Stellus Capital Investment Corporation Q3 FY2025 earnings call

• Life-to-date since IPO in 2012: ~$2.8B invested in over 215 companies, ~$1.8B repaid, $318M in dividends paid.
• Q3 financial results: GAAP net investment income $0.32/share, realized income $0.42/share, core net investment income $0.34/share.
• Portfolio and asset quality: Portfolio at fair value $1.01B, 98% loans secured, 90% floating rate, 82% portfolio rated 1 or 2.
• Capital activity: Amended revolving credit facility (spread reduced, maturity extended, size upsized), issued $50M of 2030 notes at premium.

In the third quarter, Stellus Capital generated $0.32 per share of GAAP net investment income, $0.42 per share of realized income, and $0.34 per share of core net investment income. Net asset value per share decreased $0.16 during the quarter, with components including dividend payments exceeding earnings and net unrealized losses. The investment portfolio at fair value was $1.01 billion across 115 portfolio companies, up from $985.9 million across 112 companies in Q2. 98% of loans were secured, 90% were floating rate, 82% of the portfolio was rated 1 or 2 (on or ahead of plan), and 18% was 3 or below. $51.3 million was invested in 5 new portfolio companies, and $29.8 million in repayments were received.

• Fourth quarter 2025: Expect portfolio over $1B at year-end.
• Equity realizations: $5M expected in Q4, $5M possibly in Q1 '26 with estimated gains $3.8M in Q4 and $3.3M in Q1 '26.
• Dividends: Declared $0.40 dividend for Q4.

Q: Could you repeat the expectation for equity realizations in fourth quarter and first quarter?

A: Projecting $5 million of realizations in Q4, with $1.1 million already received, and similar $5 million for Q1 '26, expected gains $3.8 million in Q4 and $3.3 million in Q1 '26.

Q: How does the pipeline look in terms of mix between new and add-on opportunities?

A: Continue to see mix, with many delayed draw term loans undrawn, expecting active pace for both new investments and follow-ons. Spreads seeing reduction in competitive market.

Q: On the new facility, was there any change in the advance rate?

A: No change in structure of credit facility in terms of advance rates, no issues sensed.

Q: Current status on the third SBA license?

A: Received greenlight letter, waiting for third license issuance, expected soon, would add ~$50M capacity.

Q: About half of deal origination is SBIC compliant?

A: Correct.

Q: Potential for significant repayments in Q4 and driver?

A: Mostly sales of businesses, could also be refinancing, but mostly sales of companies.