CION Investment Corporation Reports Third Quarter 2023 Financial Results

Reports Another Solid Quarterly Performance, Out Earning the Total Distribution by 41% and Achieving a $0.49 per Share Increase in NAV

Announces Fourth Quarter 2023 Base Distribution of $0.34 per Share

CION Investment Corporation (NYSE: CION) (“CION” or the “Company”) today reported financial results for the third quarter ended September 30, 2023 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.

CION also announced that, on November 6, 2023, its co-chief executive officers declared a fourth quarter 2023 regular distribution of $0.34 per share payable on December 15, 2023 to shareholders of record as of December 1, 2023.

THIRD QUARTER AND OTHER HIGHLIGHTS

  • Net investment income and earnings per share for the quarter ended September 30, 2023 were $0.55 per share and $0.87 per share, respectively;
  • Net asset value per share was $15.80 as of September 30, 2023 compared to $15.31 as of June 30, 2023, an increase of $0.49 per share, or 3.2%. 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 September 30, 2023, the Company had $1,008 million of total principal amount of debt outstanding, of which 72% was comprised of senior secured bank debt and 28% was comprised of unsecured debt. The Company’s net debt-to-equity ratio was 1.03x as of September 30, 2023 compared to 1.04x as of June 30, 2023;
  • As of September 30, 2023, the Company had total investments at fair value of $1,728 million in 109 portfolio companies across 24 industries. The investment portfolio was comprised of 87.8% senior secured loans, including 85.7% in first lien investments;1
  • During the quarter, the Company funded new investment commitments of $93 million, funded previously unfunded commitments of $10 million, and had sales and repayments totaling $96 million, resulting in a net increase to the Company's funded portfolio of $7 million;
  • As of September 30, 2023, investments on non-accrual status amounted to 1.0% and 3.8% of the total investment portfolio at fair value and amortized cost, respectively, which are down from 1.7% and 4.8%, respectively, as of June 30, 2023; and
  • During the quarter, the Company repurchased 168,023 shares of its common stock under its 10b5-1 trading plan at an average price of $10.71 per share for a total repurchase amount of $1.8 million. Through September 30, 2023, the Company repurchased a total of 2,493,645 shares of its common stock under its 10b5-1 trading plan at an average price of $9.65 per share for a total repurchase amount of $24.1 million.

DISTRIBUTIONS

  • For the quarter ended September 30, 2023, the Company paid a regular quarterly distribution totaling $18.6 million, or $0.34 per share, and declared supplemental distributions of (a) $2.7 million, or $0.05 per share, which was paid on October 16, 2023 and (b) $0.05 per share, payable on January 15, 2024 to shareholders of record as of December 29, 2023.

SUBSEQUENT EVENTS

  • On October 10, 2023, the Company completed a private offering in Israel pursuant to which the Company issued approximately $33.1 million of its additional unsecured Series A Notes due 2026, which bear interest at a floating rate equal to SOFR plus a credit spread of 3.82% per year payable quarterly; and
  • On November 8, 2023, the Company completed a private offering pursuant to which the Company issued $100 million of its unsecured notes due 2027, which bear interest at a floating rate equal to the three-month SOFR plus a credit spread of 4.75% per year and subject to a 2.00% SOFR floor payable quarterly.

Michael A. Reisner, co-Chief Executive Officer of CION, commented:

“We are pleased to have delivered another strong quarter, supported by NII out-earning the dividends and quarterly NAV growth. Our credit performance remains robust, with a decline in non-accruals, down to 1.03% of fair value, and 99% of our portfolio is risk-rated at 3 or higher. We continue to focus on first lien loans to true middle-market companies and have once again demonstrated our ability to access the lending markets, expanding our unsecured debt offering, and maintaining a conservative approach to leverage—all while delivering strong returns to our investors. As we look ahead, CION is strategically positioned to deliver robust returns to shareholders."

SELECTED FINANCIAL HIGHLIGHTS

 

 

As of

(in thousands, except per share data)

 

September 30, 2023

 

June 30, 2023

Investment portfolio, at fair value1

 

$

1,727,943

 

$

1,687,691

Total debt outstanding2

 

$

1,008,212

 

$

985,712

Net assets

 

$

860,760

 

$

836,364

Net asset value per share

 

$

15.80

 

$

15.31

Debt-to-equity

 

1.17x

 

1.18x

Net debt-to-equity

 

1.03x

 

1.04x

 

 

Three Months Ended

(in thousands, except share and per share data)

 

September 30, 2023

 

June 30, 2023

Total investment income

 

$

67,540

 

 

$

58,496

 

Total operating expenses and income tax expense

 

$

37,550

 

