Stellus Capital Investment Corp Q1 FY2025 earnings call

• Life to date since IPO in Nov 2012: Invested approx $2.7 billion in over 200 companies, received ~$1.7 billion in repayments, and paid $295 million in dividends ($17.09 per share to IPO investors).
• Q1 operating results: GAAP net investment income $0.35/share, core net $0.37/share; net asset value per share down $0.21 due to loan portfolio write-downs and reduced spillover income.
• Portfolio activity: Investment portfolio at fair value $991.1M across 110 companies, up from prior quarter; $46.7M invested in new companies, $15M in repayments received; 98% secured, 91% floating rate loans; asset quality slightly better than planned.
• Capital actions: Issued $75M of 7.25% notes on April 1, 2025, and received SBA green light for Stellus Capital SBIC III, expecting to use proceeds for portfolio investments.

In the first quarter, Stellus Capital generated $0.35 per share of GAAP net investment income and $0.37 per share of core net investment income (excluding estimated excise taxes). Net asset value per share decreased $0.21 during the quarter primarily due to company-specific write-downs in the loan portfolio and a reduction of spillover income. The ATM program was active, with 656,085 shares issued for $9.3 million at an average gross price of $14.11, all above net asset value. The investment portfolio ended the quarter at fair value of $991.1 million across 110 portfolio companies, up from $953.5 million across 105 companies as of December 31, 2024. During the first quarter, $46.7 million was invested in seven new portfolio companies, and repayments totaling $15 million were received. 98% of loans were secured, 91% were priced at floating rates, and asset quality was slightly better than planned with 52% of the portfolio rated 2 or on or ahead of plan and 21% in a lower investment category.

• Expect Q2 2025 portfolio to approximate current level (~$985M) with new loan originations offset by repayments.
• Potential for over $10 million of equity gains in the equity co-investment portfolio by year end.
• Declared $0.40 per share dividend for Q2, payable monthly, and expects $0.40 per share for Q3 (subject to Board approval).
• Ability to grow portfolio to over $1 billion given current capitalization.

• Tariff activity has caused slowness in M&A and pipeline activity, affecting the timing of originations and repayments.
• Uncertainty in the timing of pipeline closings due to broader economic and market conditions.
• Interest rate changes could impact funding costs and the cost of leverage from potential SBIC III utilization.
• Risks associated with individual portfolio company performance, including potential non-accrual loans.

Q: Characterize pipeline situtation now vs March 31 and relation to Liberation Day disruption?

A: Pipeline slower due to tariff-related M&A slowness, seen as temporary disruption with expectation of activity returning as clarity on tariffs improves.

Q: Bond issuances and need for more ahead of maturity?

A: Will need to issue more unsecured debt before older bonds mature; magnitude to be determined, with more issuances expected before year end but not $100M.