WhiteHorse Finance, Inc. Announces Fourth Quarter and Full Year 2021 Earnings Results and Declares Quarterly Distribution of $0.355 Per Share

NEW YORK, March 3, 2022 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (Nasdaq: WHF) today announced its financial results for the year ended December 31, 2021. In addition, the Company's board of directors has declared a distribution of $0.355 per share with respect to the quarter ending March 31, 2022. The distribution will be payable on April 4, 2022 to stockholders of record as of March 25, 2022.

Fourth Quarter 2021 Summary Highlights

• Net Asset Value of $349.8 million, or $15.10 per share, compared to $15.23 per share in 2020
• Investment portfolio(1) totaling $819.2 million
• STRS JV investment portfolio totaling $259.5 million
• Gross investment deployments(2) of $199.2 million for the fourth quarter, including new originations of $181.3 million and $17.9 million of fundings for add-ons to existing investments
• Gross investment deployments (2) of $483.2 million for the year, including new originations of $371.4 million and $111.8 million of fundings for refinancing and add-ons to existing investments
• Net investment income of $7.5 million, or $0.331 per share, for the fourth quarter
• Core net investment income of $7.3 million, or $0.322 per share(3) , for the fourth quarter
• Annual net investment income of $28.8 million, or $1.361 per share
• Annual core net investment income of $29.7 million, or $1.405 per share (3)
• Annual distributions of $1.555 per share, including special distribution of $0.135 per share

Recent Developments

In February 2022, the Company increased its capital commitment to the STRS JV in the amount of an additional $25 million, which brings the Company's total capital commitment to the STRS JV to $100 million, comprised of $80 million of subordinated notes and $20 million of LLC equity interests. In connection with this increase in the Company's capital commitment, the Company and STRS Ohio's amended economic ownership in the STRS JV is approximately 66.67% and 33.33%, respectively.

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer, commented, "This past quarter was a record-setting period for capital deployments with WhiteHorse successfully originating 18 new loans deploying a total of $199.2 million. During the fourth quarter, we successfully completed a primary offering resulting in net proceeds of approximately $33.7 million. The proceeds from the offering were fully deployed in the quarter, resulting in a transaction that was immediately accretive. Our ability to rapidly deploy these proceeds reflects the breadth and quality of our unique sourcing capabilities. The lending market remains active and competitive, with pricing, leverage and documentation terms beginning to return to pre-COVID levels. Our pipeline for future deal flow is at an all-time high 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."

Portfolio and Investment Activity

As of December 31, 2021, the fair value of WhiteHorse Finance's investment portfolio was $819.2 million, compared with $690.7 million as of December 31, 2020. The portfolio as of December 31, 2021 consisted of 127 positions across 76 companies with a weighted average effective yield of 9.1% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV (as defined below)) was $6.8 million with the overall portfolio comprised of approximately 85.1% first lien secured loans, 2.9% second lien secured loans, 2.8% equity and 9.2% in investments in STRS JV. Almost all loans were variable rate investments (primarily indexed to the London Interbank Offered 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 December 31, 2021, WhiteHorse Finance made investments in 18 new portfolio companies for a total of $181.3 million, added a total of $17.9 million to existing portfolio companies, and made net fundings of $2.7 million to revolver loans. Proceeds from sales and repayments, totaled approximately $35.0 million for the three months ended December 31, 2021, driven by four full realizations in Golden Pear Funding Assetco, LLC, SmartSign Holdings LLC, Policy Services Company, LLC and Convergence Technologies, Inc.

In addition to the transactions discussed above, during the three months ended December 31, 2021, WhiteHorse Finance transferred assets comprised of three new portfolio companies, one add-on and the remaining portion of one previously transferred deal totaling $35.1 million to STRS JV in exchange for a net investment in STRS JV of $3.4 million as well as cash proceeds of $31.7 million.

During the year ended December 31, 2021, WhiteHorse Finance invested $371.4 million across 35 new portfolio companies. The Company also invested $72.0 million in existing portfolio companies, exclusive of refinancings. Proceeds from sales and repayments, exclusive of refinancings, totaled approximately $202.1 million for the year. In addition, the Company refinanced three first lien investments, NNA Services, LLC, EducationDynamics, LLC and Source Code Midco, LLC, resulting in net repayments of approximately $7.3 million. Gross receipts from refinancings were $47.1 million and gross deployments from refinancings were $39.8 million.

