Logan Ridge Finance Corporation (LRFC) reported its first-quarter 2025 earnings, revealing a shortfall in both earnings per share (EPS) and revenue compared to market expectations. The company posted an EPS of $0.35, falling short of the forecasted $0.37. Revenue also missed projections, coming in at $4.63 million against the anticipated $5.2 million. Following the earnings report, Logan Ridge’s stock price declined by 1.45% in after-hours trading. According to InvestingPro data, the company maintains a healthy current ratio of 5.57, indicating strong short-term liquidity despite the earnings miss.
Key Takeaways
- Logan Ridge Finance’s EPS of $0.35 missed the forecast by $0.02.
- Revenue for Q1 2025 was $4.63 million, below the expected $5.2 million.
- The company’s net asset value (NAV) decreased by 7.4% from the previous quarter.
- A significant write-down on a Sequoia Healthcare investment impacted financial results.
- The stock price fell 1.45% in after-hours trading.
Company Performance
Logan Ridge Finance’s performance in the first quarter of 2025 highlighted several challenges, with both investment income and net asset value experiencing declines. The company’s total investment income dropped by $800,000 from the previous quarter, and net investment income decreased to $900,000 from $1.5 million. A notable factor in this decline was a $4.4 million write-down on a legacy investment in Sequoia Healthcare. Despite these setbacks, Logan Ridge is continuing its portfolio rotation strategy and has successfully exited its second-largest non-yielding equity investment.
Financial Highlights
- Revenue: $4.63 million, down from the previous quarter.
- Earnings per share: $0.35, down from $0.50 per share in the previous quarter.
- Net Asset Value (NAV): $78.8 million, a 7.4% decrease from the previous quarter.
- Per share NAV: $29.66, down from $32.04.
Earnings vs. Forecast
Logan Ridge’s EPS of $0.35 was below the forecasted $0.37, representing a miss of approximately 5.4%. Revenue also fell short of expectations, coming in at $4.63 million compared to the forecasted $5.2 million. This earnings miss marks a deviation from previous quarters where the company met or exceeded expectations, largely due to the impact of the Sequoia Healthcare investment write-down.
Market Reaction
Following the earnings announcement, Logan Ridge’s stock price declined by 1.45% in after-hours trading, closing at $17.49. This movement reflects investor concerns over the earnings miss and the company’s financial outlook. The stock remains closer to its 52-week low of $17.30, indicating ongoing market caution. InvestingPro analysis reveals the stock has fallen significantly, with a -27.36% return over the past six months, though it maintains an attractive 8.11% dividend yield. Technical indicators suggest the stock may be oversold, presenting a potential opportunity for value investors. Discover more insights and 8 additional ProTips with an InvestingPro subscription.
Outlook & Guidance
Looking ahead, Logan Ridge Finance is focused on monetizing its legacy equity portfolio and anticipates a merger with Fort McMurray, which could provide increased scale and operational efficiencies. The company is navigating market uncertainties and volatility, with a strategic emphasis on its debt investments and portfolio rotation. Despite recent challenges, InvestingPro data shows the company has maintained modest revenue growth of 3.66% over the last twelve months. For comprehensive analysis including Fair Value estimates and detailed financial health scores, access the full Pro Research Report, available for over 1,400 US stocks.
Executive Commentary
CEO Ted Goldthorpe expressed optimism about the company’s future, stating, "We remain very excited about the opportunities that the combination with Fort McMurray presents." Meanwhile, CIO Patrick Schafer noted limited expectations for recovery from non-accrual investments, emphasizing, "We do not expect meaningful recovery and sort of turn back on of interest from now on."
Risks and Challenges
- Continued pressure from legacy investments, particularly Sequoia Healthcare.
- Market volatility and economic uncertainties impacting investment income.
- Execution risks associated with the pending merger with Fort McMurray.
- Potential challenges in achieving operational efficiencies post-merger.
- Dependence on floating rate debt investments amid fluctuating interest rates.
