Logan Ridge Finance Q1 2025 Earnings Report

Logan Ridge Finance EPS Results

• Actual EPS: $0.35
• Consensus EPS: $0.37
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Logan Ridge Finance Revenue Results

• Actual Revenue: $4.63 million
• Expected Revenue: $5.20 million
• Beat/Miss: Missed by -$569.00 thousand
• YoY Revenue Growth: N/A

Logan Ridge Finance Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 9, 2025
• Conference Call Time: 11:00AM ET

Logan Ridge Finance (NASDAQ:LRFC), formerly known as, Capitala Finance Corp. is a Business Development Company specializing in senior subordinated debt and unitranche debt, unitranche loan, first-lien and second-lien loans, lower middle market and middle market, equity co-investment in sponsored companies. The fund targets companies in the Aerospace, defense, business services, education, food and beverage, Industrial & Environmental Services, logistics, distribution, media, telecommunication, manufacturing, consumer goods and health-care industries. It typically considers investments in the United States. The fund invests $5 million and $50 million per transaction in companies with EBITDA between $5 million to $50 million and enterprise value less than $250 million. The fund makes minority equity co-investments, alongside management or financial sponsors.

Logan Ridge Finance Q1 2025 Earnings Call Transcript

Key Takeaways

• Legacy Equity Rotation: Exited second largest non‐yielding equity position in GA Communications, reducing the legacy equity portfolio to 10.8% of assets from 13.8% last quarter.
• Net investment income declined to $0.35 per share in Q1 ’25, down from $0.50 per share in Q4 ’24 due to lower fee income, base rates and CLO income.
• Net asset value per share fell 7.5% to $29.66, primarily driven by a $4.4 million write‐down on the legacy Sequoia Healthcare investment.
• Non‐accrual exposures remained steady with four debt investments across three companies representing 8.7% of cost and 2.2% of fair value of the portfolio.
• Proposed Merger: The planned combination with Portman Ridge aims to deliver greater scale, improved liquidity and enhanced operational efficiencies to drive shareholder value.

Presentation

[Operator]

Good morning, and welcome to Logan Ridge Finance Corporation's First Quarter Ended 03/31/2025 Earnings Conference Call. An earnings press release was distributed yesterday, 05/08/2025, after the close of the market. A copy of the release along with the supplemental earnings presentation is available on the company's website at www.loganridgefinance.com in the Investor Resources section and should be reviewed in conjunction with the company's Form 10 Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. And please note that today's conference call may contain forward looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties.

[Operator]

Actual results may differ materially from those in the forward looking statements as a result of numbers of factors, including those described in the company's filings with the SEC. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President and Director of Logan Ridge Finance Corporation Brandon Satoran, Chief Financial Officer and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

Good morning. Welcome to our first quarter twenty twenty five earnings call. As mentioned, I am joined today by our Chief Financial Officer, Brandon Satoran and our Chief Investment Officer, Patrick Schafer. Following my opening remarks, Patrick will provide additional details on our investment activity to date, and Brandon will walk through the financials. Following record results in 2024, Logan Ridge continued to make significant strides in strengthening its portfolio despite the large write down on the company's legacy term loan to Sequoia Healthcare.

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

Notably, during the quarter, the company grew its portfolio with net deployment, and as previously announced, Logan Ridge continued rotating out of legacy equity portfolio with a successful exit of its second largest non yielding equity investment, GA Communications. This exit stands as another important achievement in our long term strategy to rotate out of the legacy equity portfolio, which has now been reduced to just 10.8% of our portfolio at fair value, down from 13.8% as of the prior quarter and 18.2% in the first quarter of twenty twenty four. Looking forward, with the continued monetization of the legacy equity portfolio, we believe the company is well positioned to continue to grow earnings and increase long term shareholder value as we navigate this dynamic market shape by renewed uncertainty, increased market volatility and shifting geopolitical dynamics. Finally, we remain very excited about the opportunities that the combination with Fort McMurray presents. This action offers the potential for increased scale, improved liquidity, and enhanced operational efficiencies, all of which will strengthen our ability to deliver greater value to shareholders.

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

The combination of these companies represents a significant milestone and is a culmination of years of work repositioning the portfolio that BC Partners Credit has executed since taking over as the external manager in 2021. We encourage all shareholders to attend the meeting and vote for the proposed merger as recommended by the Board of Directors of both companies. We're excited about the road ahead and look forward to sharing more updates soon. With that, I will turn the call over to Patrick Schafer to discuss our portfolio and investment activity.

[Patrick Schafer, CIO at Logan Ridge Finance]

Thanks, Ted. Hello, everyone. As of 03/31/2025, the fair value of Logan's portfolio was approximately $169,600,000 with exposure to 59 portfolio companies. This compares to 59 portfolio companies with a fair value of approximately $172,300,000 as of the prior quarter. As Ted mentioned, during the quarter ended 03/31/2025, we continue to be selective in our investment strategy.

