CION Investment Corporation (NYSE: CION) (“CION” or the “Company”) today reported financial results for the second quarter ended June 30, 2023 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.
CION also announced that, on August 7, 2023, its co-chief executive officers declared (i) a third quarter 2023 regular distribution of $0.34 per share payable on September 15, 2023 to shareholders of record as of September 1, 2023 and (ii) a supplemental distribution of $0.05 per share for both the third and fourth quarters of 2023, payable on October 16, 2023 and January 15, 2024, respectively, to shareholders of record as of September 29, 2023 and December 29, 2023, respectively.
SECOND QUARTER AND OTHER HIGHLIGHTS
- Net investment income and earnings per share for the quarter ended June 30, 2023 were $0.43 per share and $0.51 per share, respectively;
- Net asset value per share was $15.31 as of June 30, 2023 compared to $15.11 as of March 31, 2023, an increase of $0.20 per share, or 1.3%. The increase was primarily due to the Company out earning its distribution for the period and mark-to-market adjustments to the Company’s portfolio;
- As of June 30, 2023, the Company had $986 million of total principal amount of debt outstanding, of which 71% was comprised of senior secured bank debt and 29% was comprised of unsecured debt. The Company’s net debt-to-equity ratio was 1.04x as of June 30, 2023 compared to 1.02x as of March 31, 2023;
- As of June 30, 2023, the Company had total investments at fair value of $1,688 million in 112 portfolio companies across 24 industries. The investment portfolio was comprised of 89.3% senior secured loans, including 87.0% in first lien investments;1
- During the quarter, the Company funded new investment commitments of $62 million, funded previously unfunded commitments of $8 million, and had sales and repayments totaling $55 million, resulting in a net increase to the Company's funded portfolio of $15 million;
- As of June 30, 2023, investments on non-accrual status amounted to 1.7% and 4.8% of the total investment portfolio at fair value and amortized cost, respectively;
- During the quarter, the Company repurchased 328,628 shares of its common stock under its 10b5-1 trading plan at an average price of $9.81 per share for a total repurchase amount of $3.2 million. Through June 30, 2023, the Company repurchased a total of 2,325,622 shares of its common stock under its 10b5-1 trading plan at an average price of $9.57 per share for a total repurchase amount of $22.3 million and;
- During the quarter, the Company amended its senior secured credit facilities with JPMorgan Chase Bank, National Association and UBS AG to, among other things, extend the maturity from May 15, 2024 and November 19, 2023, respectively, to May 15, 2025 and November 19, 2024, respectively.
DISTRIBUTIONS
- For the quarter ended June 30, 2023, the Company paid a regular quarterly distribution totaling $18.6 million, or $0.34 per share.
Michael A. Reisner, co-Chief Executive Officer of CION, commented:
“Our quarterly earnings showed continued strength, with NII of $0.43 per share, which once again outperformed our base distribution of $0.34 per share. Moreover, our NAV grew by over 1%, or approximately $0.20 per share.
Our portfolio's credit quality is solid, with many softer credit positions from last quarter related to consumer-facing businesses already restructured. Looking forward, we expect non-accruals to align more closely with our historical average of below 1% on a pro-forma basis.
Amid recent market uncertainties, our share buyback program has capitalized on attractive market price discounts to our NAV per share, supported by our strong balance sheet. Recognizing the significant undervaluation of our shares, we have already repurchased 666,657 shares in 2023, reaffirming our confidence in the company's future growth and potential.
Given our continued strong financial performance, we have declared a supplemental distribution of $0.05/share for both Q3 and Q4.”
Looking ahead, CION is confidently positioned to deliver robust returns to shareholders.”
SELECTED FINANCIAL HIGHLIGHTS
As of | ||||||||
(in thousands, except per share data) | June 30, 2023 | March 31, 2023 | ||||||
Investment portfolio, at fair value1 | $ | 1,687,691 | $ | 1,657,026 | ||||
Total debt outstanding2 | $ | 985,712 | $ | 1,010,712 | ||||
Net assets | $ | 836,364 | $ | 830,310 | ||||
Net asset value per share | $ | 15.31 | $ | 15.11 | ||||
Debt-to-equity | 1.18x | 1.22x | ||||||
Net debt-to-equity | 1.04x | 1.02x | ||||||
Three Months Ended | ||||||||
(in thousands, except share and per share data) | June 30, 2023 | March 31, 2023 | ||||||
Total investment income | $ | 58,496 | $ | 64,975 | ||||
Total operating expenses and income tax expense | $ | 35,080 | $ | 35,117 | ||||
Net investment income after taxes | $ | 23,416 | $ | 29,858 | ||||
Net realized losses | $ | (18,928 | ) | $ | (4,525 | ) | ||
Net unrealized gains (losses) | $ | 23,406 | $ | (56,378 | ) | |||
Net increase (decrease) in net assets resulting from operations | $ | 27,894 | $ | (31,045 | ) | |||
Net investment income per share | $ | 0.43 | $ | 0.54 | ||||
Net realized and unrealized gains (losses) per share | $ | 0.08 | $ | (1.10 | ) | |||
Earnings per share | $ | 0.51 | $ | (0.56 | ) | |||
Weighted average shares outstanding | 54,788,740 | 55,109,482 | ||||||
Distributions declared per share | $ | 0.34 | $ | 0.34 | ||||
Total investment income for the three months ended June 30, 2023 and March 31, 2023 was $58.5 million and $65.0 million, respectively. The decrease in investment income was primarily driven by a decrease in dividend income from certain investments and fees generated from investment activity, partially offset by an increase in SOFR and LIBOR rates, during the three months ended June 30, 2023 compared to the three months ended March 31, 2023.
