Overview of the Company’s Performance

The company invests in corporate debt securities to generate returns. In the first quarter of 2024, the total value of the company’s investments was $250.9 million, down from $266.9 million at the end of 2023. This decrease was mainly due to some investments being repaid and sold during the quarter.

The company aims to pay regular dividends to shareholders from the income generated by its investments. In the first quarter of 2024, it generated $10.7 million of investment income, which was down from $12.9 million in the same period last year. This led to net investment income of $6.5 million for the quarter.

Investment Strategy

The company focuses on investing in corporate debt issued by U.S. companies, particularly those debt securities that are rated below investment grade. It also invests in some equity securities and collateralized loan obligations (CLOs).

As of March 31, 2024, 64% of its portfolio was invested in corporate debt, 34% in CLOs, and 2% in other equity investments. The largest industry exposures were to software companies (25%), business services companies (11%), and healthcare companies (11%).

On average, the debt investments have stated interest rates of 13.94% and maturity dates between 0 and 82 months from March 31, 2024. This means the company earns an attractive yield on debt investments that are mostly medium term in nature.

Financial Performance

In the first quarter of 2024, investment income fell by 17% compared to the first quarter of 2023. This led to lower net investment income of $6.5 million for the quarter.

The company reported a net loss of $1.8 million as the drop in investment income and $8.1 million of realized losses on investments more than offset the positive contribution from net investment income.

By comparison, in the first quarter of 2023 the company had a net profit of $6.3 million.

Investment Portfolio Quality

The company closely monitors the quality of its investment portfolio. As of March 31, 2024, 54% of the fair value of debt investments were graded 2, indicating they are meeting expectations and full repayment of interest and principal is expected.

However, 23% of the fair value of debt investments were graded 3, indicating they require closer monitoring, while 23% were graded 5, indicating full repayment may not be expected.

Financial Strength and Liquidity

The company had $20.9 million of cash on hand as of March 31, 2024 and total debt outstanding of $125.3 million. This debt is comprised of publicly traded unsecured notes maturing in 2026 and 2028. Based on the total assets held, the company has sufficient financial resources to meet its debt obligations.

In the first quarter of 2024, the company generated $20.3 million of net cash from operating activities, primarily from investment repayments. This demonstrates it is producing positive cash flow from the investment portfolio.

The company aims to pay steady monthly dividends to shareholders from its net investment income. During the first quarter of 2024, monthly dividends of $0.035 per share were declared.