SLR Investment Corp. (SLRC) Bundle
Understanding SLR Investment Corp. (SLRC) Revenue Streams
Understanding SLR Investment Corp.’s Revenue Streams
SLR Investment Corp. generates revenue primarily through gross investment income derived from various financial products and services. The following analysis outlines the key revenue sources, historical growth rates, and contributions from different business segments.
Breakdown of Primary Revenue Sources
- Gross Investment Income: For the nine months ended September 30, 2024, gross investment income totaled $176.8 million, compared to $169.5 million for the same period in 2023.
- Interest Income: Interest income from companies less than 5% owned was $122.1 million for the nine months ended September 30, 2024. For companies 5% to 25% owned, it was $2.6 million, and for companies more than 25% owned, it amounted to $10.0 million.
- Dividends: Dividends from companies more than 25% owned totaled $37.2 million for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate from gross investment income reflects a positive trend:
- 2024 Growth Rate: 4.4% increase in gross investment income from $169.5 million in 2023 to $176.8 million in 2024.
Contribution of Different Business Segments to Overall Revenue
| Business Segment | Q3 2024 Revenue ($ Million) | Q3 2023 Revenue ($ Million) | Year-Over-Year Growth (%) |
|---|---|---|---|
| SLR Credit Solutions | $42.3 | $42.4 | -0.2% |
| SLR Equipment Finance | $15.7 | $15.2 | 3.3% |
| SLR Business Credit | $31.2 | $27.9 | 11.8% |
Analysis of Significant Changes in Revenue Streams
In 2024, notable changes included:
- The SLR Credit Solutions segment experienced a slight decline in revenue, attributed to market fluctuations.
- The SLR Business Credit segment saw a significant increase of 11.8%, driven by an increase in funded commitments and a diversified portfolio.
- SLR Equipment Finance's revenue improved due to an increase in the number of funded leases and loans, contributing positively to overall investment income.
Overall, SLR Investment Corp. demonstrates a resilient revenue structure with growth across key segments, despite challenges in specific areas.
A Deep Dive into SLR Investment Corp. (SLRC) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross income was approximately $13.7 million, compared to $13.9 million for the same period in 2023. For the nine months ended September 30, 2024, the gross income totaled $42.3 million, slightly decreasing from $42.4 million in 2023.
Operating Profit Margin: The net investment income for the three months ended September 30, 2024, stood at $24.3 million with a margin of 40.6% calculated against gross investment income. This is an increase from $23.4 million or 39.2% for the same period in 2023. For the nine months ended September 30, 2024, net investment income was $72.5 million with a margin of 41.0%, compared to $68.2 million or 40.2% in 2023.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $22.0 million, leading to a net profit margin of 36.8%. In contrast, the net income for the same period in 2023 was $26.9 million, reflecting a margin of 45.0%. For the nine months ended September 30, 2024, net income was $73.1 million, representing a margin of 41.3%, compared to $52.8 million or 31.1% in 2023.
Trends in Profitability Over Time
The following table illustrates the trend in profitability metrics over the last two years:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Income | $13.7 million | $13.9 million | $42.3 million | $42.4 million |
| Net Investment Income | $24.3 million | $23.4 million | $72.5 million | $68.2 million |
| Net Income | $22.0 million | $26.9 million | $73.1 million | $52.8 million |
Comparison of Profitability Ratios with Industry Averages
The average net profit margin in the investment management industry is around 30% - 35%. The net profit margin of 36.8% for Q3 2024 indicates strong performance relative to industry averages. Additionally, the operating profit margin of 40.6% exceeds the industry average of approximately 25% - 30%.
Analysis of Operational Efficiency
Operational efficiency can be assessed through the following key metrics:
- Management Fees: Total management fees for the three months ended September 30, 2024, were $7.9 million, compared to $8.1 million in 2023.
- Performance-Based Incentive Fees: These fees were $6.1 million in Q3 2024 versus $5.8 million in Q3 2023.
- Total Expenses: Total expenses for Q3 2024 were $35.5 million, a slight decrease from $36.5 million in Q3 2023.
The operational efficiency ratio, calculated as total expenses to gross income, was 57.2% for Q3 2024, down from 58.5% in Q3 2023, indicating improved cost management.