[Patrick Schafer, CIO at Logan Ridge Finance]

We deployed approximately $15,100,000 into new and existing investments and had approximately $12,500,000 in repayments and sales, resulting in net deployment of approximately $2,700,000 for the quarter. On portfolio composition, as of 03/31/2025, '70 '1 point '8 percent of the company's investment portfolio at fair value was invested in assets originated by the BC Partners Credit platform, up from 66.7% at the end of last quarter. Also, as of 03/31/2025, our debt investment portfolio represented 86.6% of the total portfolio at fair value, the weighted average annualized yield of approximately 10.7%, excluding income from non accruals and collateralized loan obligations. And 90.7 percent of our debt investment portfolio at fair value was bearing interest at a floating rate. Additionally, as of 03/31/2025, first lien debt represented 66.767.6% of our total portfolio on cost and fair value basis respectively, while the equity portfolio was reduced to 12% from 10.8% of the portfolio on a cost and fair value basis respectively.

[Patrick Schafer, CIO at Logan Ridge Finance]

The reduction in the equity portfolio on a fair value basis during the first quarter of twenty twenty five as compared to the previous quarter was due to the exit of our second largest non yielding equity position in GA Communications, marking another milestone for our long term strategy to rotate out of the legacy equity portfolio. On to non accrual status, as of 03/31/2025, the company had four debt investments across three portfolio companies on non accrual status with an aggregate and amortized cost and fair value of $17,200,000 and $3,700,000 respectively, or 8.72.2% of the investment portfolio at cost and fair value respectively. This has remained consistent with the fourth quarter of twenty twenty four with the same four debt investments in three portfolio companies with a cost and fair value of $17,200,000 and $7,900,000 respectively, or nine point zero percent and four point six percent of the investment portfolio's cost and fair value, respectively. I'll now turn the call over to Brandon.

[Brandon Satoren, CFO, Chief Accounting Officer, Secretary & Treasurer at Logan Ridge Finance]

Thanks, Patrick. For the quarter ended 03/31/2025, Logan Ridge generated $4,600,000 of investment income, which represents a $800,000 decrease or $0.29 per share as compared to $5,400,000 reported from the quarter ended 12/31/2024. The decrease in investment income on a per share basis from the prior quarter was primarily driven by one, a decrease of $0.17 per share as a result of lower non recurring pay down and fee income, A decrease of $05 per share from lower base rates. A decrease of $05 per share as a result of the majority of the current quarter's deployment occurring in the second half of the quarter relative to the timing of repayments and sales. And five, a decrease of $02 per share in CLO income.

[Brandon Satoren, CFO, Chief Accounting Officer, Secretary & Treasurer at Logan Ridge Finance]

For the quarter ended 03/31/2025, Logan Ridge reported 3,700,000.0 of operating expenses, which represents a decrease of $200,000 or $08 per share from the prior quarter. The decrease is primarily due to a decrease in interest and financing expenses, in addition to lower base management fees and general and administrative expenses compared to the prior quarter. Accordingly, net investment income for the first quarter of twenty twenty five was $900,000 or $0.35 per share, which represents a decrease of 600,000.0 or $0.21 per share, compared to 1,500,000.0 or $0.50 per share that Logan Ridge earned in the fourth quarter of twenty twenty four. As of 03/31/2025, our net asset value was $78,800,000 representing a decrease of $6,300,000 or 7.4% as compared to the prior quarter net asset value of $85,100,000 as of 12/31/2024. On a per share basis, the company's net asset value was $29.66 as of 03/31/2025, representing a 2.38 per share decrease or 7.5% as compared to $32.4 per share in the prior quarter.

[Brandon Satoren, CFO, Chief Accounting Officer, Secretary & Treasurer at Logan Ridge Finance]

The decrease in net asset value from the prior quarter was largely due to the $4,400,000 write down on the company's legacy investment in Sequoia, which has been on non accrual since we began managing the portfolio in 2021. Finally, as of 03/31/2025, the company had 5,100,000.0 in cash and cash equivalents, as well as 31 and $500,000 of unused borrowing capacity available for deployment in new investments. With that, I will turn the call back over to Ted.

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

Thank you, Brandon. To our shareholders, thank you for your continued support. This concludes our prepared remarks, and I'll now turn over the call to the operator for questions.

[Operator]

We will now begin the question and answer session. And our first question comes from the line of Christopher Nolan with Ladenburg Thalmann. Christopher, please go ahead.

[Christopher Nolan, SVP - Equity Research at Ladenburg Thalmann & Co. Inc]

Hey, guys. With the pending merger with Portman, assuming it goes through, does that entail a full valuation review of Logan's investments?

[Patrick Schafer, CIO at Logan Ridge Finance]

Yes, similar to any of the M and deals that we've done, you have to strike a new NAV for both Portman and Logan within forty eight hours of share issuance. So the short answer is yes.

