WhiteHorse Finance, Inc. Announces First Quarter 2018 Earnings Results

PR Newswire

NEW YORK, May 8, 2018

NEW YORK, May 8, 2018 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") WHF today announced its financial results for the quarter ended March 31, 2018.

First Quarter 2018 Summary Highlights

New investments of $54.1 million
Net investment income of $8.6 million
First quarter net investment income of $0.418 per share
First quarter distribution of $0.355 per share

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer commented, "Our strong first quarter results were driven by our successful pursuit of high-yielding senior-secured direct originations. This transaction activity validates our rigorous and dynamic approach to sourcing, which facilitates business development in less competitive areas of the lower mid-market at leverage levels consistent with our historical averages. Our focus on companies with limited cyclicality, high free cash flow conversion, and no binary outcome risk is a meaningful differentiator that has created value for our shareholders."

Portfolio and Investment Activity

As of March 31, 2018, the fair value of WhiteHorse Finance's investment portfolio was $467.7 million, compared with $440.7 million as of December 31, 2017. The portfolio at March 31, 2018 consisted of 48 positions across 34 companies with an average investment size of $9.7 million and a weighted average effective yield of 12.0%. The majority of the portfolio was comprised of senior secured loans, and these loans were substantially all variable-rate investments (primarily indexed to LIBOR), which should continue to position the portfolio well for a rising interest rate environment.

During the three months ended March 31, 2018, WhiteHorse Finance made investments in four new portfolio companies totaling $54.1 million. Gross proceeds from sales and repayments totaled $33.0 million for the quarter primarily driven by full repayment on three positions. In addition, WhiteHorse Finance refinanced two of its existing positions. The first, Clarus Commerce, LLC, was a net increase of $10.9 million (after taking into account refinancing proceeds of $6.0 million). The second was to Fluent, LLC which reduced the Company's position by $13.2 million (after taking into account refinancing proceeds of $25.7 million). The Company remained highly selective in deploying new investments.

Results of Operations

For the three months ended March 31, 2018, net investment income was $8.6 million, compared with $6.5 million for the same period in the prior year, representing an increase of approximately 32.3%. The increase in net investment income was primarily attributable to an increase in fee income resulting from non-recurring prepayment and amendment fees as compared to the same period in the prior year.

For the three months ended March 31, 2018, WhiteHorse Finance reported net realized and unrealized gains on investments of $5.3 million. This compares with realized and unrealized gains on investments of $3.1 million for the three months ended March 31, 2017. The increase in net realized and unrealized gains on investments was primarily attributable to favorable fair value adjustments on an aggregate basis.

WhiteHorse Finance reported a net increase in net assets of $13.9 million for the three months ended March 31, 2018, which compares with a net increase of $9.6 million for the three months ended March 31, 2017.

WhiteHorse Finance's net asset value was $293.5 million, or $14.30 per share, as of March 31, 2018, as compared with $287.0 million, or $13.98 per share, reported as of December 31, 2017.

Liquidity and Capital Resources

As of March 31, 2018, WhiteHorse Finance had cash and cash equivalents of $18.6 million, as compared with $38.9 million as of December 31, 2017, inclusive of restricted cash. As of March 31, 2018, the Company had $45.0 million of undrawn capacity under its revolving credit facility.

Distributions

On March 12, 2018, the Company declared a distribution of $0.355 per share for the quarter ended March 31, 2018, consistent for the twenty-second consecutive quarter since the Company's IPO. The distribution was paid on April 2, 2018 to stockholders of record as of March 26, 2018.