 

$

35,080

 

Net investment income after taxes

 

$

29,990

 

 

$

23,416

 

Net realized losses

 

$

(8,123

)

 

$

(18,928

)

Net unrealized gains

 

$

25,606

 

 

$

23,406

 

Net increase in net assets resulting from operations

 

$

47,473

 

 

$

27,894

 

 

 

 

 

 

Net investment income per share

 

$

0.55

 

 

$

0.43

 

Net realized and unrealized gains per share

 

$

0.32

 

 

$

0.08

 

Earnings per share

 

$

0.87

 

 

$

0.51

 

 

 

 

 

 

Weighted average shares outstanding

 

 

54,561,367

 

 

 

54,788,740

 

Distributions declared per share

 

$

0.39

 

 

$

0.34

 

Total investment income for the three months ended September 30, 2023 and June 30, 2023 was $67.5 million and $58.5 million, respectively. The increase in investment income was primarily driven by make-whole payments received on certain investments during the three months ended September 30, 2023.

Operating expenses for the three months ended September 30, 2023 and June 30, 2023 were $37.6 million and $35.1 million, respectively. During the quarter ended September 30, 2023, the Company incurred higher advisory fees due to an increase in investment income and higher interest expense because of an increase in SOFR and LIBOR rates as compared to the quarter ended June 30, 2023.

PORTFOLIO AND INVESTMENT ACTIVITY1

A summary of the Company's investment activity for the three months ended September 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

 

$

96,427

 

100

%

 

$

96,283

 

100

%

Senior secured second lien debt

 

 

 

 

 

 

5

 

 

Collateralized securities and structured products - equity

 

 

 

 

 

 

86

 

 

Equity

 

 

377

 

 

 

 

 

 

Total

 

$

96,804

 

100

%

 

$

96,374

 

100

%

During the three months ended September 30, 2023, new investment commitments were made across 3 new and 11 existing portfolio companies. During the same period, the Company received the full repayment on investments in 5 portfolio companies and sold all investments in 1 portfolio company. As a result, the number of portfolio companies decreased from 112 as of June 30, 2023 to 109 as of September 30, 2023.

PORTFOLIO SUMMARY1

As of September 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

 

$

1,481,498

 

85.7

%

Senior secured second lien debt

 

 

36,114

 

2.1

%

Collateralized securities and structured products - equity

 

 

1,224

 

0.1

%

Unsecured debt

 

 

14,631

 

0.8

%

Equity

 

 

194,476

 

11.3

%

Total

 

$

1,727,943

 

100.0

%

The following table presents certain selected information regarding the Company’s investments:

 

 

As of

 

 

September 30, 2023

 

June 30, 2023

Number of portfolio companies

 

109

 

112

Percentage of performing loans bearing a floating rate3

 

92.5 %

 

92.2 %

Percentage of performing loans bearing a fixed rate3

 

7.5 %

 

7.8 %

Yield on debt and other income producing investments at amortized cost4

 

13.04 %

 

12.38 %

Yield on performing loans at amortized cost4

 

13.55 %

 

13.10 %

Yield on total investments at amortized cost

 

11.81 %

 

11.45 %

Weighted average leverage (net debt/EBITDA)5

 

4.78x

 

4.83x

Weighted average interest coverage5

 

1.93x

 

2.00x

Median EBITDA6

 

$33.7 million

 

$35.0 million

As of September 30, 2023, investments on non-accrual status represented 1.0% and 3.8% of the total investment portfolio at fair value and amortized cost, respectively. 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.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2023, the Company had $1,008 million of total principal amount of debt outstanding, comprised of $722 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 8.3% for the quarter ended September 30, 2023. As of September 30, 2023, the Company had $124 million in cash and short-term investments and $103 million available under its financing arrangements.2

EARNING CONFERENCE CALL

CION will host an earnings conference call on Thursday, November 9, 2023 at 11:00 am Eastern Time to discuss its financial results for the third quarter ended September 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 2023 Third Quarter Conference Call. 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

  1. The discussion of the investment portfolio excludes short-term investments.
  2. Total debt outstanding excludes netting of debt issuance costs of $8.0 million and $9.0 million as of September 30, 2023 and June 30, 2023, respectively.
  3. 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.
  4. 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.
  5. 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 believes 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, and excludes 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.
  6. 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)

 

 

 

September 30, 2023

 

June 30, 2023

 

 

(unaudited)

 

(unaudited)

Assets

Investments, at fair value:

 

 

 

 

Non-controlled, non-affiliated investments (amortized cost of $1,555,700 and $1,583,865, respectively)

 

$

1,508,505

 

 

$

1,510,372

 

