Stellus Capital Investment Corporation Reports Results for its Third Fiscal Quarter Ended September 30, 2023

FINANCIAL HIGHLIGHTS

($ in millions, except data relating to per share amounts and shares outstanding)

Three Months Ended

Three Months Ended

Nine Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

Amount

Per Share

Amount

Per Share

Amount

Per Share

Amount

Per Share

Net investment income

$10.82

$0.47

$7.19

$0.37

$30.30

$1.42

$18.88

$0.97

Core net investment income(1)

11.16

0.49

6.90

0.35

30.81

1.45

18.27

0.94

Net realized gain on investments

0.60

0.03

1.55

0.08

0.32

0.01

4.66

0.24

Net realized loss on foreign currency translation

(0.02)

–

–

–

(0.07)

–

(0.01)

–

Total realized income(2)

$11.40

$0.50

$8.74

$0.45

$30.55

$1.43

$23.53

$1.21

Distributions

(9.27)

(0.41)

(6.64)

(0.34)

(25.88)

(1.22)

(18.75)

(0.96)

Net unrealized change in depreciation on investments

(13.80)

(0.61)

(4.80)

(0.25)

(24.34)

(1.14)

(12.82)

(0.66)

Net unrealized change in depreciation on foreign currency translation

–

–

(0.01)

–

(0.02)

–

(0.05)

–

Benefit (provision) for taxes on unrealized depreciation (appreciation) on investments in taxable subsidiaries

–

–

0.03

–

(0.14)

(0.01)

(0.15)

(0.01)

Net (decrease) increase in net assets resulting from operations

($2.40)

($0.11)

$3.96

$0.20

$6.05

$0.28

$10.51

$0.54

Weighted average shares outstanding

22,824,221

19,545,935

21,289,880

19,535,708

(1)

Core net investment income, as presented, excludes the impact of capital gains incentive fees (reversal) and income taxes, the majority of which are excise taxes. The Company believes presenting core net investment income and the related per share amount is a useful supplemental disclosure for analyzing its financial performance. However, core net investment income is a non-U.S. generally accepted accounting principles (“U.S. GAAP”) measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. A reconciliation of net investment income in accordance with U.S. GAAP to core net investment income is presented in the table below the financial statements.                    

(2)

Total realized income is the sum of net investment income, net realized gains (losses) on investments, net realized gains (losses) on foreign currency, and loss on debt extinguishment; all U.S. GAAP measures.

PORTFOLIO ACTIVITY

($ in millions, except data relating to per share amounts and number of portfolio companies)

As of

As of

September 30, 2023

December 31, 2022

Investments at fair value

$886.3

$844.7

Total assets

$912.0

$898.2

Net assets

$318.1

$275.8

Shares outstanding

24,125,642

19,666,769

Net asset value per share

$13.19

$14.02

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2023

New investments

$51.9

$139.7

Repayments of investments

(34.8)

(79.1)

Net activity

$17.1

$60.6

As of

As of

September 30, 2023

December 31, 2022

Number of portfolio company investments

96

85

Number of debt investments

83

73

Weighted average yield of debt and other income producing investments (3)

Cash

10.7 %

10.3 %

Payment-in-kind (“PIK”)

0.4 %

0.4 %

Fee amortization

0.4 %

0.4 %

Total

11.5 %

11.1 %

Weighted average yield on total investments (4)

Cash

10.2 %

9.7 %

Payment-in-kind (“PIK”)

0.3 %

0.3 %

Fee amortization

0.3 %

0.4 %

Total

10.8 %

10.4 %

(3)

The dollar-weighted average annualized effective yield is computed using the effective interest rate for our debt investments and other income producing investments, including cash and PIK interest, as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective cost of the investments (as of the date presented) in calculating the weighted average effective yield of the portfolio. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors in the Company’s common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expenses or any sales load that may be paid by investors.

(4)

The dollar-weighted average yield on total investments takes the same yields as calculated in the footnote above, but weights them to determine the weighted average effective yield as a percentage of the Company’s total investments, including non-income producing loans and equity.

Activity Type

Date

Company Name

Company Description

Investment Amount

 Instrument Type

New Investment

July 7, 2023

Madison Logic, Inc.*

Provider of B2B account based marketing services

$

394,767

Equity

Add-On Investment

July 12, 2023

EH Real Estate Services, LLC*

Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers

$

501,846

Senior Secured – First Lien

New Investment

July 31, 2023

EHI Buyer, Inc.