Operating expenses for the three months ended June 30, 2023 and March 31, 2023 were $35.1 million. During the quarter ended June 30, 2023, the Company incurred higher interest expense due to an increase in SOFR and LIBOR rates which was offset by lower advisory fees as compared to the quarter ended March 31, 2023.
PORTFOLIO AND INVESTMENT ACTIVITY1
A summary of the Company's investment activity for the three months ended June 30, 2023 is as follows:
New Investment Commitments | Sales and Repayments | |||||||||||
Investment Type | $ in Thousands | % of Total | $ in Thousands | % of Total | ||||||||
Senior secured first lien debt | $ | 62,779 | 90 | % | $ | 54,498 | 100 | % | ||||
Senior secured second lien debt | — | — | 5 | — | ||||||||
Collateralized securities and structured products - equity | — | — | 96 | — | ||||||||
Unsecured debt | 4,200 | 6 | % | — | — | |||||||
Equity | 2,906 | 4 | % | — | — | |||||||
Total | $ | 69,885 | 100 | % | $ | 54,599 | 100 | % | ||||
During the three months ended June 30, 2023, new investment commitments were made across 4 new and 8 existing portfolio companies. During the same period, the Company received the full repayment of a loan from one portfolio company. As a result, the number of portfolio companies increased from 109 as of March 31, 2023 to 112 as of June 30, 2023.
PORTFOLIO SUMMARY1
As of June 30, 2023, the Company’s investments consisted of the following:
Investments at Fair Value | ||||||
Investment Type | $ in Thousands | % of Total | ||||
Senior secured first lien debt | $ | 1,468,630 | 87.0 | % | ||
Senior secured second lien debt | 39,544 | 2.3 | % | |||
Collateralized securities and structured products - equity | 1,046 | 0.1 | % | |||
Unsecured debt | 17,301 | 1.0 | % | |||
Equity | 161,170 | 9.6 | % | |||
Total | $ | 1,687,691 | 100.0 | % | ||
The following table presents certain selected information regarding the Company’s investments:
As of | ||||
June 30, 2023 | March 31, 2023 | |||
Number of portfolio companies | 112 | 109 | ||
Percentage of performing loans bearing a floating rate3 | 92.2 % | 92.8 % | ||
Percentage of performing loans bearing a fixed rate3 | 7.8 % | 7.2 % | ||
Yield on debt and other income producing investments at amortized cost4 | 12.38 % | 11.97 % | ||
Yield on performing loans at amortized cost4 | 13.10 % | 12.90 % | ||
Yield on total investments at amortized cost | 11.45 % | 11.18 % | ||
Weighted average leverage (net debt/EBITDA)5 | 4.83x | 5.11x | ||
Weighted average interest coverage5 | 2.00x | 2.07x | ||
Median EBITDA6 | $35.0 million | $35.0 million | ||
As of June 30, 2023, investments on non-accrual status represented 1.7% and 4.8% of the total investment portfolio at fair value and amortized cost, respectively. As of March 31, 2023, investments on non-accrual status represented 3.5% and 6.8% of the total investment portfolio at fair value and amortized cost, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2023, the Company had $986 million of total principal amount of debt outstanding, comprised of $700 million of outstanding borrowings under its senior secured credit facilities and $286 million of unsecured notes and term loans. The combined weighted average interest rate on debt outstanding was 7.9% for the quarter ended June 30, 2023. As of June 30, 2023, the Company had $112 million in cash and short-term investments and $125 million available under its financing arrangements.2
EARNING CONFERENCE CALL
CION will host an earnings conference call on Wednesday, August 9, 2023 at 11:00 am Eastern Time to discuss its financial results for the second quarter ended June 30, 2023. Please visit the Investor Resources - Events and Presentations section of the Company’s website at www.cionbdc.com for a slide presentation that complements the earnings conference call.
