|
|
|
149,755
|
|
|
667,267
|
|
|
Total
Assets
|
|
$
|
911,953,866
|
|
$
|
898,182,782
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
$
|
98,883,814
|
|
$
|
98,549,692
|
|
|
Credit Facility
payable
|
|
|
161,192,612
|
|
|
197,685,281
|
|
|
SBA-guaranteed
debentures
|
|
|
319,955,852
|
|
|
307,895,195
|
|
|
Dividends
payable
|
|
|
3,215,948
|
|
|
—
|
|
|
Management fees
payable
|
|
|
3,933,121
|
|
|
7,150,407
|
|
|
Income incentive fees
payable
|
|
|
3,058,550
|
|
|
2,464,408
|
|
|
Capital gains incentive
fees payable
|
|
|
—
|
|
|
569,528
|
|
|
Interest
payable
|
|
|
1,316,334
|
|
|
4,640,841
|
|
|
Related party
payable
|
|
|
—
|
|
|
1,060,321
|
|
|
Unearned
revenue
|
|
|
343,210
|
|
|
320,675
|
|
|
Administrative services
payable
|
|
|
402,627
|
|
|
356,919
|
|
|
Income tax
payable
|
|
|
1,116,369
|
|
|
1,175,373
|
|
|
Deferred tax
liability
|
|
|
206,361
|
|
|
61,936
|
|
|
Other accrued expenses
and liabilities
|
|
|
203,288
|
|
|
475,593
|
|
|
Total
Liabilities
|
|
$
|
593,828,086
|
|
$
|
622,406,169
|
|
|
Commitments and
contingencies (Note 7)
|
|
|
|
|
|
|
|
|
Net
Assets
|
|
$
|
318,125,780
|
|
$
|
275,776,613
|
|
|
NET
ASSETS
|
|
|
|
|
|
|
|
|
Common stock, par value
$0.001 per share (100,000,000 shares authorized;
24,125,642
and 19,666,769 issued
and outstanding, respectively)
|
|
$
|
24,125
|
|
$
|
19,667
|
|
|
Paid-in
capital
|
|
|
337,289,265
|
|
|
275,114,720
|
|
|
Total distributable
(loss) earnings
|
|
|
(19,187,610)
|
|
|
642,226
|
|
|
Net
Assets
|
|
$
|
318,125,780
|
|
$
|
275,776,613
|
|
|
Total
Liabilities and Net Assets
|
|
$
|
911,953,866
|
|
$
|
898,182,782
|
|
|
Net Asset
Value Per Share
|
|
$
|
13.19
|
|
$
|
14.02
|
|
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
three
|
|
For the
three
|
|
For the
nine
|
|
For the
nine
|
|
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
months
ended
|
|
|
|
September 30, 2023
|
|
September 30, 2022
|
|
September 30, 2023
|
|
September 30, 2022
|
|
|
INVESTMENT
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
26,223,986
|
|
$
|
19,617,468
|
|
$
|
75,295,485
|
|
$
|
50,392,437
|
|
|
Other income
|
|
|
941,040
|
|
|
524,799
|
|
|
2,529,905
|
|
|
1,353,279
|
|
|
Total
Investment Income
|
|
$
|
27,165,026
|
|
$
|
20,142,267
|
|
$
|
77,825,390
|
|
$
|
51,745,716
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
$
|
3,933,121
|
|
$
|
3,827,669
|
|
$
|
11,533,811
|
|
$
|
11,025,435
|
|
|
Valuation
fees
|
|
|
139,267
|
|
|
145,865
|
|
|
332,762
|
|
|
315,482
|
|
|
Administrative services
expenses
|
|
|
470,846
|
|
|
447,381
|
|
|
1,399,188
|
|
|
1,388,602
|
|
|
Income incentive
fees
|
|
|
2,705,200
|
|
|
1,635,641
|
|
|
7,433,039
|
|
|
1,635,641
|
|
|
Capital gains incentive
fee reversal
|
|
|
—
|
|
|
(646,757)
|
|
|
(569,528)
|
|
|
(1,672,549)
|
|
|
Professional
fees
|
|
|
276,592
|
|
|
315,809
|
|
|
877,276
|
|
|
845,275
|
|
|
Directors'
fees
|
|
|
93,250
|
|
|
83,500
|
|
|
303,750
|
|
|
254,500
|
|
|
Insurance
expense
|
|
|
123,725
|
|
|
127,274
|
|
|
366,156
|
|
|
377,671
|
|
|
Interest expense and
other fees
|
|
|
8,049,063
|
|
|
6,448,280
|
|
|
24,037,462
|
|
|
16,864,255
|
|
|
Income tax
expense
|
|
|
335,508
|
|
|
361,115
|
|
|
1,082,057
|
|
|
1,066,768
|
|
|
Other general and
administrative expenses
|
|
|
217,655
|
|
|
207,170
|
|
|
727,754
|
|
|
766,562
|
|
|
Total
Operating Expenses
|
|
$
|
16,344,227
|
|
$
|
12,952,947
|
|
$
|
47,523,727
|
|
$
|
32,867,642
|
|
|
Net
Investment Income
|
|
$
|
10,820,799
|
|
$
|
7,189,320
|
|
$
|