Non-controlled, affiliated investments (amortized cost of $207,222 and $204,248, respectively)

 

 

201,617

 

 

 

198,084

 

Controlled investments (amortized cost of $132,900 and $76,900, respectively)

 

 

134,755

 

 

 

80,006

 

Total investments, at fair value (amortized cost of $1,895,822 and $1,865,013, respectively)

 

 

1,844,877

 

 

 

1,788,462

 

Cash

 

 

6,805

 

 

 

11,515

 

Interest receivable on investments

 

 

40,378

 

 

 

33,200

 

Receivable due on investments sold and repaid

 

 

2,646

 

 

 

997

 

Dividends receivable on investments

 

 

82

 

 

 

 

Prepaid expenses and other assets

 

 

1,552

 

 

 

608

 

Total assets

 

$

1,896,340

 

 

$

1,834,782

 

 

 

 

 

 

Liabilities and Shareholders' Equity

Liabilities

 

 

 

 

Financing arrangements (net of unamortized debt issuance costs of $8,001 and $8,976, respectively)

 

$

1,000,211

 

 

$

976,737

 

Payable for investments purchased

 

 

9,663

 

 

 

 

Accounts payable and accrued expenses

 

 

1,510

 

 

 

1,344

 

Interest payable

 

 

7,238

 

 

 

8,183

 

Accrued management fees

 

 

6,741

 

 

 

6,546

 

Accrued subordinated incentive fee on income

 

 

6,362

 

 

 

4,967

 

Accrued administrative services expense

 

 

1,064

 

 

 

574

 

Share repurchases payable

 

 

67

 

 

 

67

 

Shareholder distribution payable

 

 

2,724

 

 

 

 

Total liabilities

 

 

1,035,580

 

 

 

998,418

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

Common stock, $0.001 par value; 500,000,000 shares authorized; 54,477,427 and 54,645,571 shares issued, and 54,464,804 and 54,632,827 shares outstanding, respectively

 

 

54

 

 

 

55

 

Capital in excess of par value

 

 

1,035,929

 

 

 

1,037,729

 

Accumulated distributable losses

 

 

(175,223

)

 

 

(201,420

)

Total shareholders' equity

 

 

860,760

 

 

 

836,364

 

Total liabilities and shareholders' equity

 

$

1,896,340

 

 

$

1,834,782

 

Net asset value per share of common stock at end of period

 

$

15.80

 

 

$

15.31

 

 

CION Investment Corporation

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

Year Ended

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

Investment income

 

 

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

51,032

 

 

$

37,336

 

 

$

140,917

 

 

$

100,079

 

 

$

140,560

 

Paid-in-kind interest income

 

 

6,608

 

 

 

6,876

 

 

 

15,736

 

 

 

16,095

 

 

 

22,737

 

Fee income

 

 

2,447

 

 

 

4,542

 

 

 

4,744

 

 

 

8,045

 

 

 

9,019

 

Dividend income

 

 

82

 

 

 

57

 

 

 

82

 

 

 

103

 

 

 

103

 

Non-controlled, affiliated investments

 

 

 

 

 

 

 

 

 

 

Paid-in-kind interest income

 

 

2,471

 

 

 

1,174

 

 

 

5,953

 

 

 

3,493

 

 

 

6,204

 

Interest income

 

 

1,341

 

 

 

1,949

 

 

 

5,549

 

 

 

4,517

 

 

 

5,865

 

Dividend income

 

 

13

 

 

 

13

 

 

 

3,946

 

 

 

66

 

 

 

79

 

Fee income

 

 

35

 

 

 

19

 

 

 

2,432

 

 

 

525

 

 

 

525

 

Controlled investments

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,413

 

 

 

2,197

 

 

 

5,304

 

 

 

6,066

 

 

 

6,049

 

Dividend income

 

 

 

 

 

 

 

 

4,250

 

 

 

 

 

 

1,275

 

Paid-in-kind interest income

 

 

1,048

 

 

 

 

 

 

1,048

 

 

 

409

 

 

 

2,482

 

Total investment income

 

 

67,540

 

 

 

54,163

 

 

 

191,011

 

 

 

139,398

 

 

 

194,898

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

6,741

 

 

 

6,942

 

 

 

19,963

 

 

 

20,436

 

 

 

27,361

 

Administrative services expense

 

 

996

 

 

 

733

 

 

 

2,743

 

 

 

2,234

 

 

 

3,348

 

Subordinated incentive fee on income

 

 

6,362

 

 

 

5,421

 

 

 

17,662

 

 

 

13,645

 

 

 

18,710

 

General and administrative

 

 

1,931

 

 

 

2,027

 

 