All interested parties are invited to participate via telephone or listen via the live webcast, which can be accessed by clicking the following link: CION Investment Corporation Second Quarter 2023 Financial Results Webcast. Domestic callers can access the conference call by dialing (877) 484-6065. International callers can access the conference call by dialing +1 (201) 689-8846. All callers are asked to dial in approximately 10 minutes prior to the call. An archived replay will be available on a webcast link located in the Investor Resources - Events and Presentations section of CION’s website.
ENDNOTES
- The discussion of the investment portfolio excludes short-term investments.
- Total debt outstanding excludes netting of debt issuance costs of $9.0 million and $8.3 million as of June 30, 2023 and March 31, 2023, respectively.
- The fixed versus floating composition has been calculated as a percentage of performing debt investments measured on a fair value basis, including income producing preferred stock investments and excludes investments, if any, on non-accrual status.
- Computed based on the (a) annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total performing debt and other income producing investments (excluding investments on non-accrual status) at amortized cost. This calculation excludes exit fees that are receivable upon repayment of the investment.
-
For a particular portfolio company, the Company calculates the level of contractual indebtedness net of cash (“net debt”) owed by the portfolio company and compares that amount to measures of cash flow available to service the net debt. To calculate net debt, the Company includes debt that is both senior and pari passu to the tranche of debt owned by it but excludes debt that is legally and contractually subordinated in ranking to the debt owned by the Company. The Company believes this calculation method assists in describing the risk of its portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by the Company relative to other senior and junior creditors of a portfolio company. The Company typically calculates cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve-month period. Weighted average net debt to EBITDA is weighted based on the fair value of the Company's performing debt investments and excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
For a particular portfolio company, the Company also calculates the level of contractual interest expense owed by the portfolio company and compares that amount to EBITDA (“interest coverage ratio”). The Company believe this calculation method assists in describing the risk of its portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company. Weighted average interest coverage is weighted based on the fair value of the Company's performing debt investments, excluding investments where interest coverage may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
Portfolio company statistics, including EBITDA, are derived from the financial statements most recently provided to the Company for each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by the Company and may reflect a normalized or adjusted amount. - Median EBITDA is calculated based on the portfolio company's EBITDA as of the Company's initial investment.
CION Investment Corporation | ||||||||
Consolidated Balance Sheets | ||||||||
(in thousands, except share and per share amounts) | ||||||||
June 30, 2023 | March 31, 2023 | |||||||
(unaudited) | (unaudited) | |||||||
Assets | ||||||||
Investments, at fair value: | ||||||||
Non-controlled, non-affiliated investments (amortized cost of $1,583,865 and $1,576,870, respectively) | $ | 1,510,372 | $ | 1,479,976 | ||||
Non-controlled, affiliated investments (amortized cost of $204,248 and $169,539, respectively) | 198,084 | 162,785 | ||||||
Controlled investments (amortized cost of $76,900) | 80,006 | 80,591 | ||||||
Total investments, at fair value (amortized cost of $1,823,309 and $1,803,609, respectively) | 1,788,462 | 1,723,352 | ||||||
Cash | 11,515 | 96,016 | ||||||
Interest receivable on investments | 33,200 | 27,333 | ||||||
Receivable due on investments sold and repaid | 997 | 3,239 | ||||||
Prepaid expenses and other assets | 608 | 4,552 | ||||||
Total assets | $ | 1,834,782 | $ | 1,854,492 | ||||
Liabilities and Shareholders' Equity | ||||||||
Liabilities | ||||||||
Financing arrangements (net of unamortized debt issuance costs of $8,976 and $8,316, respectively) | $ | 976,737 | $ | 1,002,396 | ||||
Accounts payable and accrued expenses | 1,344 | 1,075 | ||||||
Interest payable | 8,183 | 7,007 | ||||||
Accrued management fees | 6,546 | 6,676 | ||||||
Accrued subordinated incentive fee on income | 4,967 | 6,334 | ||||||
Accrued administrative services expense | 574 | 694 | ||||||
Share repurchases payable | 67 | — | ||||||
Total liabilities | 998,418 | 1,024,182 | ||||||
Shareholders' Equity | ||||||||
Common stock, $0.001 par value; 500,000,000 shares authorized; 54,645,571 and 54,961,455 shares issued, and 54,632,827 and 54,961,455 shares outstanding, respectively | 55 | 55 | ||||||
Capital in excess of par value | 1,037,729 | 1,040,955 | ||||||
Accumulated distributable losses | (201,420 | |||||||
