Reports Strong Performance with Elevated Total Investment Income, Core Investment Income and Net Investment Income Year-over-Year, While Also Continuing Share Repurchase Program in the Second Quarter of 2023
Announces Quarterly Distribution of $0.69 Per Share in the Third Quarter of 2023, Marking a $0.06 per Share Increase from the $0.63 Distribution Seen in the Third Quarter of 2022
NEW YORK, Aug. 09, 2023 (GLOBE NEWSWIRE) -- Portman Ridge Finance Corporation ( PTMN) (the “Company” or “Portman Ridge”) announced today its financial results for the second quarter ended June 30, 2023.
Second Quarter 2023 Highlights
- Total investment income for the second quarter of 2023 was $19.6 million, an increase of $4.6 million as compared to $15.0 million for the second quarter of 2022 and a decrease of $0.7 million as compared to $20.3 million for the first quarter of 2023.
- Core investment income1, excluding the impact of purchase price accounting, for the second quarter of 2023 was $19.2 million, an increase of $5.5 million as compared to $13.7 million for the second quarter of 2022 and a decrease of $0.1 million as compared to $19.3 million for the first quarter of 2023.
- Net investment income ("NII") for the second quarter of 2023 was $7.9 million ($0.83 per share), an increase of $2.4 million as compared to $5.5 million ($0.57 per share) for the second quarter of 2022 and a decrease of $0.6 million as compared to $8.5 million ($0.89 per share) for the first quarter of 2023.
- Core net investment income2 for the second quarter of 2023 was $7.6 million ($0.79 per share), an increase of $2.7 million as compared to $4.9 million ($0.51 per share) for the second quarter of 2022 and a decrease of $0.1 million as compared to $7.7 million ($0.80 per share) for the first quarter of 2023.
- Total shares repurchased in open market transactions under the Renewed Stock Repurchase Program during the quarter ended June 30, 2023 were 27,081 at an aggregate cost of approximately $552 thousand.
Subsequent Events
- Declared stockholder distribution of $0.69 per share for the third quarter of 2023, payable on August 31, 2023 to stockholders of record at the close of business on August 22, 2023. This is a $0.06 per share distribution increase as compared to the third quarter of 2022. Including the distribution subsequent to the announcement of full year 2022 earnings results, total stockholder distributions for 2023 amount to $2.06 per share.
Management Commentary
- Ted Goldthorpe, Chief Executive Officer of Portman Ridge, stated, “Continuing off the back of strong earnings momentum seen in the first quarter of 2023, we are pleased to announce strong financial performance for Portman Ridge in both the second quarter of 2023 and the first half of 2023 overall. Our total investment income, core investment income, and net investment income substantially increased as compared to the same three month and six month periods of last year as we continue to see the impact that rising rates have had in generating incremental revenue from our debt portfolio investments. We believe we are well-positioned to take advantage of opportunities that arise from the current market environment by continuing to be selective and resourceful in our investment decision-making. Overall, our strong performance this past quarter has allowed us to declare a dividend of $0.69 per share, marking a $0.06 per share distribution increase as compared to the third quarter of 2022. We believe we remain situated to continue to deliver attractive returns to our shareholders throughout the second half of 2023.”
Selected Financial Highlights
- Total investments at fair value as of June 30, 2023 was $510.1 million; when excluding CLO funds, Joint Ventures, and short-term investments, these investments are spread across 27 different industries and 104 different entities with an average par balance per entity of approximately $3.2 million.
- Weighted average contractual interest rate on our interest earning Debt Securities Portfolio as of June 30, 2023 was approximately 12.2%.
- Non-accruals on debt investments, as of June 30, 2023, were seven debt investments representing 0.8% and 2.6% of the Company’s investment portfolio at fair value and amortized cost, respectively.
- Net asset value (“NAV”) for the second quarter of 2023 was $215.0 million ($22.54 per share), a decrease of $10.1 million ($1.02 per share) as compared to $225.1 million ($23.56 per share) for the first quarter of 2023. The decrease in NAV was predominately driven by $6.6 million ($0.69 per share) of realized and unrealized losses on the CLO portfolio.
- Par value of outstanding borrowings, as of June 30, 2023, was $333.7 million with an asset coverage ratio of total assets to total borrowings of 163%. On a net basis, leverage as of June 30, 2023 was 1.39x3 compared to net leverage of 1.39x3 as of March 31, 2023.
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1 Core investment income represents reported total investment income as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, less the impact of purchase price discount accounting in connection with the Garrison Capital Inc. (“GARS”) and Harvest Capital Credit Corporation (“HCAP”) mergers. Portman Ridge believes presenting core investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, core investment income is a non-U.S. GAAP measure and should not be considered as a replacement for total investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, core investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
2 Core net investment income represents reported total net investment income as determined in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, less the impact of purchase price discount accounting in connection with the GARS and HCAP mergers, while also considering the impact of accretion from these mergers on expenses, such as incentive fees. Portman Ridge believes presenting core net investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, core net investment income is a non-U.S. GAAP measure and should not be considered as a replacement for total net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, core net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance.
