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SI

SLR Investment Corp. (SLRC)·Q1 2025 Earnings Summary

Executive Summary

  • NII was $22.1M ($0.41 per share) and covered the $0.41 quarterly distribution; NAV was $18.16, down $0.04 QoQ as credit quality remained strong with only one non‑accrual and 96.4% first‑lien exposure .
  • Investment income was $53.2M, down QoQ and YoY, reflecting a smaller income‑producing portfolio and lower index rates; EPS (GAAP) was $0.37, with net realized/unrealized losses of $(2.2)M .
  • Management reiterated a pivot toward specialty finance (ABL, equipment, life sciences) with a “significant and growing pipeline,” available capital of >$800M, and net debt-to-equity of 1.04x (target range 0.9x–1.25x) .
  • Results were largely in line with Street: EPS matched consensus and revenue was a slight miss; no formal revenue/EPS guidance was provided, dividend maintained at $0.41 for Q2 2025 .
  • Catalysts: continued ABL origination momentum amid regional bank retrenchment, resilient yields (12.2% comprehensive portfolio yield), and low tariff exposure (<1% direct) per management monitoring .

What Went Well and What Went Wrong

What Went Well

  • Credit quality and portfolio defensiveness: 96.4% first‑lien senior secured loans; non‑accruals 0.4% of fair value and 0.6% of cost; internal ratings skewed to lower‑risk buckets .
  • Specialty finance growth and pipeline: “significant and growing pipeline of asset‑based lending investment opportunities” and 88% of Q1 originations in specialty finance; available capital >$800M to deploy .
  • Dividend coverage and stable NAV: NII $0.41 matched the $0.41 distribution; NAV of $18.16 down only $0.04 QoQ, reflecting disciplined underwriting and diversified strategies .

What Went Wrong

  • Top‑line pressure: investment income fell to $53.2M (vs. $55.6M in Q4 and $59.8M in Q3), driven by smaller portfolio size and lower index rates .
  • Market headwinds in sponsor finance: competitive conditions compressed illiquidity premiums and cash‑flow yields (cash‑flow weighted average yield 10.4%, down from 10.6% at year‑end) .
  • Below-the-line drag: net realized/unrealized losses of $(2.2)M reduced GAAP EPS to $0.37 (vs. $0.41 in Q4), partly offsetting operating income .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Investment Income ($USD Millions)$59.771 $55.583 $53.178
Net Investment Income ($USD Millions)$24.348 $23.792 $22.105
NII per Share ($USD)$0.45 $0.44 $0.41
Earnings per Share ($USD)$0.40 $0.41 $0.37
NAV per Share ($USD)$18.20 $18.20 $18.16
Net Debt-to-Equity (x)1.10x 1.03x 1.04x
Weighted Avg Portfolio Yield (%)11.8% 12.1% 12.2%

Segment investment income contribution:

Segment Investment Income ($USD Millions)Q3 2024Q4 2024Q1 2025
Sponsor Finance$21.4 $18.7 $17.0
Asset‑Based Lending$15.4 $18.1 $19.5
Equipment Finance$7.8 $8.8 $9.7
Life Science Finance$15.2 $10.0 $7.0

Key portfolio KPIs:

KPIQ3 2024Q4 2024Q1 2025
Originations ($USD Millions)$396.6 $338.4 $361.3
Repayments ($USD Millions)$328.4 $442.7 $390.6
Net Portfolio Activity ($USD Millions)$68.2 $(104.3) $(29.3)
Comprehensive Portfolio FV ($USD Billions)$3.1925 $3.0826 $3.0529
First Lien Senior Secured Loans (%)96.8% 96.4% 96.4%
Unique Issuers (approx)~850 ~890 ~940