Provider of design, engineering, installation, and maintenance services for building management systems

$

6,111,343

Senior Secured – First Lien

$

3,055,671

Delayed Draw Term Loan Commitment

$

100,000

Revolver Commitment

$

617,801

Equity

New Investment

August 2, 2023

Compost 360 Acquisition, LLC

Organic waste recycler and producer of compost, mulch, and engineered soils

$

9,595,100

Senior Secured – First Lien

$

4,096,741

Delayed Draw Term Loan Commitment

$

100,000

Revolver Commitment

$

250,761

Equity

New Investment

August 3, 2023

Morgan Electrical Group Intermediate Holdings, Inc.

Provider of commercial electrical services

$

4,439,439

Senior Secured – First Lien

$

2,864,154

Delayed Draw Term Loan Commitment

$

100,000

Revolver Commitment

$

356,800

Equity

Add-On Investment

August 4, 2023

TradePending OpCo Aggregator, LLC*

Provider of vehicle trade-in and merchandising intelligence solutions for auto dealerships

$

2,473,227

Senior Secured – First Lien

$

687,007

Delayed Draw Term Loan Commitment

$

325,379

Equity

New Investment

August 7, 2023

The Hardenbergh Group, Inc.

Provider of temporary professional staffing of Medical Services Professionals, external peer review, consulting and physician leadership solutions

$

10,501,898

Senior Secured – First Lien

$

100,000

Revolver Commitment

$

434,504

Equity

New Investment

August 8, 2023

Green Intermediateco II, Inc.

Cyber-security focused value-added reseller and associated service provider

$

11,170,252

Senior Secured – First Lien

$

500,000

Delayed Draw Term Loan Commitment

$

271,401

Equity

Add-On Investment

August 11, 2023

Data Centrum Communications, Inc.*

Provider of point-of-care patient engagement and marketing solutions for pharmaceutical companies.

$

52,919

Equity

Add-On Investment

September 22, 2023

NINJIO, LLC*

Cybersecurity awareness and training platform

$

14,470

Equity

Add-On Investment

September 25, 2023

Tower Arch Infolinks Media, LP*

Advertising placement partner for small to mid-sized publishers

$

1,093

Equity

Add-On Investment

September 28, 2023

TradePending OpCo Aggregator, LLC*

Provider of vehicle trade-in and merchandising intelligence solutions for auto dealerships

$

53,625

Equity

*Existing portfolio company

Activity Type

Date

Company Name

Company Description

Proceeds Received

 Instrument Type

Full Repayment

July 31, 2023

NuSource Financial, LLC*

Provider of technology integration and installation of Automated Teller Machines/Integrated Teller Machines, maintenance services, and security solutions

$

10,984,910

Senior Secured – First Lien

Full Repayment

September 1, 2023

Vortex Companies, LLC*

Provider of trenchless services and products to restore and repair large diameter water, sewer, and industrial pipe infrastructure.

$

10,000,000

Senior Secured – First Lien

Activity Type

Date

Company Name

Company Description

Investment Amount

 Instrument Type

Add-On Investment

October 3, 2023

EH Real Estate Services, LLC*

Offers residential property brokerage, title & settlement, and property and casualty insurance brokerage services to home buyers and sellers

$

2,281,116

Revolver Commitment(a)

Add-On Investment

October 11, 2023

Impact Home Services LLC*

Residential, garage door, electrical, and plumbing services provider

$

539,718

Senior Secured – First Lien

13,398

Equity

Add-On Investment

October 16, 2023

Equine Network, LLC*

Provider of content, information, tech-enabled services, and hosts competitions for the U.S. equine industry

$

955,516

Senior Secured – First Lien

Add-On Investment

October 19, 2023

ArborWorks Acquisition LLC*

A professional tree care firm

$

230,769

Senior Secured – First Lien

Add-On Investment

October 31, 2023

2X LLC*

Provider of outsourced digital B2B marketing-as-a-service

$

1,448,388

Senior Secured – First Lien

*Existing portfolio company

(a) The Company has full discretion to fund this revolver commitment

Activity Type

Date

Company Name

Company Description

Proceeds Received

Realized Loss

 Instrument Type

Full Realization

October 24, 2023

Interstate Waste Services, Inc.*

Provider of non-hazardous waste management, collection, and recycling services

$

389,496

$

(556,629)

Equity

*Existing portfolio company

Ex-Dividend

Record

Payment

Amount per

Declared

Date

Date

Date

Share

10/5/2023

10/30/2023

10/31/2023

11/15/2023

$

0.1333

10/5/2023

11/29/2023

11/30/2023

12/15/2023

$

0.1333

10/5/2023

12/15/2023

12/18/2023

12/29/2023

$

0.1333

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (unaudited)

