WhiteHorse Finance, Inc. (WHF) Bundle
Understanding WhiteHorse Finance, Inc. (WHF) Revenue Streams
Understanding WhiteHorse Finance, Inc.’s Revenue Streams
WhiteHorse Finance, Inc. generates revenue primarily through interest income from its investment portfolio, which consists mainly of senior secured loans. The following breakdown illustrates the company's revenue sources:
- Interest Income: This is the main revenue source, accounting for a significant portion of total revenues.
- Fee Income: Income generated from various fees associated with investments.
- Dividend Income: Earnings from equity investments in portfolio companies.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for WhiteHorse Finance, Inc. can be summarized as follows:
| Year | Total Revenue ($ in thousands) | Year-over-Year Growth Rate (%) |
|---|---|---|
| 2022 | 99,985 | N/A |
| 2023 | 95,540 | -4.5% |
| 2024 (Projected) | 93,000 | -2.6% |
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contribution of different revenue segments is as follows:
| Revenue Source | Contribution to Total Revenue (%) |
|---|---|
| Interest Income | 85% |
| Fee Income | 10% |
| Dividend Income | 5% |
Analysis of Significant Changes in Revenue Streams
In 2024, the company experienced notable changes in its revenue streams:
- Interest Income: Decreased from $85 million in 2023 to $79 million in 2024.
- Fee Income: Slight decrease from $10 million in 2023 to $9 million in 2024.
- Dividend Income: Remained stable at approximately $4 million.
The decline in interest income is attributed to a higher rate of non-accrual loans, which amounted to $57 million in cost basis as of September 30, 2024, compared to $38 million at the end of 2023.
Conclusion of Revenue Trends
Overall, while WhiteHorse Finance, Inc. has faced challenges in revenue growth, it maintains a diversified revenue stream primarily driven by interest income from its investment portfolio, which remains critical for its financial health moving forward.
A Deep Dive into WhiteHorse Finance, Inc. (WHF) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the total investment income was $71,808,000, while total expenses amounted to $41,694,000. This results in a gross profit of $30,114,000, translating to a gross profit margin of 42.0%.
Operating Profit Margin: The net investment income before excise tax for the same period was $30,114,000. After accounting for excise tax of $853,000, the operating profit stood at $29,261,000, leading to an operating profit margin of approximately 40.7%.
Net Profit Margin: For the nine months ended September 30, 2024, the net realized gains (losses) on investments and foreign currency transactions resulted in a net loss of $5,634,000. Therefore, the net profit was $23,627,000 from $71,808,000 of total income, giving a net profit margin of about 32.9%.
Trends in Profitability Over Time
The profitability metrics have shown a downward trend compared to the previous year. For the nine months ended September 30, 2023, the gross profit margin was 46.0%, indicating a decrease of 4.0% percentage points year-over-year. The operating profit margin also declined from 43.2% in 2023 to 40.7% in 2024.
Comparison of Profitability Ratios with Industry Averages
Industry averages for companies in the same sector typically report a gross profit margin of around 45.0% and an operating profit margin of 38.0%. The company’s gross profit margin of 42.0% is slightly below the industry average, while the operating profit margin of 40.7% exceeds the average, suggesting strong operational efficiency relative to peers.
Analysis of Operational Efficiency
The company has maintained a focus on cost management, which is evident in the reduction of total expenses from $44,843,000 in 2023 to $41,694,000 in 2024. This represents a decrease of approximately 7.6% year-over-year. The gross margin trend indicates that while total income has decreased, the company has effectively managed costs to maintain a healthier operating profit margin.
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 42.0% | 46.0% | -4.0% |
| Operating Profit Margin | 40.7% | 43.2% | -2.5% |
| Net Profit Margin | 32.9% | 37.4% | -4.5% |
Debt vs. Equity: How WhiteHorse Finance, Inc. (WHF) Finances Its Growth
Debt vs. Equity: How WhiteHorse Finance, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, WhiteHorse Finance had total outstanding borrowings of $161,594,000 under its credit facility. The company had $173,406,000 available for drawdown under the same facility. The weighted average interest rate on outstanding borrowings was 7.69% for the three months ended September 30, 2024.
As of December 31, 2023, total outstanding borrowings were $196,512,000, with $138,488,000 undrawn. The weighted average interest rate in effect on outstanding borrowings was 7.87%.
Debt-to-Equity Ratio and Industry Comparison
The company's debt-to-equity ratio as of September 30, 2024, was calculated at 1.5, indicating a balanced approach to leveraging debt for growth. This ratio is well within the permissible limits set by the Small Business Credit Availability Act, which allows a maximum ratio of 2.0.
In comparison, the industry average for business development companies typically hovers around a debt-to-equity ratio of 1.0 to 2.0, highlighting the company's strategic positioning within industry norms.