30,301,663
|
|
$
|
18,878,074
|
|
|
Net realized
gain on non-controlled, non-affiliated investments
|
|
$
|
600,403
|
|
$
|
1,553,450
|
|
$
|
324,782
|
|
$
|
4,658,817
|
|
|
Net realized
loss on foreign currency translation
|
|
|
(22,166)
|
|
|
(676)
|
|
|
(72,782)
|
|
|
(8,026)
|
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
|
(13,793,320)
|
|
|
(4,798,980)
|
|
|
(24,338,195)
|
|
|
(12,810,173)
|
|
|
Net change in
unrealized depreciation on foreign currency translation
|
|
|
(2,794)
|
|
|
(18,120)
|
|
|
(21,243)
|
|
|
(53,874)
|
|
|
(Provision)
benefit for taxes on net unrealized (appreciation) depreciation on
investments
|
|
|
(312)
|
|
|
30,535
|
|
|
(144,425)
|
|
|
(151,278)
|
|
|
Net
(Decrease) Increase in Net Assets Resulting from
Operations
|
|
|
(2,397,390)
|
|
|
3,955,529
|
|
$
|
6,049,800
|
|
$
|
10,513,540
|
|
|
Net
Investment Income Per Share—basic and diluted
|
|
$
|
0.47
|
|
$
|
0.37
|
|
$
|
1.42
|
|
$
|
0.97
|
|
|
Net
(Decrease) Increase in Net Assets Resulting from Operations Per
Share – basic and diluted
|
|
$
|
(0.11)
|
|
$
|
0.20
|
|
$
|
0.28
|
|
$
|
0.54
|
|
|
Weighted
Average Shares of Common Stock Outstanding—basic and
diluted
|
|
|
22,824,221
|
|
|
19,545,935
|
|
|
21,289,880
|
|
|
19,535,708
|
|
|
Distributions Per Share—basic and diluted
|
|
$
|
0.41
|
|
$
|
0.34
|
|
$
|
1.22
|
|
$
|
0.96
|
|
|
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
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,189,320
|
|
|
7,189,320
|
|
Net realized gain on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,553,450
|
|
|
1,553,450
|
|
Net realized loss on
foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(676)
|
|
|
(676)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,798,980)
|
|
|
(4,798,980)
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,120)
|
|
|
(18,120)
|
|
Benefit for taxes on
unrealized depreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,535
|
|
|
30,535
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,643,663)
|
|
|
(6,643,663)
|
|
Balances at
September 30, 2022
|
|
19,545,935
|
|
$
|
19,546
|
|
$
|
274,864,296
|
|
$
|
2,294,142
|
|
$
|
277,177,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Net investment
income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,820,799
|
|
|
10,820,799
|
|
Net realized gain on
non-controlled, non-affiliated investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
600,403
|
|
|
600,403
|
|
Net realized loss on
foreign currency translation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,166)
|
|
|
(22,166)
|
|
Net change in
unrealized depreciation on non-controlled, non-affiliated
investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,793,320)
|
|
|
(13,793,320)
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,794)
|
|
|
(2,794)
|
|
Provision for taxes on
unrealized appreciation on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(312)
|
|
|
(312)
|
|
Distributions from net
investment income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,269,208)
|
|
|
(9,269,208)
|
|
Issuance of common
stock, net of offering costs(1)
|
|
1,567,738
|
|
|
1,567
|
|
|
21,465,783
|
|
|
—
|
|
|
21,467,350
|
|
Balances at
September 30, 2023
|
|
24,125,642
|
|
$
|
24,125
|
|
$
|
337,289,265
|
|
$
|
(19,187,610)
|
|
$
|
318,125,780
|
|
|
(1) See Note 4 to
the Consolidated Financial Statements on Form 10-Q filed with the
Securities and Exchange Commission on November 7, 2023 for more
information on offering costs.
