WhiteHorse Finance ((WHF)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for WhiteHorse Finance painted a picture of a challenging quarter, marked by significant declines in net investment income, a decrease in NAV per share, and an increase in non-accrual investments. Despite these hurdles, the company maintained steady capital deployments and cash resources, continuing its streak of quarterly distributions. However, the overall sentiment of the call leaned towards the negative, with the adverse trends overshadowing the positive aspects.
Gross Capital Deployments
WhiteHorse Finance reported gross capital deployments of $45.5 million in the first quarter of 2025. This was partially offset by total repayments and sales amounting to $19.4 million, resulting in net deployments of $26.1 million. This activity highlights the company’s efforts to strategically manage its investment portfolio amidst challenging market conditions.
STRS JV Portfolio Performance
The STRS JV portfolio maintained an aggregate fair value of $310.2 million at the end of the first quarter, with an average effective yield of 10.8%. This performance underscores the portfolio’s resilience and its contribution to the company’s overall financial standing.
Cash Resources and Credit Facility
At the end of Q1 2025, WhiteHorse Finance had cash resources totaling approximately $19.6 million, including $8.2 million in restricted cash. Additionally, the company had around $165 million of undrawn capacity available under its revolving credit facility, providing a buffer to navigate financial uncertainties.
First Quarter Distribution
WhiteHorse Finance announced a first quarter distribution of $0.385 per share, consistent with the previous quarter. This marks the 51st consecutive quarterly distribution since the company’s IPO in December 2012, reflecting a commitment to returning value to shareholders.
Decline in Net Investment Income
The company faced a decline in GAAP net investment income and core NII, which stood at $6.8 million or $0.294 per share in Q1 2025, down from $8 million or $0.343 per share in the previous quarter. This decline highlights the financial challenges faced during the quarter.
Decrease in NAV Per Share
NAV per share decreased to $12.11 by the end of Q1 2025, representing a 1.6% decline from the prior quarter. This decrease was influenced by net realized losses and markdowns totaling $2.6 million.
Net Realized and Unrealized Losses
The portfolio was impacted by net realized losses and markdowns totaling $2.6 million in the first quarter, contributing to the decline in NAV per share and reflecting the challenging market environment.
Increase in Non-Accrual Investments
Non-accrual investments rose to 8.8% of the debt portfolio in Q1 2025, up from 7.2% in the prior quarter. This increase, including MSI Information Services being placed on non-accrual, posed a challenge to the company’s earnings power.
Decreased Yield on Debt Investments
The weighted average effective yield on income-producing debt investments decreased to 12.1% at the end of Q1 2025, compared to 12.5% in the previous quarter, indicating a reduction in income generation from these investments.
Forward-Looking Guidance
During the earnings call, CEO Stuart Aronson and CFO Joyson Thomas provided guidance for future activities. They acknowledged the disappointing first quarter results, with net investment income falling short of the quarterly distribution. The company is managing challenges related to tariff risks and is focused on diversifying its investments to maintain stability. The board is actively evaluating the quarterly distribution, considering core earnings power and market conditions.
In conclusion, the earnings call for WhiteHorse Finance reflected a quarter of mixed outcomes, with negative trends in net investment income and NAV per share overshadowing the company’s efforts to maintain steady capital deployments and distributions. The forward-looking guidance suggests a focus on diversification and stability as the company navigates ongoing market challenges.