Distributions are paid from taxable earnings and may include a 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 at 10:00 am ET on Tuesday, May 8, 2018. To access the teleconference, please dial 706-758-9224 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference ID #4386858. 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 15, 2018. The teleconference replay can be accessed by dialing 404-537-3406 (domestic and international) and entering ID #4386858. 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 $25 billion of capital under management⁽¹⁾ 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) Based on total capital commitments managed by H.I.G. Capital and affiliates.}

WhiteHorse Finance, Inc. Consolidated Statements of Assets and Liabilities *(in thousands, except share and per share data)*

	March 31, 2018		December 31, 2017
	(Unaudited)
Assets
Investments, at fair value
Non-controlled/non-affiliate company investments	$	423,309	$	404,434
Non-controlled affiliate company investments		44,433		36,246
Total investments, at fair value (amortized cost $470,309 and $448,522, respectively)		467,742		440,680
Cash and cash equivalents		11,992		35,219
Restricted cash and cash equivalents		6,580		3,717
Interest receivable		5,030		4,947
Receivables from investments sold		463		783
Prepaid expenses and other receivables		838		185
Total assets	$	492,645	$	485,531

Liabilities
Debt	$	182,317	$	182,122
Distributions payable		7,289		7,289
Management fees payable		7,736		7,848
Accounts payable and accrued expenses		1,064		701
Interest payable		562		527
Advances received from unfunded credit facilities		161		92
Total liabilities		199,129		198,579

Commitments and contingencies

Net assets
Common stock, 20,531,948 shares issued and outstanding, par value $0.001 per share and 100,000,000 authorized		20		20
Paid-in capital in excess of par		302,292		302,292
Accumulated overdistributed net investment income		(5,495)		(6,784)
Accumulated net realized losses on investments		(734)		(734)
Accumulated net unrealized depreciation on investments		(2,567)		(7,842)
Total net assets		293,516		286,952
Total liabilities and total net assets	$	492,645	$	485,531

Number of shares outstanding		20,531,948		20,531,948
Net asset value per share	$	14.30	$	13.98

WhiteHorse Finance, Inc. Consolidated Statements of Operations (Unaudited) *(in thousands, except share and per share data)*

	Three months ended March 31,
	2018		2017
Investment income
From non-controlled/non-affiliate company investments
Interest income	$	13,763	$	12,018
Fee income		2,192		767
From non-controlled affiliate company investments
Dividend income		650		790
Total investment income		16,605		13,575

Expenses
Interest expense		2,565		2,444
Base management fees		2,445		2,262
Performance-based incentive fees		2,144		1,631
Administrative service fees		175		134
General and administrative expenses		698		582
Total expenses		8,027		7,053
Net investment income		8,578		6,522

Realized and unrealized gains (losses) on investments
Net realized gains
Non-controlled/non-affiliate company investments		-		23
Net realized gains		-		23
Net change in unrealized appreciation (depreciation)
Non-controlled/non-affiliate company investments		(2,911)		3,227
Non-controlled affiliate company investments		8,186		(143)
Net change in unrealized appreciation		5,275		3,084
Net realized and unrealized gains on investments		5,275		3,107
Net increase in net assets resulting from operations	$	13,853	$	9,629

Per Common Share Data
Basic and diluted earnings per common share	$	0.68	$	0.53
Dividends and distributions declared per common share	$	0.36	$	0.36
Basic and diluted weighted average common shares outstanding		20,531,948		18,303,890