In addition to the transactions above, during the year ended December 31, 2021, WhiteHorse Finance transferred assets totaling $141.6 million in exchange for a net investment in STRS JV of $23.6 million as well as cash proceeds of $118.0 million. As of December 31, 2021, the Company's investment in STRS JV was approximately $75.6 million, at fair value.

WHF STRS Ohio Senior Loan Fund LLC

As of December 31, 2021, STRS JV's portfolio totaled $259.5 million, consisted of 28 portfolio companies and had a weighted average effective yield of 7.9% on its portfolio.

Results of Operations

For the three months and year ended December 31, 2021, the Company's net investment income was approximately $7.5 million and $28.8 million, respectively, compared with approximately $6.9 million and $24.2 million for the same period in the prior year, representing an increase of approximately 8.7% and 19.0%, respectively. The increase in net investment income for the year-over-year period was primarily attributable to higher investment income from STRS JV, accelerated accretion and interest income recognized due to higher repayment activities and larger portfolio size in both the Company and STRS JV. This was partially offset by higher interest expense incurred due to higher leverage balances and higher management fee charged on higher average total assets. For the three months ended December 31, 2021, the Company's investment in STRS JV generated an annualized, gross investment yield of approximately 12.6%.

For the three months and year ended December 31, 2021, core net investment income(3) was $7.3 million and $29.7 million, or $0.322 per share and $1.405 per share, respectively, compared with $7.1 million and $25.7 million, or $0.348 per share and $1.249 per share, for the same periods in the prior year.

For the three months and year ended December 31, 2021, WhiteHorse Finance reported a net realized and unrealized loss on investments and foreign currency transactions of $4.3 million and a net realized and unrealized gain on investments and foreign currency transactions of $1.3 million, respectively. This compares with net realized and unrealized gains on investments and foreign currency transactions of $1.3 million and $7.5 million for the three months and year ended December 31, 2020, respectively. The decrease for the year-over-year period was primarily attributable to unrealized losses generated on markdowns on two portfolio companies, Grupo HIMA San Pablo, Inc. and PlayMonster LLC.

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $3.1 million and $30.1 million for the three months and year ended December 31, 2021, respectively, which compares with a net increase of $8.2 million and $31.7 million for the three months and year ended December 31, 2020, respectively.

WhiteHorse Finance's net asset value was $349.8 million, or $15.10 per share, as of December 31, 2021, as compared with $323.7 million, or $15.46 per share, as of September 30, 2021. As of December 31, 2020, WhiteHorse Finance's net asset value was $312.9 million, or $15.23 per share.

Liquidity and Capital Resources

As of December 31, 2021, WhiteHorse Finance had cash and cash equivalents of $22.5 million, as compared with $16.6 million as of September 30, 2021, inclusive of restricted cash. As of December 31, 2021, the Company also had $43.4 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 March 31, 2022. The distribution will be payable on April 4, 2022 to stockholders of record as of March 25, 2022.

On November 9, 2021, the Company declared a distribution of $0.355 per share for the quarter ended December 31, 2021, consistent with distributions declared for the thirty-seventh consecutive quarter since the Company's initial public offering. The distribution was paid on January 4, 2022 to stockholders of record as of December 20, 2021. In addition, previously on October 14, 2021, the Company declared a special distribution of $0.135 per share, which was paid on December 10, 2021 to stockholders of record as of October 29, 2021.

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 fourth quarter and full year results for the period ended December 31, 2021 at 12:00 p.m. ET on Thursday, March 3, 2022. To access the teleconference, please dial 800-909-5202 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference Conference ID #WHFQ421. 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 March 10, 2022. The teleconference replay can be accessed by dialing 888-219-1262 (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.

(1) Includes investments in WHF STRS Ohio Senior Loan Fund LLC ("STRS JV"), an unconsolidated joint venture, totaling $75.6 million, at fair value.
(2) Excludes investments made in STRS JV.
(3) "Core net investment income" is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding (i) the net impact of costs associated with the refinancing of the Company's indebtedness, (ii) the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and (iii) excise and other income taxes related to such net realized gains and losses (net of incentive fees). The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Additional information on core net investment income and a reconciliation of core net investment income to its most directly comparable GAAP financial measure, net investment income, are set forth in Schedule 1 hereto.
(4) Based on total capital commitments managed by H.I.G. Capital and affiliates.

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 for the quarters and years ended December 31, 2021 and December 31, 2020.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended December 31, 2021 and December 31, 2020 (in thousands, except per share data):

The following table provides a reconciliation of net investment income to core net investment income for the years ended December 31, 2021 and December 31, 2020 (in thousands, except per share data):