• Net Investment Income: $0.44 per share for Q4 2024, flat year-over-year, down from $0.45 in Q3 2024.
• Quarterly Dividend: $0.41 per share, covered by net investment income.
• Net Asset Value (NAV): Increased to $18.20 per share from $18.09 a year ago.
• Total Portfolio: $3.1 billion at year-end, with 96.4% in first lien senior secured loans.
• Portfolio Yield: 12.1%, up from 11.8% in the prior quarter.
• New Investments: $338 million originated in Q4 2024.
• Repayments: $442 million received in Q4 2024.
• Debt Outstanding: Approximately $1 billion with a net debt to equity ratio of 1.03 times.
• Unsecured Debt: $444 million as of December 31, 2024.
• Gross Investment Income: $55.6 million for Q4 2024.
• Net Expenses: $31.8 million for Q4 2024.
• Net Increase in Net Assets: $22.6 million for Q4 2024.
• Available Capital: Over $900 million as of December 31, 2024.
• Non-Accruals: Only one investment on non-accrual, representing 0.6% of the portfolio at cost.

• Warning! GuruFocus has detected 8 Warning Sign with SLRC.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SLR Investment Corp (NASDAQ:SLRC) achieved a net investment income of $0.44 per share for Q4 2024, covering the quarterly dividend of $0.41 per share.
• The company's net asset value increased to $1,820 million from $1,809 million a year ago, indicating strong credit quality.
• SLRC's portfolio yield increased to 12.1% from 11.8% in the prior quarter, reflecting favorable conditions in specialty finance markets.
• The company has over $900 million of available capital to deploy, positioning it well for future opportunities.
• SLRC's focus on first lien senior secured loans, comprising 96.4% of its portfolio, provides a conservative position against inflationary pressures and high interest rates.

Negative Points

• Net investment income per share was flat year-over-year and down a penny from the third quarter.
• The sponsor finance market remains challenging with tight spreads and competitive conditions, leading to a decline in cash flow loan yields.
• SLRC experienced $442 million in repayments in Q4, which exceeded new investments of $338 million, resulting in a net decrease in the portfolio size.
• The company has only one investment on non-accrual, but it represents 0.6% of the portfolio on a cost basis.
• The equipment finance sector faces yield volatility due to the mismatch between fixed-rate loans and floating-rate liabilities.

Q & A Highlights

Q: Can you discuss the opportunities for acquiring portfolios or teams in your specialty finance verticals? A: Bruce Spohler, Co-CEO, explained that while they saw opportunities last year, they passed on some due to credit underwriting concerns. They have a dedicated team for sourcing portfolios and teams, and post-regional banking disruptions, they have seen increased activity in specialty finance. However, they remain selective, often preferring organic growth over acquisitions.

Q: What are you seeing in the sponsor finance market in terms of structure and spread pressure? A: Bruce Spohler noted that both spread compression and loosening of terms have stabilized, but the current levels are unattractive compared to their ABL and specialty finance strategies. They are targeting returns of 10.5% to 11% in sponsor finance, but current market conditions are not meeting these expectations.

Q: Regarding the equipment finance sector, is there anything you can do to reduce yield volatility given the fixed-rate loans and floating-rate liabilities? A: Bruce Spohler stated that the sector is reasonably well-matched. The floating-rate debt is part of their parent company's investment, and the business benefits from inflationary environments. Borrowers tend to keep assets longer, extending leases, which increases profitability.

Q: Can you clarify the increase in the ABL pipeline? Is it more about transitioning traditional cash flow opportunities into ABL opportunities? A: Bruce Spohler confirmed that the increase is due to individual ABL loans rather than new specialty finance companies. They have reduced their cash flow book and are focusing on individual ABL loans, with ample capacity to pursue these opportunities.

Q: What drove the higher dividend income in the fourth quarter, and is it sustainable? A: Bruce Spohler explained that the increase was due to higher income from the lease portfolio and the acquisition of the Webster portfolio, which provided attractive returns. They expect this to be a run rate, emphasizing their commitment to the ABL asset class.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.