Q&A
During the earnings call, analysts inquired about the potential recovery from non-accrual investments and the impact of the pending merger. Executives clarified that while some BC-sourced loans are performing well, recovery from non-accrual investments like Sequoia Healthcare is unlikely. The merger with Fort McMurray will involve a full portfolio valuation, with expectations of enhanced scale and efficiency.
Full transcript - Logan Ridge Finance Corp (LRFC) Q1 2025:
Conference Operator: Good morning, and welcome to Logan Ridge Finance Corporation’s First Quarter Ended 03/31/2025 Earnings Conference Call. An earnings press release was distributed yesterday, 05/08/2025, after the close of the market. A copy of the release along with the supplemental earnings presentation is available on the company’s website at www.loganridgefinance.com in the Investor Resources section and should be reviewed in conjunction with the company’s Form 10 Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. And please note that today’s conference call may contain forward looking statements, which 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 numbers of factors, including those described in the company’s filings with the SEC. Speaking on today’s call will be Ted Goldthorpe, Chief Executive Officer, President and Director of Logan Ridge Finance Corporation Brandon Satoran, Chief Financial Officer and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of Logan Ridge Finance Corporation. Please go ahead, Ted.
Ted Goldthorpe, Chief Executive Officer, President and Director, Logan Ridge Finance Corporation: Good morning. Welcome to our first quarter twenty twenty five earnings call. As mentioned, I am joined today by our Chief Financial Officer, Brandon Satoran and our Chief Investment Officer, Patrick Schafer. Following my opening remarks, Patrick will provide additional details on our investment activity to date, and Brandon will walk through the financials. Following record results in 2024, Logan Ridge continued to make significant strides in strengthening its portfolio despite the large write down on the company’s legacy term loan to Sequoia Healthcare.
Notably, during the quarter, the company grew its portfolio with net deployment, and as previously announced, Logan Ridge continued rotating out of legacy equity portfolio with a successful exit of its second largest non yielding equity investment, GA Communications. This exit stands as another important achievement in our long term strategy to rotate out of the legacy equity portfolio, which has now been reduced to just 10.8% of our portfolio at fair value, down from 13.8% as of the prior quarter and 18.2% in the first quarter of twenty twenty four. Looking forward, with the continued monetization of the legacy equity portfolio, we believe the company is well positioned to continue to grow earnings and increase long term shareholder value as we navigate this dynamic market shape by renewed uncertainty, increased market volatility and shifting geopolitical dynamics. Finally, we remain very excited about the opportunities that the combination with Fort McMurray presents. This action offers the potential for increased scale, improved liquidity, and enhanced operational efficiencies, all of which will strengthen our ability to deliver greater value to shareholders.
The combination of these companies represents a significant milestone and is a culmination of years of work repositioning the portfolio that BC Partners Credit has executed since taking over as the external manager in 2021. We encourage all shareholders to attend the meeting and vote for the proposed merger as recommended by the Board of Directors of both companies. We’re excited about the road ahead and look forward to sharing more updates soon. With that, I will turn the call over to Patrick Schafer to discuss our portfolio and investment activity.
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: Thanks, Ted. Hello, everyone. As of 03/31/2025, the fair value of Logan’s portfolio was approximately $169,600,000 with exposure to 59 portfolio companies. This compares to 59 portfolio companies with a fair value of approximately $172,300,000 as of the prior quarter. As Ted mentioned, during the quarter ended 03/31/2025, we continue to be selective in our investment strategy.
We deployed approximately $15,100,000 into new and existing investments and had approximately $12,500,000 in repayments and sales, resulting in net deployment of approximately $2,700,000 for the quarter. On portfolio composition, as of 03/31/2025, ’70 ’1 point ’8 percent of the company’s investment portfolio at fair value was invested in assets originated by the BC Partners Credit platform, up from 66.7% at the end of last quarter. Also, as of 03/31/2025, our debt investment portfolio represented 86.6% of the total portfolio at fair value, the weighted average annualized yield of approximately 10.7%, excluding income from non accruals and collateralized loan obligations. And 90.7 percent of our debt investment portfolio at fair value was bearing interest at a floating rate. Additionally, as of 03/31/2025, first lien debt represented 66.767.6% of our total portfolio on cost and fair value basis respectively, while the equity portfolio was reduced to 12% from 10.8% of the portfolio on a cost and fair value basis respectively.