September 30, 2023

(unaudited)

December 31, 2022

ASSETS

Non-controlled, non-affiliated investments, at fair value (amortized cost of

$941,679,195 and $875,823,177, respectively)

$

886,338,148

$

844,733,638

Cash and cash equivalents

19,210,721

48,043,329

Receivable for sales and repayments of investments

594,726

718,794

Interest receivable

5,600,021

3,984,409

Other receivables

60,495

34,245

Deferred offering costs

—

1,100

Prepaid expenses

149,755

667,267

  Total Assets

$

911,953,866

$

898,182,782

LIABILITIES

Notes payable

$

98,883,814

$

98,549,692

Credit Facility payable

161,192,612

197,685,281

SBA-guaranteed debentures

319,955,852

307,895,195

Dividends payable

3,215,948

—

Management fees payable

3,933,121

7,150,407

Income incentive fees payable

3,058,550

2,464,408

Capital gains incentive fees payable

—

569,528

Interest payable

1,316,334

4,640,841

Related party payable

—

1,060,321

Unearned revenue

343,210

320,675

Administrative services payable

402,627

356,919

Income tax payable

1,116,369

1,175,373

Deferred tax liability

206,361

61,936

Other accrued expenses and liabilities

203,288

475,593

  Total Liabilities

$

593,828,086

$

622,406,169

Commitments and contingencies (Note 7)

Net Assets

$

318,125,780

$

275,776,613

NET ASSETS

Common stock, par value $0.001 per share (100,000,000 shares authorized; 24,125,642

and 19,666,769 issued and outstanding, respectively)

$

24,125

$

19,667

Paid-in capital

337,289,265

275,114,720

Total distributable (loss) earnings

(19,187,610)

642,226

Net Assets

$

318,125,780

$

275,776,613

  Total Liabilities and Net Assets

$

911,953,866

$

898,182,782

  Net Asset Value Per Share

$

13.19

$

14.02

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

For the three

For the three

For the nine

For the nine

months ended

months ended

months ended

months ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022

INVESTMENT INCOME

Interest income

$

26,223,986

$

19,617,468

$

75,295,485

$

50,392,437

Other income

941,040

524,799

2,529,905

1,353,279

  Total Investment Income

$

27,165,026

$

20,142,267

$

77,825,390

$

51,745,716

OPERATING EXPENSES

Management fees

$

3,933,121

$

3,827,669

$

11,533,811

$

11,025,435

Valuation fees

139,267

145,865

332,762

315,482

Administrative services expenses

470,846

447,381

1,399,188

1,388,602

Income incentive fees

2,705,200

1,635,641

7,433,039

1,635,641

Capital gains incentive fee reversal

—

(646,757)

(569,528)

(1,672,549)

Professional fees

276,592

315,809

877,276

845,275

Directors’ fees

93,250

83,500

303,750

254,500

Insurance expense

123,725

127,274

366,156

377,671

Interest expense and other fees

8,049,063

6,448,280

24,037,462

16,864,255

Income tax expense

335,508

361,115

1,082,057

1,066,768

Other general and administrative expenses

217,655

207,170

727,754

766,562

  Total Operating Expenses

$

16,344,227

$

12,952,947

$

47,523,727

$

32,867,642

  Net Investment Income

$

10,820,799

$

7,189,320

$

30,301,663

$

18,878,074

  Net realized gain on non-controlled, non-affiliated investments

$

600,403

$

1,553,450

$

324,782

$

4,658,817

  Net realized loss on foreign currency translation

(22,166)

(676)

(72,782)

(8,026)

  Net change in unrealized depreciation on non-controlled, non-affiliated investments

(13,793,320)

(4,798,980)

(24,338,195)

(12,810,173)

  Net change in unrealized depreciation on foreign currency translation

(2,794)

(18,120)

(21,243)

(53,874)

  (Provision) benefit for taxes on net unrealized (appreciation) depreciation on investments

(312)

30,535

(144,425)

(151,278)

  Net (Decrease) Increase in Net Assets Resulting from Operations

(2,397,390)

3,955,529

$

6,049,800

$

10,513,540

  Net Investment Income Per Share—basic and diluted

$

0.47

$

0.37

$

1.42

$

0.97

  Net (Decrease) Increase in Net Assets Resulting from Operations Per Share – basic and diluted

$

(0.11)

$

0.20

$

0.28

$

0.54

  Weighted Average Shares of Common Stock Outstanding—basic and diluted

22,824,221

19,545,935

21,289,880

19,535,708

  Distributions Per Share—basic and diluted

$

0.41

$

0.34

$

1.22

$

0.96

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (unaudited)