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareQ2 2025$0.41 (Q1 2025 declared Feb 25, 2025) $0.41 (declared May 7, 2025) Maintained
Net Debt-to-Equity Target RangeOngoing0.9x–1.25x 0.9x–1.25x; expect migration toward middle of range Maintained (trajectory higher)
Unsecured Notes/MaturitiesOngoing$394M outstanding at 12/31/24; added $50M due 2028 post‑year‑end; next maturity Dec 2026 $359M outstanding; next maturity Dec 2026 Maintained
Revenue/EPS GuidanceN/ANone providedNone providedN/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2025)Trend
Pivot to Specialty Finance96% of Q3 originations in specialty finance; specialty mix ~78% 88% of Q1 originations in specialty; specialty finance now ~80% of portfolio Increasing specialty mix
ABL opportunity/Regional banks retreatWebster portfolio acquisition; expanding ABL pipeline “Significant and growing pipeline” in ABL; 75–80% of pipeline ABL Strengthening
Sponsor finance competitivenessSpreads tight; selective; cash‑flow yield down to 10.6% YE Competitive; illiquidity premiums compressed; cash‑flow yield 10.4% Still challenged
Equipment finance dynamicsYield rose to 10.7% in Q4; lease extensions supportive Yield 11.5%; lease extensions and some one‑time gains at Kingsbridge Improving yields (partly one‑time)
Life sciences environmentChallenged sector; later‑stage focus; Q3 income high Later‑stage focus; yield 12.5%; FDA/NIH cuts may slow innovation Mixed; cautious
Tariffs/MacroPreparedness; minimal direct impact expected Low direct exposure (<1%); ABL borrowers monitored with controls Risk monitored; limited direct impact
SSLP JVQ4 income $1.9M at 15.6% yield Q1 income $1.9M at 15.7% yield; capacity >$70M Stable contribution

Management Commentary

  • “We remain pleased with the composition, quality, and performance of our portfolio… well positioned for the current environment” .
  • “Approximately 88% of our first quarter originations were in specialty finance… Cash flow loans now represent less than 20% of our comprehensive portfolio, the lowest level in 3 years” .
  • “At March 31… we had over $800 million of available capital to deploy” .
  • CFO: “Net investment income… totaled $22.1 million or $0.41 per average share… This was in line with our $0.41 per share distribution” .
  • Co‑CEO: “We believe the potential direct impact of tariffs is minimal… focus on policy around healthcare” .

Q&A Highlights

  • Pipeline mix: ABL comprises ~75–80% of pipeline; ABL returns seen as 11–13% all‑in, relatively stable across cycles .
  • Sponsor finance selectivity: Prefer tuck‑in acquisitions with short duration and re‑underwrite optionality; remain highly selective given tight spreads .
  • Equipment finance/Kingsbridge: Yield uplift aided by lease extensions and some one‑time gains; run‑rate uncertain but constructive .
  • Tariff exposure: Management estimates <1% direct exposure; ABL borrowers monitored with advance rate controls and collateral dominion .
  • SSLP usage: Continues to accept lower‑spread cash‑flow loans; JV operating near optimized capacity .

Estimates Context

MetricQ3 2024 EstimateQ3 2024 ActualQ4 2024 EstimateQ4 2024 ActualQ1 2025 EstimateQ1 2025 Actual
Primary EPS ($USD)0.42675*0.45 0.43128*0.44 0.41053*0.41
Revenue ($USD Millions)57.995*59.771 57.077*55.583 53.429*53.178
  • Q1 2025: EPS inline; revenue slight miss. Q4 2024: EPS and revenue both slight misses; Q3 2024: EPS and revenue beats .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Portfolio quality and defensiveness remain differentiators (96.4% first‑lien, minimal non‑accruals); helps sustain NAV and dividend coverage through macro volatility .
  • ABL pipeline is a core near‑term growth driver as regional banks retrench; expect continued specialty finance skew with resilient absolute returns .
  • Equipment finance yields are improving, aided by lease extensions; watch for sustainability as one‑time gains normalize .
  • Sponsor finance remains selective amid tight spreads; deployment likely concentrated in tuck‑ins with shorter duration and stronger structures .
  • Low direct tariff exposure and strong real‑time controls in ABL mitigate macro trade risks; focus shifts to healthcare policy impacts .
  • Liquidity and capacity (> $800M available capital; 1.04x net leverage within target) provide flexibility to capitalize on dislocation without compromising risk standards .
  • Near‑term trading: stable dividend yield and defensiveness support downside protection; medium‑term thesis hinges on specialty finance origination momentum and maintaining credit discipline through policy/interest‑rate shifts .