WhiteHorse Finance, Inc. Consolidated Schedule of Investments (Unaudited) March 31, 2018 *(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal/ Share Amount		Amortized Cost		Fair Value⁽¹⁰⁾		Fair Value As A Percentage of Net Assets
North America
Debt Investments
Advertising
Fluent, LLC
First Lien Secured Term Loan	L+ 7.00%	8.87%	03/27/23		12,500	$	12,500	$	12,500		4.26	%
	(0.50% Floor)
Outcome Health
First Lien Secured Term Loan	L+ 9.50%	11.44%	12/22/21		11,298		10,457		9,716		3.31
	(1.00% Floor)	(3.00% PIK)
					23,798		22,957		22,216		7.57
Application Software
Intermedia Holdings, Inc.
Second Lien Secured Term Loan	L+ 9.50%	11.27%	02/03/25		18,000		17,691		17,892		6.10
	(1.00% Floor)
Automotive Retail
Team Car Care Holdings, LLC
First Lien Secured Term Loan⁽⁴⁾	L+ 8.00%	9.89%	02/23/23		18,453		18,045		18,078		6.16
	(1.00% Floor)
First Lien Secured Revolving Loan⁽⁴⁾⁽⁷⁾	L+ 7.00%	11.75%	02/23/23		-		-		3		-
	(1.00% Floor)				18,453		18,045		18,081		6.16
Broadcasting
Multicultural Radio Broadcasting, Inc.
First Lien Secured Term Loan	L+ 8.00%	9.89%	12/28/22		19,920		19,542		19,580		6.67
	(1.00% Floor)
Rural Media Group, Inc.
First Lien Secured Term Loan	L+ 6.75%	9.63%	12/29/22		7,133		6,998		7,008		2.39
	(1.00% Floor)
First Lien Secured Delayed Draw Loan⁽⁷⁾	L+ 6.75%	9.63%	12/29/22		-		-		4		-
	(1.00% Floor)
					27,053		26,540		26,592		9.06
Data Processing & Outsourced Services
FPT Operating Company, LLC/
TLabs Operating Company, LLC
First Lien Secured Term Loan	L+ 8.25%	9.91%	12/23/21		23,156		22,848		22,925		7.81
	(1.00% Floor)
Department Stores
Mills Fleet Farm Group, LLC
Second Lien Secured Term Loan	L+ 9.75%	11.63%	02/26/23		7,146		7,043		7,146		2.43
	(1.00% Floor)
Diversified Support Services
Account Control Technology Holdings, Inc.
First Lien Secured Term Loan⁽⁴⁾	L+ 8.50%	10.27%	04/28/22		11,576		11,303		11,381		3.88
	(1.00% Floor)
ImageOne Industries, LLC
First Lien Secured Term Loan	L+ 7.50%	9.39%	01/11/23		7,607		7,461		7,493		2.55
	(1.00% Floor)
First Lien Secured Revolving Loan⁽⁷⁾	L+ 6.50%	11.25%	01/11/23		-		-		8		-
	(1.00% Floor)
Sitel Worldwide Corporation
Second Lien Secured Term Loan	L+ 9.50%	11.25%	09/18/22		8,670		8,559		8,757		2.98
	(1.00% Floor)
					27,853		27,323		27,639		9.41

WhiteHorse Finance, Inc. Consolidated Schedule of Investments (Unaudited) - (continued) March 31, 2018 *(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal/ Share Amount		Amortized Cost		Fair Value⁽¹⁰⁾		Fair Value As A Percentage of Net Assets
Environmental & Facilities Services
Montrose Environmental Group, Inc.
Second Lien Secured Term Loan	L+ 9.50%	11.27%	09/30/20		8,500	$	8,359	$	8,350		2.84	%
	(1.00% Floor)
Food Retail
AG Kings Holdings, Inc.
First Lien Secured Term Loan	L+ 9.95%	12.25%	08/10/21		13,510		13,117		13,105		4.46
	(1.00% Floor)
Crews of California, Inc.
First Lien Secured Term Loan	L+ 11.00%	12.78%	11/20/19		16,681		16,576		16,513		5.63
	(1.00% Floor)	(1.00% PIK)
First Lien Secured Revolving Loan	L+ 11.00%	12.78%	11/20/19		5,132		5,090		5,080		1.73
	(1.00% Floor)	(1.00% PIK)
First Lien Secured Delayed Draw Loan	L+ 11.00%	12.78%	11/20/19		4,834		4,796		4,785		1.63
	(1.00% Floor)	(1.00% PIK)
					40,157		39,579		39,483		13.45
Health Care Facilities
Grupo HIMA San Pablo, Inc.
First Lien Secured Term Loan	L+ 9.00%	10.50%	01/31/18		14,250		14,250		11,129		3.79
	(1.50% Floor)
Second Lien Secured Term Loan⁽⁸⁾	N/A	15.75%	07/31/18		1,028		1,025		119		0.04
		(2.00% PIK)
					15,278		15,275		11,248		3.83
Internet Retail
Clarus Commerce, LLC
First Lien Secured Term Loan	L+ 8.62%	10.51%	03/09/23		17,100		16,899		16,895		5.76
	(1.00% Floor)
Internet Software & Services
London Trust Media Incorporated
First Lien Secured Term Loan	L+ 8.00%	9.77%	02/01/23		11,500		11,334		11,344		3.86
	(1.00% Floor)
StackPath, LLC & Highwinds Capital, Inc.
Second Lien Secured Term Loan	L+ 9.50%	11.29%	02/02/24		18,000		17,624		17,640		6.01
	(1.00% Floor)
					29,500		28,958		28,984		9.87
Investment Banking & Brokerage
JVMC Holdings Corp. (f/k/a RJO Holdings Corp)
First Lien First Out Secured Term Loan	L+ 8.02%	9.90%	05/05/22		12,994		12,754		12,994		4.43
	(1.00% Floor)
First Lien Last Out Secured Term Loan	L+ 12.00%	13.88%	05/05/22		4,813		4,724		4,813		1.64
	(1.00% Floor)
					17,807		17,478		17,807		6.07
IT Consulting & Other Services
AST-Applications Software Technology LLC
First Lien Secured Term Loan	L+ 9.00%	10.89%	01/10/23		4,171		4,092		4,004		1.36
	(1.00% Floor)	(2.00% PIK)