Debt vs. Equity: How SLR Investment Corp. (SLRC) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total liabilities of approximately $1.45 billion, with debt constituting $1.10 billion of this total. The debt includes both secured and unsecured borrowings, with significant amounts arising from credit facilities and term loans.
The long-term debt is primarily composed of a senior secured credit facility amounting to $620 million in revolving credit and $140 million in term loans. As of the same date, the company had $476.8 million in outstanding borrowings under this credit facility. Short-term debt is also reflected in the company’s liabilities, with borrowings from various credit facilities contributing to its overall debt load.
The company's debt-to-equity ratio stands at approximately 1.11, indicating a balanced approach towards leveraging debt relative to equity, which is in line with industry standards for similar investment companies.
Recently, the company has engaged in refinancing activities, including an amendment to its credit agreement that allows for increased borrowing capacity up to $800 million, which could be essential for future growth and investment opportunities. The average annualized interest cost for all borrowings for the nine months ended September 30, 2024, was reported at 6.01%.
| Debt Component | Amount (in millions) |
|---|---|
| Long-term Debt | $1,101.95 |
| Revolving Credit Facility | $620.00 |
| Term Loans | $140.00 |
| Short-term Debt | $208.30 |
| Total Debt | $1,450.23 |
The company has maintained a diversified capital structure, balancing its financing between debt and equity. As of September 30, 2024, total net assets were approximately $992.7 million, with equity capital contributing significantly to the funding structure. This strategy allows the company to optimize its capital costs while pursuing growth opportunities in various sectors.
In summary, the company continues to navigate the complexities of debt and equity financing effectively, ensuring that it remains competitive and capable of funding its strategic initiatives while maintaining a healthy balance sheet.
Assessing SLR Investment Corp. (SLRC) Liquidity
Assessing Liquidity
As of September 30, 2024, the liquidity position of the company can be evaluated using the current and quick ratios. The current ratio, which measures the ability to cover short-term liabilities with short-term assets, stands at approximately 1.63. The quick ratio, which excludes inventory from current assets, is around 1.50.
Current and Quick Ratios
| Ratio | Value |
|---|---|
| Current Ratio | 1.63 |
| Quick Ratio | 1.50 |
Working Capital Trends
Working capital has shown a favorable trend, increasing to approximately $492.3 million as of September 30, 2024, compared to $475.9 million at the end of the previous fiscal year. This is indicative of a solid capacity to meet operational needs and unexpected expenses.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was approximately $147.2 million, compared to a cash outflow of ($115.1 million) for the same period in 2023. The cash flow from investing activities was ($322.1 million) in 2024, while financing activities generated $333.6 million.
Cash Flow Trends
| Cash Flow Category | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Operating Activities | $147.2 million | ($115.1 million) |
| Investing Activities | ($322.1 million) | ($556.3 million) |
| Financing Activities | $333.6 million | $667.7 million |
Potential Liquidity Concerns or Strengths
While the liquidity ratios indicate a strong position, the significant cash outflow in investing activities raises concerns about capital allocation efficiency. The company has approximately $393.2 million in unused borrowing capacity under its credit facilities as of September 30, 2024, which serves as a buffer against liquidity pressures.
Overall, the liquidity analysis reflects a robust operational framework, although monitoring capital expenditures and cash management practices will be crucial for maintaining financial health.
Is SLR Investment Corp. (SLRC) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the company reported a price-to-earnings (P/E) ratio of 11.25, which is calculated based on a market price of $15.05 and earnings per share of $1.33. The price-to-book (P/B) ratio stands at 0.83, derived from a book value per share of $18.20.
The enterprise value-to-EBITDA (EV/EBITDA) ratio is approximately 8.2, calculated using an enterprise value of $1.25 billion and EBITDA of $152 million for the trailing twelve months.
| Metric | Value |
|---|---|
| P/E Ratio | 11.25 |
| P/B Ratio | 0.83 |
| EV/EBITDA | 8.2 |
Over the past 12 months, the stock price has experienced fluctuations, starting at $15.39 in October 2023, peaking at $16.50 in January 2024, and falling to $15.05 by September 2024. This represents a 2.2% decline over the year.