[Christopher Nolan, SVP - Equity Research at Ladenburg Thalmann & Co. Inc]

Okay. So the entire portfolio for both companies is basically reevaluated. Is that done by an outsider, outside organization with the board? Or how is that done?

[Patrick Schafer, CIO at Logan Ridge Finance]

It's generally done consistent with our practices. To the extent, depending on the timing, we'll have third party marks for certain of the names. We'll do all the liquid pricing. We'll do our own internal models. I would think of it as kind of a regular way process for us.

[Christopher Nolan, SVP - Equity Research at Ladenburg Thalmann & Co. Inc]

Okay. The only reason I ask all this is just because of all the uncertainty in the economy, is this one of these things where the discount rate can be increased more than otherwise, things like that?

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

The short answer is it's linked to liquid benchmarks usually, which quite frankly have been relatively muted. So credit really hasn't widened that much since the last quarter. So we think there'll be a huge impact. If it impacts Logan, it'll impact Portman as well.

[Christopher Nolan, SVP - Equity Research at Ladenburg Thalmann & Co. Inc]

Okay. That's it for me. Thanks, guys.

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

Good question, though.

[Operator]

And your next question comes from the line of Stephen Martin with Plater Capital. Stephen, please go ahead.

[Steven L. Martin, President at Slater Capital Management LLC]

All right. Thanks a lot. I'll ask the same question here. Can you talk about the non accruals and what the prospect is for recovering some of that and what's left in the portfolio that has that kind of risk? You talked about what you inherited when took over the portfolio, but the NAV was about $42 a share then and it's $30 now.

[Patrick Schafer, CIO at Logan Ridge Finance]

Yeah. So Steve, I would say like far and away, the biggest asset in our calls was always been Sequoia. So I think from that perspective, I don't think we expect sort of meaningful recovery and sort of a turn back on of interest from now on. Again, it's been a non accrual since even before we took over management. So I would think generally speaking that I would say there's not a lot of incremental upside from the non accrual book converting onto accruals. With respect to the rest of the book, mean, again, we kind of in the notes, over 70% of the portfolio is originated and then you can get 10% of equity portfolio, which is largely sort of legacy versus.

[Patrick Schafer, CIO at Logan Ridge Finance]

So if you think about it, there's maybe 20% of the portfolio that is sort of legacy Capitola names and vast majority is an investment in Eastport, which is generally performing pretty well and pretty stable. So I would say there's not a ton of risk on sort of the legacy Capitala portfolio from a non accrual perspective, but acknowledge that they do have sort of one there is one large position on the debt side, but that is generally performing well.

[Steven L. Martin, President at Slater Capital Management LLC]

Okay. And you guys have sourced 75%, eighty % of the book now of the debt book. Are any of the BC loans in non accrual and what's the status of the BC loans?

[Brandon Satoren, CFO, Chief Accounting Officer, Secretary & Treasurer at Logan Ridge Finance]

Yeah, so in terms of BC names on non accrual. So, and again, are three, it's MMI, which is a legacy name, Sequoia legacy name and then Lucky Bucks, which has been on non accrual for close to two years now.

[Patrick Schafer, CIO at Logan Ridge Finance]

And that would be a BC name. So, see the answer is one of three.

[Steven L. Martin, President at Slater Capital Management LLC]

And what about in general, obviously, don't have this probably at hand. If you looked at the BC sourced book, what is the discount to par? Or how would you characterize the mark on the BC sourced book?

[Patrick Schafer, CIO at Logan Ridge Finance]

Yeah. I mean, the short answer that, I'd get back to you with the specific one. The long answer is if you strip out lucky bucks, which is kind of on the non accrual, I think there's maybe one name that I can think of off the top of my head that is marked at something that is less than sort of 90, and that would be DataLink, which is in the high 80s. And then we do have some liquid names in the book similar to Portman. So again, I can get back to you, Steve, with the number.

[Patrick Schafer, CIO at Logan Ridge Finance]

I don't have one off the top of my head, though.

[Steven L. Martin, President at Slater Capital Management LLC]

Okay. Thanks a lot.

[Operator]

That concludes our question and answer session. I would now like to turn the call over to Ted Goldfarb for closing remarks. Ted?

[Ted Goldthorpe, CEO, President & Director at Logan Ridge Finance]

Thanks, everyone, for joining us today. We'll continue to provide our shareholders with updates about the proposed merger with Portman Ridge as those become available. As always, please reach out to us with any questions, which we're happy to discuss. We look forward to speaking to you guys again soon. Thank you.

[Operator]

That concludes today's conference call. You may now disconnect.

Participants

Executives

• Ted Goldthorpe, CEO, President & Director
• Brandon Satoren, CFO, Chief Accounting Officer, Secretary & Treasurer

Analysts

• Patrick Schafer, CIO at Logan Ridge Finance
• Christopher Nolan, SVP - Equity Research at Ladenburg Thalmann & Co. Inc
• Steven L. Martin, President at Slater Capital Management LLC