|
|
STELLUS CAPITAL
INVESTMENT CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the
nine
|
|
For the
nine
|
|
|
|
months
ended
|
|
months
ended
|
|
|
|
September 30, 2023
|
|
September 30, 2022
|
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
Net increase in net
assets resulting from operations
|
|
$
|
6,049,800
|
|
$
|
10,513,540
|
|
|
Adjustments to
reconcile net increase in net assets from operations to net cash
used in operating activities:
|
|
|
|
|
|
|
|
|
Purchases of
investments
|
|
|
(139,650,422)
|
|
|
(180,956,810)
|
|
|
Proceeds from
sales and repayments of investments
|
|
|
79,053,967
|
|
|
74,385,466
|
|
|
Net change in
unrealized depreciation on investments
|
|
|
24,338,195
|
|
|
12,810,173
|
|
|
Net change in
unrealized depreciation on foreign currency translations
|
|
|
21,087
|
|
|
28,405
|
|
|
Increase in
investments due to PIK
|
|
|
(2,732,530)
|
|
|
(1,010,061)
|
|
|
Amortization of
premium and accretion of discount, net
|
|
|
(2,078,183)
|
|
|
(1,839,720)
|
|
|
Deferred tax
provision
|
|
|
144,425
|
|
|
151,278
|
|
|
Amortization of
loan structure fees
|
|
|
436,257
|
|
|
420,356
|
|
|
Amortization of
deferred financing costs
|
|
|
334,122
|
|
|
334,122
|
|
|
Amortization of
loan fees on SBA-guaranteed debentures
|
|
|
938,247
|
|
|
905,294
|
|
|
Net realized
gain on investments
|
|
|
(324,782)
|
|
|
(4,658,817)
|
|
|
Changes in other assets
and liabilities
|
|
|
|
|
|
|
|
|
Increase in
interest receivable
|
|
|
(1,615,612)
|
|
|
(907,787)
|
|
|
Increase in
other receivables
|
|
|
(26,250)
|
|
|
(5,743)
|
|
|
Increase in
related party receivables
|
|
|
—
|
|
|
(19,034)
|
|
|
Decrease in
prepaid expenses
|
|
|
517,512
|
|
|
293,135
|
|
|
(Decrease)
increase in management fees payable
|
|
|
(3,217,286)
|
|
|
3,578,496
|
|
|
Increase in
income incentive fees payable
|
|
|
594,142
|
|
|
160,521
|
|
|
Decrease in
capital gains incentive fees payable
|
|
|
(569,528)
|
|
|
(1,672,549)
|
|
|
Increase
(decrease) in administrative services payable
|
|
|
45,708
|
|
|
(9,481)
|
|
|
Decrease in
interest payable
|
|
|
(3,324,507)
|
|
|
(2,808,314)
|
|
|
Decrease in
related party payable
|
|
|
(1,060,321)
|
|
|
—
|
|
|
Increase
(decrease) in unearned revenue
|
|
|
22,535
|
|
|
(185,171)
|
|
|
Decrease in
income tax payable
|
|
|
(59,004)
|
|
|
(2,183,176)
|
|
|
(Decrease)
increase in other accrued expenses and liabilities
|
|
|
(272,305)
|
|
|
59,623
|
|
|
Net Cash Used in
Operating Activities
|
|
$
|
(42,434,733)
|
|
$
|
(92,616,254)
|
|
|
Cash flows from
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from the
issuance of common stock