The dividend yield as of September 30, 2024, is 2.73%, based on an annual dividend of $0.41 per share, reflecting a payout ratio of 30.8% of net income.
| Dividend Metric | Value |
|---|---|
| Annual Dividend per Share | $0.41 |
| Dividend Yield | 2.73% |
| Payout Ratio | 30.8% |
Analyst consensus as of October 2024 suggests a "Hold" rating, with 60% of analysts recommending to hold, 30% rating it as a buy, and 10% suggesting a sell. This indicates a cautious outlook on the stock's valuation in the current market environment.
In summary, the current valuation metrics indicate that the stock may be undervalued compared to its earnings potential, while the yield provides an attractive income opportunity for investors.
Key Risks Facing SLR Investment Corp. (SLRC)
Key Risks Facing SLR Investment Corp.
SLR Investment Corp. faces various internal and external risks that can impact its financial health. Below are some key risk factors:
Industry Competition
The competitive landscape in the investment sector is intense. As of September 30, 2024, SLR Credit had total funded loans of approximately $401.4 million on total assets of $429.7 million. The presence of numerous competitors can lead to pricing pressures and reduced margins.
Regulatory Changes
The company operates in a heavily regulated environment. Changes in regulations could impact its ability to operate or require adjustments to business practices. As of September 30, 2024, total commitments to the revolving credit facility were $300 million.
Market Conditions
Market volatility can significantly affect the company's investment portfolio. At September 30, 2024, the company had a credit facility with approximately $208.3 million of borrowings outstanding. Fluctuations in market conditions may also impact the net investment income, which was reported as $59.8 million for the three months ended September 30, 2024.
Operational Risks
Operational inefficiencies or failures could lead to financial losses. For the nine months ended September 30, 2024, SLR Credit reported a net income of $21.3 million on gross income of $42.3 million. Maintaining operational integrity is crucial for performance.
Financial Risks
Financial leverage can amplify risks. The average annualized interest cost for borrowings was 6.01% for the nine months ended September 30, 2024. High levels of debt can lead to increased interest expenses and financial strain in adverse conditions.
Strategic Risks
Strategic missteps can jeopardize long-term growth. The net asset value per share as of September 30, 2024, was $18.20. Decisions that do not align with market realities or investor expectations can lead to value erosion.
Mitigation Strategies
The company employs various strategies to mitigate these risks. This includes maintaining a diversified investment portfolio and adhering to strict compliance measures. As of September 30, 2024, the company had a total net asset value of $992.7 million, reflecting its efforts to manage financial health effectively.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition in investment sector | Potential margin compression |
| Regulatory Changes | Heavily regulated environment | Operational adjustments needed |
| Market Conditions | Volatility affecting portfolio | Net investment income fluctuations |
| Operational Risks | Operational inefficiencies | Potential financial losses |
| Financial Risks | High leverage | Increased interest expenses |
| Strategic Risks | Misalignment with market | Value erosion |
Future Growth Prospects for SLR Investment Corp. (SLRC)
Growth Opportunities
Future growth prospects for SLR Investment Corp. (SLRC) are driven by several key factors.
Key Growth Drivers
- Product Innovations: As of September 30, 2024, the company had total funded loans of approximately $401.4 million on total assets of $429.7 million.
- Market Expansions: The company's equipment finance division reported a total net investment in leases and loans of approximately $274.3 million as of September 30, 2024.
- Acquisitions: The company acquired 90.625% of Kingsbridge Holdings, LLC for approximately $216.6 million.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, gross investment income totaled $59.8 million, compared to $59.6 million in the same period of 2023. For the nine months ended September 30, 2024, gross investment income was $176.8 million, up from $169.5 million in 2023.
Strategic Initiatives and Partnerships
On January 31, 2024, the company entered into a $225 million senior secured credit facility, which was expanded to $350 million on March 1, 2024.
Competitive Advantages
As of September 30, 2024, the company had $393.2 million of collective unused borrowing capacity under its credit facilities.
| Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Funded Loans | $401.4 million | $406.6 million |
| Total Assets | $429.7 million | $438.4 million |
| Net Income (3 months) | $8.8 million | $4.3 million |
| Net Income (9 months) | $21.3 million | $1.4 million |
| Net Investment Income (3 months) | $24.3 million | $23.4 million |
| Net Investment Income (9 months) | $72.5 million | $68.2 million |
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Updated on 16 Nov 2024
Resources:
- SLR Investment Corp. (SLRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SLR Investment Corp. (SLRC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View SLR Investment Corp. (SLRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.