• GAAP Net Investment Income: $0.48 per share.
• Core Net Investment Income: $0.50 per share, excluding estimated excise taxes.
• Dividend Declared: $0.40 per share.
• Net Asset Value Per Share: Decreased by $0.05 during the quarter.
• Equity Investment Gain: $2 million or $0.08 per share.
• ATM Program Issuance: $25.2 million in shares at an average gross price of $13.89 per share.
• Investment Portfolio at Fair Value: $900 million across 100 portfolio companies.
• New Investments: $53 million in eight new portfolio companies.
• Repayments Received: $31 million in full repayments and $9.7 million in other repayments.
• Loans on Nonaccrual: 2.9% of the fair value of the total loan portfolio.

• Warning! GuruFocus has detected 7 Warning Signs with SCM.

Release Date: August 08, 2024

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

Positive Points

• Stellus Capital Investment Corp (NYSE:SCM) reported GAAP net investment income of $0.48 per share, exceeding the declared dividend of $0.40 per share.
• Core net investment income was $0.50 per share, excluding estimated excise taxes, indicating strong financial performance.
• The company realized a gain of $2 million or $0.08 per share on an equity investment during the quarter.
• Stellus Capital Investment Corp (NYSE:SCM) issued $25.2 million in shares at an average gross price of $13.89 per share, all above net asset value, indicating strong investor confidence.
• The investment portfolio grew to $900 million across 100 portfolio companies, up from $876 million across 94 companies, showing positive portfolio growth.

Negative Points

• Net asset value per share decreased by $0.05 during the quarter due to net unrealized depreciation on the investment portfolio.
• Five loans are currently on nonaccrual, comprising 2.9% of the fair value of the total loan portfolio, indicating some asset quality concerns.
• The company experienced unrealized depreciation driven by company-specific activities, which could impact future valuations.
• Stellus Capital Investment Corp (NYSE:SCM) has a relatively high leverage ratio, which may pose risks in an uncertain credit environment.
• The company is cautious about future fee waivers, which may not repeat in coming quarters, potentially affecting future income.

Q & A Highlights

Q: The fee waiver, is that something that we should expect to repeat in coming quarters? A: (W. Todd Huskinson, CFO) It depends on each quarter's performance and the mechanics of the 12-quarter test. Currently, we don't expect any fee waivers for the remainder of this year unless there are changes in performance.

Q: Can you provide more details about the nonaccruals, specifically regarding EH Real Estate? A: (Robert Ladd, CEO) EH Real Estate is a residential realtor title company insurance business located in the Midwest.

Q: What caused the unrealized depreciation in the quarter? A: (Robert Ladd, CEO) The unrealized depreciation was driven by company-specific activities, but overall, it was not a significant amount.

Q: With low leverage ratios, are you planning to increase the credit facility usage given the uncertain credit environment? A: (Robert Ladd, CEO) We have unused capacity in our current credit facility, which we plan to utilize as we grow the portfolio. We aim to align our credit facility usage with our increased capital base, potentially growing the portfolio to over $1 billion.

Q: Regarding the nonaccruals, is there a timeline or pathway for resolution? A: (Robert Ladd, CEO) Each nonaccrual has a specific path, and while we are cautious about discussing individual companies, each is being actively managed towards resolution.

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