WhiteHorse Finance, Inc. Announces First Quarter 2022 Earnings Results and Declares Quarterly Distribution of $0.355 Per Share

NEW YORK, May 10, 2022 /PRNewswire/ — WhiteHorse Finance, Inc. (« WhiteHorse Finance » or the « Company ») (Nasdaq: WHF) today announced its financial results for the quarter ended March 31, 2022. In addition, the Company’s board of directors has declared a distribution of $0.355 per share with respect to the quarter ending June 30, 2022. The distribution will be payable on July 5, 2022 to stockholders of record as of June 20, 2022.

First Quarter 2022 Summary Highlights

• Net Asset Value of $347.9 million, or $14.99 per share

• Investment portfolio⁽¹⁾ totaling $800.4 million

• STRS JV investment portfolio totaling $312.8 million

• Gross investment deployments⁽²⁾ of $83.6 million for the first quarter, including new originations of $69.5 million and $14.1 million of fundings for add-ons to existing investments

• Net investment income of $8.5 million, or $0.368 per share

• Core net investment income of $7.9 million, or $0.344 per share⁽³⁾

• First quarter distribution of $0.355 per share

Stuart Aronson, WhiteHorse Finance’s Chief Executive Officer, commented, « This past quarter was another active period for capital deployments with WhiteHorse successfully deploying a total of $83.6 million, a record amount for any first quarter in our history. Following the exit from our position in Grupo HIMA and the restructuring of PlayMonster, we ended the quarter with no debt investment on non-accrual status, allowing us to focus all of our resources on managing our directly originated assets that make up the majority of our portfolio as well as sourcing future originations. Importantly, we believe our investment portfolio is well-positioned to benefit from a rising interest rate environment as nearly 100% of our debt portfolio is comprised of floating rate debt investments. We are likewise confident, given the modest leverage levels that we underwrite our loans to, that the majority of our portfolio companies will be able to service our debt in a rising interest rate environment. The lending market remains active and competitive, and our pipeline for future deal flow remains strong due in part to our differentiated three-tiered sourcing approach and relationship with the leading H.I.G. platform. This has allowed us to adhere to our disciplined deal sourcing and rigorous underwriting standards to maintain and grow a healthy portfolio, generating robust cash flows to support our dividend and ultimately creating value for our shareholders. »

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Portfolio and Investment Activity

As of March 31, 2022, the fair value of WhiteHorse Finance’s investment portfolio was $800.4 million, compared with $819.2 million as of December 31, 2021. The portfolio as of March 31, 2022 consisted of 111 positions across 68 companies with a weighted average effective yield of 9.2% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV (as defined below)) was $7.7 million with the overall portfolio comprised of approximately 81.0% first lien secured loans, 3.0% second lien secured loans, 3.4% equity and 12.6% in investments in STRS JV. Almost all loans were variable rate investments (primarily indexed to the London Interbank Offered Rate or Secured Overnight Financing Rate) with fixed rate securities representing only 0.4% of loans at fair value. Nearly all performing floating rate investments have interest rate floors.

During the three months ended March 31, 2022, WhiteHorse Finance made investments in six new portfolio companies for a total of $69.5 million, added a total of $14.1 million to existing portfolio companies, and made net fundings of $1.8 million to revolver loans. Proceeds from sales and repayments totaled approximately $45.1 million for the three months ended March 31, 2022, driven by five full realizations in LHS Borrower, LLC, DCA Investment Holding, LLC, Epiphany Business Services, LLC, AST-Applications Software Technology LLC and Grupo HIMA San Pablo, Inc.

In addition to the transactions discussed above, during the three months ended March 31, 2022, WhiteHorse Finance transferred assets comprised of six new portfolio companies, five add-ons and the remaining portion of three previously transferred deals totaling $82.7 million to STRS JV in exchange for a net investment in STRS JV of $25.0 million as well as cash proceeds of $57.7 million.

WHF STRS Ohio Senior Loan Fund LLC

As of March 31, 2022, STRS JV’s portfolio totaled $312.8 million, consisted of 33 portfolio companies and had a weighted average effective yield of 7.9% on its portfolio.