WhiteHorse Finance, Inc. Consolidated Schedule of Investments (Unaudited) - (continued) March 31, 2018 *(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal/ Share Amount		Amortized Cost		Fair Value⁽¹⁰⁾		Fair Value As A Percentage of Net Assets
Leisure Facilities
Planet Fit Indy 10 LLC
First Lien Incremental Term Loan	L+ 7.25%	9.55%	03/07/22		1,930	$	1,912	$	1,911		0.65	%
	(1.00% Floor)
First Lien Initial Delayed Draw Loan⁽⁷⁾	L+ 7.25%	9.23%	03/07/22		2,658		2,633		2,629		0.90
	(1.00% Floor)
First Lien Initial Term Loan	L+ 7.25%	9.28%	03/07/22		131		131		130		0.04
	(1.00% Floor)
					4,719		4,676		4,670		1.59
Oil & Gas Exploration & Production
Caelus Energy Alaska O3, LLC
Second Lien Secured Term Loan	L+ 7.50%	9.68%	04/15/20		13,000		12,937		11,631		3.96
	(1.25% Floor)
Other Diversified Financial Services
Sigue Corporation⁽⁴⁾
Second Lien Secured Term Loan	L+ 11.50%	13.81%	12/27/18		25,000		24,926		23,125		7.88
	(1.00% Floor)
The Pay-O-Matic Corp.
First Lien Secured Term Loan	L+ 13.00%	14.69%	04/02/18		11,829		11,829		11,889		4.05
	(1.00% Floor)
					36,829		36,755		35,014		11.93
Research & Consulting Services
Nelson Worldwide, LLC
First Lien Secured Term Loan	L+ 8.00%	9.70%	01/09/23		17,710		17,287		17,312		5.90
	(1.00% Floor)
First Lien Secured Revolving Loan⁽⁷⁾	L+ 8.00%	9.70%	01/09/23		1,234		1,205		1,208		0.41
	(1.00% Floor)
					18,944		18,492		18,520		6.31
Security & Alarm Services
SecurAmerica, LLC
First Lien Secured Term Loan	L+ 9.50%	11.48%	11/17/22		11,320		11,058		11,114		3.79
	(1.00% Floor)
Specialized Consumer Services
Pre-Paid Legal Services, Inc.
Second Lien Secured Term Loan	L+ 9.00%	10.88%	07/01/20		19,000		18,921		18,999		6.47
	(1.25% Floor)

WhiteHorse Finance, Inc. Consolidated Schedule of Investments (Unaudited) - (continued) March 31, 2018 *(in thousands)*