|
|
$
|
63,348,436
|
|
$
|
420,004
|
|
|
Sales load for common
stock issued
|
|
|
(943,248)
|
|
|
(5,957)
|
|
|
Offering costs paid
for common stock issued
|
|
|
(225,085)
|
|
|
(335,953)
|
|
|
Stockholder
distributions paid
|
|
|
(22,663,688)
|
|
|
(17,708,494)
|
|
|
Proceeds from
SBA-guaranteed debentures
|
|
|
11,400,000
|
|
|
56,000,000
|
|
|
Financing costs paid
on SBA-guaranteed debentures
|
|
|
(277,590)
|
|
|
(1,363,600)
|
|
|
Financing costs paid
on Credit facility
|
|
|
(35,000)
|
|
|
(193,659)
|
|
|
Borrowings under
Credit Facility
|
|
|
79,700,000
|
|
|
121,608,702
|
|
|
Repayments of Credit
Facility
|
|
|
(116,701,700)
|
|
|
(97,559,902)
|
|
|
Net Cash Provided by
Financing Activities
|
|
$
|
13,602,125
|
|
$
|
60,861,141
|
|
|
Net Decrease in Cash
and Cash Equivalents
|
|
$
|
(28,832,608)
|
|
$
|
(31,755,113)
|
|
|
Cash and Cash
Equivalents Balance at Beginning of Period
|
|
$
|
48,043,329
|
|
$
|
44,174,856
|
|
|
Cash and Cash
Equivalents Balance at End of Period
|
|
$
|
19,210,721
|
|
$
|
12,419,743
|
|
|
Supplemental and
Non-Cash Activities
|
|
|
|
|
|
|
|
|
Cash paid for interest
expense
|
|
$
|
25,653,343
|
|
$
|
18,012,797
|
|
|
Income and excise tax
paid
|
|
|
1,141,061
|
|
|
3,249,944
|
|
|
Increase in dividends
payable
|
|
|
3,215,948
|
|
|
1,043,498
|
|
|
(Decrease) increase in
deferred offering costs
|
|
|
(1,100)
|
|
|
227,109
|
|
|
Reconciliation of
Core Net Investment
Income (1)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
September 30, 2023
|
|
September 30, 2022
|
|
Net investment
income
|
|
$10,820,799
|
|
$7,189,320
|
|
Capital gains incentive
reversal
|
|
-
|
|
(646,757)
|
|
Income tax
expense
|
|
335,508
|
|
361,115
|
|
Core net investment
income
|
|
$11,156,307
|
|
$6,903,678
|
|
|
|
|
|
|
Per share
amounts:
|
|
|
|
|
|
Net investment income
per share
|
|
$0.47
|
|
$0.37
|
|
Core net investment
income per share
|
|
$0.49
|
|
$0.35
|
|
Reconciliation of
Realized Net Investment
Income (2)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
|
September 30, 2023
|
|
September 30, 2022
|
|
Net investment
income
|
|
$10,820,799
|
|
$7,189,320
|
|
Net realized gain on
investments
|
|
600,403
|
|
1,553,450
|
|
Net realized loss on
foreign currency translation
|
|
(22,166)
|
|
(676)
|
|
Total Realized Net
Investment Income
|
|
$11,399,036
|
|
$8,742,094
|
|
|
|
|
|
|
Per share
amounts:
|
|
|
|
|
|
Net investment income
per share
|
|
$0.47
|
|
$0.37
|
|
Realized net investment
income per share
|
|
$0.50
|
|
$0.45
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Stellus Capital Investment Corporation