Common Stock

Total

Number 

Par 

Paid-in 

distributable

of shares

value

capital

earnings (loss)

Net Assets

Balances at December 31, 2021

19,517,595

$

19,518

$

274,559,121

$

10,532,594

$

285,111,233

Net investment income

—

—

—

5,514,183

5,514,183

Net realized gain on non-controlled, non-affiliated investments

—

—

—

3,458,090

3,458,090

Net realized loss on foreign currency translation

—

—

—

(7,350)

(7,350)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(3,721,602)

(3,721,602)

Provision for taxes on unrealized appreciation on investments

—

—

—

(21,157)

(21,157)

Distributions from net investment income

—

—

—

(5,464,666)

(5,464,666)

Issuance of common stock, net of offering costs(1)

14,924

15

167,655

—

167,670

Balances at March 31, 2022

19,532,519

$

19,533

$

274,726,776

$

10,290,092

$

285,036,401

Net investment income

—

—

—

6,174,571

6,174,571

Net realized loss on non-controlled, non-affiliated investments

—

—

—

(352,723)

(352,723)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(4,289,591)

(4,289,591)

Net change in unrealized depreciation on foreign currency translations

—

—

—

(35,754)

(35,754)

Provision for taxes on unrealized appreciation on investments

—

—

—

(160,656)

(160,656)

Distributions from net investment income

—

—

—

(6,643,663)

(6,643,663)

Issuance of common stock, net of offering costs(1)

13,416

13

137,520

—

137,533

Balances at June 30, 2022

19,545,935

$

19,546

$

274,864,296

$

4,982,276

$

279,866,118

Net investment income

—

—

—

7,189,320

7,189,320

Net realized gain on non-controlled, non-affiliated investments

—

—

—

1,553,450

1,553,450

Net realized loss on foreign currency translation

—

—

—

(676)

(676)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(4,798,980)

(4,798,980)

Net change in unrealized depreciation on foreign currency translations

—

—

—

(18,120)

(18,120)

Benefit for taxes on unrealized depreciation on investments

—

—

—

30,535

30,535

Distributions from net investment income

—

—

—

(6,643,663)

(6,643,663)

Balances at September 30, 2022

19,545,935

$

19,546

$

274,864,296

$

2,294,142

$

277,177,984

Balances at December 31, 2022

19,666,769

$

19,667

$

275,114,720

$

642,226

$

275,776,613

Net investment income

—

—

—

9,067,620

9,067,620

Net realized gain on non-controlled, non-affiliated investments

—

—

—

34,967

34,967

Net realized loss on foreign currency translation

—

—

—

(39,912)

(39,912)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(4,249,642)

(4,249,642)

Net change in unrealized appreciation on foreign currency translations

—

—

—

1,874

1,874

Provision for taxes on unrealized appreciation on investments

—

—

—

(78,760)

(78,760)

Distributions from net investment income

—

—

—

(7,951,284)

(7,951,284)

Issuance of common stock, net of offering costs(1)

581,614

581

8,289,988

—

8,290,569

Balances at March 31, 2023

20,248,383

$

20,248

$

283,404,708

$

(2,572,911)

$

280,852,045

Net investment income

—

—

—

10,413,244

10,413,244

Net realized loss on non-controlled, non-affiliated investments

—

—

—

(310,588)

(310,588)

Net realized loss on foreign currency translation

—

—

—

(10,704)

(10,704)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(6,295,233)

(6,295,233)

Net change in unrealized depreciation on foreign currency translations

—

—

—

(20,323)

(20,323)

Provision for taxes on unrealized appreciation on investments

—

—

—

(65,353)

(65,353)

Distributions from net investment income

—

—

—

(8,659,144)

(8,659,144)

Issuance of common stock, net of offering costs(1)

2,309,521

2,310

32,418,774

—

32,421,084

Balances at June 30, 2023

22,557,904

$

22,558

$

315,823,482

$

(7,521,012)

$

308,325,028

Net investment income

—

—

—

10,820,799

10,820,799

Net realized gain on non-controlled, non-affiliated investments

—

—

—

600,403

600,403

Net realized loss on foreign currency translation

—

—

—

(22,166)

(22,166)

Net change in unrealized depreciation on non-controlled, non-affiliated investments

—

—

—

(13,793,320)

(13,793,320)

Net change in unrealized depreciation on foreign currency translations

—

—

—

(2,794)

(2,794)

Provision for taxes on unrealized appreciation on investments

—

—

—

(312)

(312)

Distributions from net investment income

—

—

—

(9,269,208)

(9,269,208)

Issuance of common stock, net of offering costs(1)

1,567,738

1,567

21,465,783

—

21,467,350

Balances at September 30, 2023

24,125,642

$

24,125

$

337,289,265

$

(19,187,610)

$

318,125,780

(1) See Note 4 to the Consolidated Financial Statements on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2023 for more information on offering costs.