Investment Type⁽¹⁾	Spread Above Index⁽²⁾	Interest Rate⁽³⁾	Maturity Date	Principal/ Share Amount		Amortized Cost		Fair Value⁽¹⁰⁾	Fair Value As A Percentage of Net Assets
Specialized Finance
Golden Pear Funding III, LLC⁽⁵⁾
Second Lien Secured Term Loan	L+ 11.25%	13.02%	06/25/20	25,000	$	24,869	$	24,500	8.35	%
	(1.00% Floor)
Second Lien Secured Revolving Loan	L+ 11.25%	13.02%	06/25/20	5,000		4,974		4,900	1.67
	(1.00% Floor)
Oasis Legal Finance, LLC⁽⁵⁾
Second Lien Secured Term Loan	L+ 10.75%	12.41%	03/09/22	20,000		19,714		20,000	6.81
	(1.00% Floor)
				50,000		49,557		49,400	16.83
Trucking
Sunteck / TTS Holdings, LLC
Second Lien Secured Term Loan	L+ 9.00%	11.12%	06/15/22	3,500		3,453		3,500	1.19
	(1.00% Floor)
Total Debt Investments				435,284		428,936		422,110	143.79

Equity Investments
Advertising
Cogint, Inc. (f/k/a IDI, Inc.)⁽⁴⁾⁽⁹⁾	N/A	N/A	12/08/25	187		560		467	0.16

Food Retail
Crews of California, Inc. Warrants ⁽⁴⁾	N/A	N/A	12/31/24	-		-		6	0.00
Nicholas & Associates, LLC Warrants⁽⁴⁾	N/A	N/A	12/31/24	3		-		131	0.04
Pinnacle Management Group, LLC Warrants⁽⁴⁾	N/A	N/A	12/31/24	3		-		131	0.04
RC3 Enterprises, LLC Warrants⁽⁴⁾	N/A	N/A	12/31/24	3		-		131	0.04
				9		-		399	0.12

Internet Software & Services
Red Violet, Inc.⁽⁴⁾⁽⁹⁾	N/A	N/A	N/A	25		-		152	0.05

Other Diversified Financial Services
Aretec Group, Inc. ^(4)(5)(6)	N/A	N/A	N/A	536		20,693		25,141	8.57

RCS Creditor Trust Class B Units⁽⁴⁾⁽⁶⁾	N/A	N/A	N/A	143		-		543	0.18
				679		20,693		25,684	8.75
Specialized Finance
NMFC Senior Loan Program I LLC Units ^(4)(5)(6)	N/A	N/A	06/13/20	20,000		20,120		18,750	6.39

Trucking
Fox Rent A Car, Inc. Warrants⁽⁴⁾	N/A	N/A	N/A	-		-		180	0.06

Total Equity Investments				20,900		41,373		45,632	15.53

Total Investments				456,184	$	470,309	$	467,742	159.32	%

(1) Except as otherwise noted, all investments are non-controlled/non-affiliate investments as defined by the Investment Company Act of 1940, as amended (the "1940 Act"), and provide collateral for the Company's credit facility.

(2) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate ("LIBOR" or "L"), which resets monthly, quarterly or semiannually, or the U.S. Prime Rate as published by the Wall Street Journal ("Prime" or "P"). The one, three and six-month LIBOR were 1.9%, 2.0% and 2.3%, respectively, as of March 31, 2018. The Prime was 4.8% as of March 31, 2018.

(3) The interest rate is the "all-in-rate" including the current index and spread, the fixed rate, and the payment-in-kind ("PIK") interest rate, as the case may be.

(4) The investment or a portion of the investment does not provide collateral for the Company's credit facility.

(5) Not a qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of total assets. Qualifying assets represented 81% of total assets as of the date of the consolidated schedule of investments.

(6) Investment is a non-controlled/affiliate investment as defined by the 1940 Act.

(7) The investment has an unfunded commitment in addition to any amounts presented in the consolidated schedule of investments as of March 31, 2018.

(8) The investment is on non-accrual status.

(9) The fair value of the investment was determined using observable inputs.

(10) Except as otherwise noted, the fair value of each investment was determined using significant unobservable inputs.

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SOURCE WhiteHorse Finance, Inc.

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