3 Net leverage is calculated as the ratio between (A) debt, excluding unamortized debt issuance costs, less available cash and cash equivalents, and restricted cash and (B) NAV. Portman Ridge believes presenting a net leverage ratio is useful and appropriate supplemental disclosure because it reflects the Company’s financial condition net of $35.4 million and $46.1 million of cash and cash equivalents and restricted cash for the quarters ended June 30, 2023 and March 31, 2023, respectively. However, the net leverage ratio is a non-U.S. GAAP measure and should not be considered as a replacement for the regulatory asset coverage ratio and other similar information presented in accordance with U.S. GAAP. Instead, the net leverage ratio should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial condition.
Results of Operations
Operating results for the three months ended June 30, 2023 and June 30, 2022 were as follows:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Total investment income | $ | 19,626 | $ | 15,044 | $ | 39,953 | $ | 31,988 | ||||||||
| Total expenses | 11,711 | 9,522 | 23,509 | 18,558 | ||||||||||||
| Net Investment Income | 7,915 | 5,522 | 16,444 | 13,430 | ||||||||||||
| Net realized gain (loss) on investments | (6,471 | ) | (13,991 | ) | (9,556 | ) | (19,544 | ) | ||||||||
| Net unrealized gain (loss) on investments | (4,176 | ) | 113 | (10,136 | ) | 2,256 | ||||||||||
| Tax (provision) benefit on realized and unrealized gains (losses) on investments | (164 | ) | (77 | ) | 407 | (517 | ) | |||||||||
| Net realized and unrealized appreciation (depreciation) on investments, net of taxes | (10,811 | ) | (13,955 | ) | (19,285 | ) | (17,805 | ) | ||||||||
| Realized gains (losses) on extinguishments of debt | (218 | ) | - | (218 | ) | - | ||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (3,114 | ) | $ | (8,433 | ) | $ | (3,059 | ) | $ | (4,375 | ) | ||||
| Net Increase (Decrease) In Net Assets Resulting from Operations per Common Share: | ||||||||||||||||
| Basic and Diluted: | $ | (0.33 | ) | $ | (0.88 | ) | $ | (0.32 | ) | $ | (0.45 | ) | ||||
| Net Investment Income Per Common Share: | ||||||||||||||||
| Basic and Diluted: | $ | 0.83 | $ | 0.57 | $ | 1.72 | $ | 1.39 | ||||||||
| Weighted Average Shares of Common Stock Outstanding—Basic and Diluted | 9,541,722 | 9,634,870 | 9,548,424 | 9,666,298 | ||||||||||||
Investment Income
The composition of our investment income for the three and six months ended June 30, 2023 and June 30, 2022 was as follows:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||
| ($ in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Interest from investments in debt excluding accretion | $ | 14,156 | $ | 9,275 | $ | 28,261 | $ | 19,087 | ||||||
| Purchase discount accounting | 427 | 1,303 | 1,469 | 3,115 | ||||||||||
| PIK Investment Income | 966 | 1,292 | 2,566 | 2,674 | ||||||||||
| CLO Income | 829 | 928 | 1,377 | 2,562 | ||||||||||
| JV Income | 2,329 | 2,071 | 4,788 | 4,179 | ||||||||||
| Service Fees | 919 | 175 | 1,492 | 371 | ||||||||||
| Investment Income | $ | 19,626 | 15,044 | $ | 39,953 | $ | 31,988 | |||||||
| Less: Purchase discount accounting | $ | (427 | ) | $ | (1,303 | ) | $ | (1,469 | ) | $ | (3,115 | ) | ||
| Core Investment Income | $ | 19,199 | $ | 13,741 | $ | 38,484 | $ | 28,873 | ||||||
Fair Value of Investments
The composition of our investment portfolio as of June 30, 2023 and December 31, 2022 at cost and fair value was as follows:
| ($ in thousands) | June 30, 2023 (Unaudited) | December 31, 2022 | ||||||||||||||||||||||
| Security Type | Cost/Amortized Cost | Fair Value | %(4) | Cost/Amortized Cost | Fair Value | %(4) | ||||||||||||||||||
| Senior Secured Loan | $ | 396,674 | $ | 376,539 | 74 | $ | 435,856 | $ | 418,722 | 73 | ||||||||||||||
| Junior Secured Loan | 51,707 | 37,962 | 7 | 65,776 | 56,400 | 10 | ||||||||||||||||||
| Senior Unsecured Bond | 416 | 43 | 0 | 416 | 43 | 0 | ||||||||||||||||||
| Equity Securities | 28,901 | 20,013 | 4 | 28,848 | 21,905 | 4 | ||||||||||||||||||
| CLO Fund Securities | 25,577 | 12,996 | 3 | |||||||||||||||||||||