STELLUS CAPITAL INVESTMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the nine

For the nine

months ended

months ended

September 30, 2023

September 30, 2022

Cash flows from operating activities

Net increase in net assets resulting from operations

$

6,049,800

$

10,513,540

Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:

 Purchases of investments

(139,650,422)

(180,956,810)

 Proceeds from sales and repayments of investments

79,053,967

74,385,466

 Net change in unrealized depreciation on investments

24,338,195

12,810,173

 Net change in unrealized depreciation on foreign currency translations

21,087

28,405

 Increase in investments due to PIK

(2,732,530)

(1,010,061)

 Amortization of premium and accretion of discount, net

(2,078,183)

(1,839,720)

 Deferred tax provision

144,425

151,278

 Amortization of loan structure fees

436,257

420,356

 Amortization of deferred financing costs

334,122

334,122

 Amortization of loan fees on SBA-guaranteed debentures

938,247

905,294

 Net realized gain on investments

(324,782)

(4,658,817)

Changes in other assets and liabilities

 Increase in interest receivable

(1,615,612)

(907,787)

 Increase in other receivables

(26,250)

(5,743)

 Increase in related party receivables

—

(19,034)

 Decrease in prepaid expenses

517,512

293,135

 (Decrease) increase in management fees payable

(3,217,286)

3,578,496

 Increase in income incentive fees payable

594,142

160,521

 Decrease in capital gains incentive fees payable

(569,528)

(1,672,549)

 Increase (decrease) in administrative services payable

45,708

(9,481)

 Decrease in interest payable

(3,324,507)

(2,808,314)

 Decrease in related party payable

(1,060,321)

—

 Increase (decrease) in unearned revenue

22,535

(185,171)

 Decrease in income tax payable

(59,004)

(2,183,176)

 (Decrease) increase in other accrued expenses and liabilities

(272,305)

59,623

Net Cash Used in Operating Activities

$

(42,434,733)

$

(92,616,254)

Cash flows from Financing Activities

Proceeds from the issuance of common stock

$

63,348,436

$

420,004

Sales load for common stock issued

(943,248)

(5,957)

Offering costs paid for common stock issued

(225,085)

(335,953)

Stockholder distributions paid

(22,663,688)

(17,708,494)

Proceeds from SBA-guaranteed debentures

11,400,000

56,000,000

Financing costs paid on SBA-guaranteed debentures

(277,590)

(1,363,600)

Financing costs paid on Credit facility

(35,000)

(193,659)

Borrowings under Credit Facility

79,700,000

121,608,702

Repayments of Credit Facility

(116,701,700)

(97,559,902)

Net Cash Provided by Financing Activities

$

13,602,125

$

60,861,141

Net Decrease in Cash and Cash Equivalents

$

(28,832,608)

$

(31,755,113)

Cash and Cash Equivalents Balance at Beginning of Period

$

48,043,329

$

44,174,856

Cash and Cash Equivalents Balance at End of Period

$

19,210,721

$

12,419,743

Supplemental and Non-Cash Activities

Cash paid for interest expense

$

25,653,343

$

18,012,797

Income and excise tax paid

1,141,061

3,249,944

Increase in dividends payable

3,215,948

1,043,498

(Decrease) increase in deferred offering costs

(1,100)

227,109

Reconciliation of Core Net Investment Income (1)

(Unaudited)

Three Months Ended

Three Months Ended

September 30, 2023

September 30, 2022

Net investment income

$10,820,799

$7,189,320

Capital gains incentive reversal

–

(646,757)

Income tax expense

335,508

361,115

Core net investment income

$11,156,307

$6,903,678

Per share amounts:

Net investment income per share

$0.47

$0.37

Core net investment income per share

$0.49

$0.35

Reconciliation of Realized Net Investment Income (2)

(Unaudited)

 

Three Months Ended

Three Months Ended

September 30, 2023

September 30, 2022

Net investment income

$10,820,799

$7,189,320

Net realized gain on investments

600,403

1,553,450

Net realized loss on foreign currency translation

(22,166)

(676)

Total Realized Net Investment Income

$11,399,036

$8,742,094

Per share amounts:

Net investment income per share

$0.47

$0.37

Realized net investment income per share

$0.50

$0.45