Recent Debt Issuances and Credit Ratings
Recent debt issuances include:
- 7.875% 2028 Notes: Issued on August 24, 2023, for a total of $34,500,000, used to fund investments and repay existing debt.
- 4.000% 2026 Notes: Issued on November 24, 2021, for $75,000,000.
- 5.375% 2025 Notes: Issued on October 20, 2020, for $40,000,000.
The company maintains an investment-grade credit rating, which influences borrowing costs and access to capital markets.
Debt Balancing Strategy
WhiteHorse Finance employs a balanced approach between debt and equity funding. As of September 30, 2024, total debt was $352,796,000, while total net assets stood at $296,875,000, demonstrating a clear strategy to utilize debt for expansion while maintaining adequate equity levels.
| Debt Instrument | Principal Amount | Outstanding Amount | Maturity Date | Interest Rate |
|---|---|---|---|---|
| JPM Credit Facility | $196,512,000 | $161,594,000 | 11/22/2025 | S+2.50% |
| 5.375% 2025 Notes | $40,000,000 | $39,761,000 | 10/20/2025 | 5.375% |
| 4.000% 2026 Notes | $75,000,000 | $73,992,000 | 12/15/2026 | 4.000% |
| 5.625% 2027 Notes | $10,000,000 | $9,901,000 | 12/4/2027 | 5.625% |
| 4.250% 2028 Notes | $25,000,000 | $24,745,000 | 12/6/2028 | 4.250% |
| 7.875% 2028 Notes | $34,500,000 | $33,209,000 | 9/15/2028 | 7.875% |
Assessing WhiteHorse Finance, Inc. (WHF) Liquidity
Assessing WhiteHorse Finance, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.31. This indicates the company's ability to cover its short-term liabilities with its short-term assets.
Quick Ratio: The quick ratio as of September 30, 2024, was 1.19, reflecting the liquidity position without relying on inventory or less liquid assets.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital was calculated as follows:
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $ 208,210 | $ 158,809 | $ 49,401 |
| December 31, 2023 | $ 215,500 | $ 162,728 | $ 52,772 |
Working capital has decreased from $52,772 thousand at the end of 2023 to $49,401 thousand by September 2024, indicating a slight decline in liquidity.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow trends are detailed below:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $ 57,684 | $ 74,568 |
| Investing Activities | ($ 169,341) | ($ 86,400) |
| Financing Activities | ($ 61,517) | ($ 71,000) |
| Net Change in Cash | ($ 3,816) | $ 3,515 |
Operating cash flow has decreased from $74,568 thousand in 2023 to $57,684 thousand in 2024, while investing cash flow has become increasingly negative, indicating potential liquidity concerns.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $161,594 thousand in outstanding borrowings with $173,406 thousand available under the Credit Facility, reflecting robust access to liquidity. However, the decrease in working capital and cash flow from operations may suggest a need for closer monitoring of liquidity moving forward.
Is WhiteHorse Finance, Inc. (WHF) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we can analyze key valuation metrics including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 12.41 based on earnings per share (EPS) of $0.90 for the trailing twelve months. The industry average P/E ratio in the same sector is approximately 15.00.
Price-to-Book (P/B) Ratio
The P/B ratio is currently at 0.91, compared to the industry average of 1.25. This indicates that the stock is trading at a discount to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 8.5, which is below the industry average of 10.0, suggesting that the company may be undervalued relative to its earnings potential.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a high of $15.20 and a low of $10.50. Currently, the stock is trading at $12.50, indicating a 17.3% decrease from its 52-week high.
Dividend Yield and Payout Ratios
The current dividend yield is 3.10%, with a payout ratio of 43.3%. The dividends declared per share over the last year were $0.39.
Analyst Consensus
The consensus among analysts shows a rating of Hold with a price target of $13.00, indicating a potential upside of 4.0% from the current trading price.
| Valuation Metric | Current Value | Industry Average |
|---|---|---|
| Price-to-Earnings (P/E) | 12.41 | 15.00 |
| Price-to-Book (P/B) | 0.91 | 1.25 |
| EV/EBITDA | 8.5 | 10.0 |
| Stock Price (Current) | $12.50 | |
| 52-Week High | $15.20 | |
| 52-Week Low | $10.50 | |
| Dividend Yield | 3.10% | |
| Payout Ratio | 43.3% | |
| Analyst Consensus | Hold | |
| Price Target | $13.00 |
Key Risks Facing WhiteHorse Finance, Inc. (WHF)
Key Risks Facing WhiteHorse Finance, Inc.
WhiteHorse Finance, Inc. faces various internal and external risks that can impact its financial health. These include industry competition, regulatory changes, and market conditions.
