SLR Investment Corp. Q1 FY2025 earnings call

• Multi-strategy approach: Tilted the portfolio towards specialty finance for superior downside protection and risk-adjusted returns. - Portfolio composition: 96.4% of the comprehensive investment portfolio consisted of first lien senior secured loans, with low non-accruals (only 1 investment on non-accrual, representing 0.6% and 0.4% on cost and fair value basis respectively) and low restructured PIK income (only 2% of total income). - Originations: SLRC originated $361 million of new investments across the portfolio and received repayments of $391 million, with 88% of first quarter originations in specialty finance. - Global economic uncertainties: Monitoring the impact of tariffs, with the portfolio focused on domestic service-oriented businesses primarily in healthcare, business services, etc., and specialty finance loans backed by working capital collateral insulated from direct tariff impact to a large extent.

SLR Investment Corp.'s segment performance includes various components. Cash flow loans now represent less than 20% of the comprehensive portfolio, the lowest in three years, with a weighted average yield of 10.4% at quarter end. Sponsor finance originated $45 million in first lien cash flow loans and had repayments of $73 million, with a weighted average cash flow yield of 10.4%. The specialty finance segment includes: ABL with a $1.1 billion portfolio, $164 million in new investments, $100 million in repayments, and a weighted average yield of 13.8%; equipment finance with over $1 billion portfolio, $128 million in new originations, $173 million in repayments, and a weighted average yield of 11.5%; life science with a $187 million portfolio, $25 million in new investments, $45 million in repayments, and a weighted average yield of 12.5%; and SSLP which earned $1.9 million, had $6.6 million in new investments, and $20 million in repayments. Revenue contribution: approximately 80% of the portfolio is from social finance investments, with the remainder from cash flow and sponsor back agrees like healthcare and business services.

• Declared Q2 2025 quarterly distribution of $0.41 per share, payable on June 27, 2025. - Expect to opportunistically access the debt capital markets. - Net debt-to-equity ratio expected to migrate towards the middle of the target range of 0.9 times to 1.25 times.

• Global economic and policy uncertainties including tariffs, changes in supply chains, and investor angst. - Impact on cash flow loans from cyclical economic factors. - Potential effects of regulatory changes on regional banks and the ABL market, such as regional banks tightening credit standards and rationalizing business lines affecting ABL opportunities.

Q: Erik Zwick asked about the pipeline weights for main lending verticals and spreads compared to three/six months ago.

A: Bruce Spohler said the pipeline is 75-80% weighted towards ABL, and ABL tends to be an absolute return asset class moving between 11% and 13% depending on the cycle, with today in the midpoint.

Q: Melissa Wedel asked about tariff exposed companies in the portfolio and equipment finance yield.

A: Bruce Spohler said less than 1% of the portfolio has direct tariff exposure, and Shiraz Kajee mentioned equipment finance yield has some onetime gains from asset sales and potential elevated income due to borrowers extending leases instead of buying new equipment amidst tariffs and economic uncertainty.