 

5,960

 

 

 

5,961

 

 

 

7,278

 

Interest expense

 

 

21,757

 

 

 

13,469

 

 

 

61,533

 

 

 

32,769

 

 

 

49,624

 

Total operating expenses

 

 

37,787

 

 

 

28,592

 

 

 

107,861

 

 

 

75,045

 

 

 

106,321

 

Net investment income before taxes

 

 

29,753

 

 

 

25,571

 

 

 

83,150

 

 

 

64,353

 

 

 

88,577

 

Income tax (benefit) expense, including excise tax

 

 

(237

)

 

 

14

 

 

 

(114

)

 

 

25

 

 

 

372

 

Net investment income after taxes

 

 

29,990

 

 

 

25,557

 

 

 

83,264

 

 

 

64,328

 

 

 

88,205

 

Realized and unrealized gains (losses)

 

 

 

 

 

 

 

 

 

 

Net realized (losses) gains on:

 

 

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

(8,123

)

 

 

4,267

 

 

 

(31,576

)

 

 

4,475

 

 

 

(11,217

)

Non-controlled, affiliated investments

 

 

 

 

 

(21,433

)

 

 

 

 

 

(21,530

)

 

 

(21,530

)

Foreign currency

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

 

 

(3

)

Net realized losses

 

 

(8,123

)

 

 

(17,169

)

 

 

(31,576

)

 

 

(17,058

)

 

 

(32,750

)

Net change in unrealized appreciation (depreciation) on:

 

 

 

 

 

 

 

 

Non-controlled, non-affiliated investments

 

 

26,298

 

 

 

(669

)

 

 

8,608

 

 

 

(25,646

)

 

 

(19,807

)

Non-controlled, affiliated investments

 

 

559

 

 

 

18,966

 

 

 

(9,136

)

 

 

13,609

 

 

 

13,523

 

Controlled investments

 

 

(1,251

)

 

 

7,298

 

 

 

(6,838

)

 

 

5,373

 

 

 

970

 

Net change in unrealized appreciation (depreciation)

 

 

25,606

 

 

 

25,595

 

 

 

(7,366

)

 

 

(6,664

)

 

 

(5,314

)

Net realized and unrealized gains (losses)

 

 

17,483

 

 

 

8,426

 

 

 

(38,942

)

 

 

(23,722

)

 

 

(38,064

)

Net increase in net assets resulting from operations

 

$

47,473

 

 

$

33,983

 

 

$

44,322

 

 

$

40,606

 

 

$

50,141

 

Per share information—basic and diluted

 

 

 

 

 

 

 

 

 

 

Net increase in net assets per share resulting from operations

 

$

0.87

 

 

$

0.60

 

 

$

0.81

 

 

$

0.71

 

 

$

0.89

 

Net investment income per share

 

$

0.55

 

 

$

0.45

 

 

$

1.52

 

 

$

1.13

 

 

$

1.56

 

Weighted average shares of common stock outstanding

 

 

54,561,367

 

 

 

56,816,992

 

 

 

54,817,855

 

 

 

56,910,773

 

 

 

56,556,510

 

ABOUT CION INVESTMENT CORPORATION

CION Investment Corporation is a leading publicly listed business development company that had approximately $1.9 billion in total assets as of September 30, 2023. CION seeks to generate current income and, to a lesser extent, capital appreciation for investors by focusing primarily on senior secured loans to U.S. middle-market companies. CION is advised by CION Investment Management, LLC, a registered investment adviser and an affiliate of CION. For more information, please visit www.cionbdc.com.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. You should read statements that contain these words carefully because they discuss CION’s plans, strategies, prospects and expectations concerning its business, operating results, financial condition and other similar matters. These statements represent CION’s belief regarding future events that, by their nature, are uncertain and outside of CION’s control. There are likely to be events in the future, however, that CION is not able to predict accurately or control. Any forward-looking statement made by CION in this press release speaks only as of the date on which it is made. Factors or events that could cause CION’s actual results to differ, possibly materially from its expectations, include, but are not limited to, the risks, uncertainties and other factors CION identifies in the sections entitled “Risk Factors” and “Forward-Looking Statements” in filings CION makes with the SEC, and it is not possible for CION to predict or identify all of them. CION undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

OTHER INFORMATION

The information in this press release is summary information only and should be read in conjunction with CION’s Quarterly Report on Form 10-Q, which CION filed with the SEC on November 9, 2023, as well as CION’s other reports filed with the SEC. A copy of CION’s Quarterly Report on Form 10-Q and CION’s other reports filed with the SEC can be found on CION’s website at www.cionbdc.com and the SEC’s website at www.sec.gov.

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