Industry Competition
The competitive landscape in the finance sector is intense. The company faces challenges from both traditional banks and other business development companies (BDCs). As of September 30, 2024, the company reported total assets of $296,875,000, which reflects the competitive pressures in attracting capital and clients.
Regulatory Changes
Changes in regulations can significantly affect operations. The company operates under the Investment Company Act of 1940, which imposes strict requirements on leverage and asset coverage. As of September 30, 2024, the company's asset coverage for borrowed amounts was 183.4%, below the required 200% for traditional investment companies.
Market Conditions
The financial health of the company is sensitive to market conditions. For instance, the weighted average interest rate on outstanding borrowings was 7.44% as of September 30, 2024, which can affect profitability if interest rates rise further.
Operational Risks
Operational risks related to investment management and execution are also present. The company reported a net investment income after excise tax of $9,154,000 for the three months ended September 30, 2024. This represents a decrease from the previous period, indicating potential operational inefficiencies.
Financial Risks
The company has substantial debt obligations, with $161,594,000 in outstanding borrowings as of September 30, 2024. This level of debt requires careful management to avoid liquidity issues.
Strategic Risks
Strategic risks include the company's ability to identify and capitalize on investment opportunities. The total investment income for the nine months ended September 30, 2024, was $71,808,000, down from $77,627,000 in the prior year. This decline raises concerns about the effectiveness of the company's investment strategy.
Mitigation Strategies
The company employs several mitigation strategies, including maintaining a diversified investment portfolio and adhering to regulatory requirements to ensure compliance. They have also established a credit facility with $173,406,000 available to be drawn based on collateral and portfolio quality.
| Risk Factor | Description | Current Data |
|---|---|---|
| Industry Competition | Intense competition affecting capital and client acquisition | Total Assets: $296,875,000 |
| Regulatory Changes | Compliance with Investment Company Act of 1940 | Asset Coverage: 183.4% |
| Market Conditions | Interest rate fluctuations impacting profitability | Weighted Avg. Interest Rate: 7.44% |
| Operational Risks | Investment management and execution challenges | Net Investment Income: $9,154,000 |
| Financial Risks | High levels of debt obligations | Outstanding Borrowings: $161,594,000 |
| Strategic Risks | Challenges in identifying investment opportunities | Total Investment Income: $71,808,000 |
| Mitigation Strategies | Diversification and regulatory compliance | Available Credit Facility: $173,406,000 |
Future Growth Prospects for WhiteHorse Finance, Inc. (WHF)
Future Growth Prospects for WhiteHorse Finance, Inc.
Analysis of Key Growth Drivers
WhiteHorse Finance has several avenues for growth, including:
- Market Expansions: The company has opportunities to broaden its investment portfolio, particularly in the lower middle market, which has shown resilience.
- Acquisitions: Potential acquisitions can enhance its asset base. The firm has a history of strategic investments to bolster its market position.
- Product Innovations: New financial products tailored for specific market needs are on the horizon, aiming to attract a wider client base.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, WhiteHorse Finance projects a revenue increase driven by a higher volume of loans and better yield on investments. The anticipated revenue growth is estimated at $80 million, increasing from $75 million in 2023.
Earnings per share (EPS) forecasts are set at $1.25 for 2024, up from $1.10 in 2023, reflecting improved operational efficiency and investment performance.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is actively exploring partnerships with financial technology firms to enhance its service offerings. Collaborations aimed at improving loan origination processes and risk assessment models could significantly impact profitability.
Competitive Advantages That Position the Company for Growth
WhiteHorse Finance's competitive advantages include:
- Diverse Investment Portfolio: As of September 30, 2024, the firm holds an investment portfolio valued at $654.3 million, primarily in senior secured loans.
- Strong Asset Coverage: The company maintains an asset coverage ratio of 183.4% as of September 30, 2024, well above the required threshold, allowing for greater leverage in investment opportunities.
- Established Relationships: Long-standing relationships with borrowers and financial institutions facilitate access to exclusive investment opportunities.
| Metric | 2023 Value | 2024 Value | Growth (%) |
|---|---|---|---|
| Revenue | $75 million | $80 million | 6.67% |
| EPS | $1.10 | $1.25 | 13.64% |
| Total Investments | $696.2 million | $654.3 million | -6.02% |
| Asset Coverage Ratio | 181.0% | 183.4% | 1.32% |
WhiteHorse Finance's strategic position, coupled with its proactive approach to market challenges, positions it well for future growth and increased shareholder value.
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Updated on 16 Nov 2024
Resources:
- WhiteHorse Finance, Inc. (WHF) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of WhiteHorse Finance, Inc. (WHF)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View WhiteHorse Finance, Inc. (WHF)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.