Results of Operations

For the three months ended March 31, 2022, the Company’s net investment income was approximately $8.5 million, compared with approximately $7.6 million for the same period in the prior year, representing an increase of approximately 11.8%. The increase in net investment income for the year-over-year period was primarily attributable to higher investment income from interest income and STRS JV due to a larger portfolio size in both the Company and STRS JV. This was partially offset by higher interest expense incurred due to higher leverage balances. For the three months ended March 31, 2022, the Company’s investment in STRS JV generated an annualized, gross investment yield of approximately 12.0%.

For the three months ended March 31, 2022, core net investment income⁽³⁾ was $7.9 million, or $0.344 per share, compared with $7.7 million, or $0.375 per share for the same period in the prior year.

For the three months ended March 31, 2022, WhiteHorse Finance reported a net realized and unrealized loss on investments and foreign currency transactions of $2.8 million. This compares with a net realized and unrealized gain on investments and foreign currency transactions of $0.6 million for the three months ended March 31, 2021. The decrease for the year-over-year period was primarily attributable to net losses generated from Grupo HIMA San Pablo, Inc. realization.

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $5.7 million for the three months ended March 31, 2022, which compares with a net increase of $8.2 million the three months ended March 31, 2021.

WhiteHorse Finance’s net asset value was $347.9 million, or $14.99 per share, as of March 31, 2022, compared with $349.8 million, or $15.10 per share, as of December 31, 2021.

Liquidity and Capital Resources

As of March 31, 2022, WhiteHorse Finance had cash and cash equivalents of $21.3 million, compared with $22.5 million as of December 31, 2021, inclusive of restricted cash. As of March 31, 2022, the Company also had $51.2 million of undrawn capacity under its revolving credit facility.

Distributions

The Company’s Board of Directors has declared a distribution of $0.355 per share with respect to the quarter ending June 30, 2022. The distribution will be payable on July 5, 2022 to stockholders of record as of June 20, 2022.

On March 3, 2022, the Company declared a distribution of $0.355 per share for the quarter ended March 31, 2022, consistent with distributions declared for the thirty-eighth consecutive quarter since the Company’s initial public offering. The distribution was paid on April 4, 2022 to stockholders of record as of March 25, 2022.

Distributions are paid from taxable earnings and may include return of capital and/or capital gains. The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company’s periodic reports filed with the Securities and Exchange Commission.

Conference Call

WhiteHorse Finance will host a conference call to discuss its first quarter results for the period ended March 31, 2022 at 12:00 p.m. ET on Tuesday, May 10, 2022. To access the teleconference, please dial 866-518-6930 (domestic and international) approximately 10 minutes before the teleconference’s scheduled start time and reference Conference ID #WHFQ122. Investors may also access the call on the investor relations portion of the Company’s website at www.whitehorsefinance.com.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call’s completion through May 17, 2022. The teleconference replay can be accessed by dialing 800-938-2243 (domestic and international). A webcast replay will also be available on the investor relations portion of the Company’s website at www.whitehorsefinance.com.

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held, lower middle market companies across a broad range of industries. The Company’s investment activities are managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC, (« H.I.G. Capital »). H.I.G. Capital is a leading global alternative asset manager with over $47 billion of capital under management⁽⁴⁾ across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com. For more information about the Company, please visit http://www.whitehorsefinance.com.

Forward-Looking Statements

This press release may contain « forward-looking statements » within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

SCHEDULE 1

As a supplement to GAAP financial measures, the Company has provided information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. The Company’s non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted to exclude the net impact of costs associated with the refinancing of the Company’s indebtedness, the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and excise or other income taxes related to such net realized gains and losses (net of incentive fees). There were no excise or other income taxes related to net realized gains and losses nor did the Company incur any costs with refinancing any of its indebtedness for the quarters ended March 31, 2022 and March 31, 2021.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended March 31, 2022 and March 31, 2021 (in thousands, except per share data):