The reduction in the equity portfolio on a fair value basis during the first quarter of twenty twenty five as compared to the previous quarter was due to the exit of our second largest non yielding equity position in GA Communications, marking another milestone for our long term strategy to rotate out of the legacy equity portfolio. On to non accrual status, as of 03/31/2025, the company had four debt investments across three portfolio companies on non accrual status with an aggregate and amortized cost and fair value of $17,200,000 and $3,700,000 respectively, or 8.72.2% of the investment portfolio at cost and fair value respectively. This has remained consistent with the fourth quarter of twenty twenty four with the same four debt investments in three portfolio companies with a cost and fair value of $17,200,000 and $7,900,000 respectively, or nine point zero percent and four point six percent of the investment portfolio’s cost and fair value, respectively. I’ll now turn the call over to Brandon.
Brandon Satoran, Chief Financial Officer, Logan Ridge Finance Corporation: Thanks, Patrick. For the quarter ended 03/31/2025, Logan Ridge generated $4,600,000 of investment income, which represents a $800,000 decrease or $0.29 per share as compared to $5,400,000 reported from the quarter ended 12/31/2024. The decrease in investment income on a per share basis from the prior quarter was primarily driven by one, a decrease of $0.17 per share as a result of lower non recurring pay down and fee income, A decrease of $05 per share from lower base rates. A decrease of $05 per share as a result of the majority of the current quarter’s deployment occurring in the second half of the quarter relative to the timing of repayments and sales. And five, a decrease of $02 per share in CLO income.
For the quarter ended 03/31/2025, Logan Ridge reported 3,700,000.0 of operating expenses, which represents a decrease of $200,000 or $08 per share from the prior quarter. The decrease is primarily due to a decrease in interest and financing expenses, in addition to lower base management fees and general and administrative expenses compared to the prior quarter. Accordingly, net investment income for the first quarter of twenty twenty five was $900,000 or $0.35 per share, which represents a decrease of 600,000.0 or $0.21 per share, compared to 1,500,000.0 or $0.50 per share that Logan Ridge earned in the fourth quarter of twenty twenty four. As of 03/31/2025, our net asset value was $78,800,000 representing a decrease of $6,300,000 or 7.4% as compared to the prior quarter net asset value of $85,100,000 as of 12/31/2024. On a per share basis, the company’s net asset value was $29.66 as of 03/31/2025, representing a 2.38 per share decrease or 7.5% as compared to $32.4 per share in the prior quarter.
The decrease in net asset value from the prior quarter was largely due to the $4,400,000 write down on the company’s legacy investment in Sequoia, which has been on non accrual since we began managing the portfolio in 2021. Finally, as of 03/31/2025, the company had 5,100,000.0 in cash and cash equivalents, as well as 31 and $500,000 of unused borrowing capacity available for deployment in new investments. With that, I will turn the call back over to Ted.
Ted Goldthorpe, Chief Executive Officer, President and Director, Logan Ridge Finance Corporation: Thank you, Brandon. To our shareholders, thank you for your continued support. This concludes our prepared remarks, and I’ll now turn over the call to the operator for questions.
Conference Operator: We will now begin the question and answer session. And our first question comes from the line of Christopher Nolan with Ladenburg Thalmann. Christopher, please go ahead.
Christopher Nolan, Analyst, Ladenburg Thalmann: Hey, guys. With the pending merger with Portman, assuming it goes through, does that entail a full valuation review of Logan’s investments?
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: Yes, similar to any of the M and deals that we’ve done, you have to strike a new NAV for both Portman and Logan within forty eight hours of share issuance. So the short answer is yes.
Christopher Nolan, Analyst, Ladenburg Thalmann: Okay. So the entire portfolio for both companies is basically reevaluated. Is that done by an outsider, outside organization with the board? Or how is that done?
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: It’s generally done consistent with our practices. To the extent, depending on the timing, we’ll have third party marks for certain of the names. We’ll do all the liquid pricing. We’ll do our own internal models. I would think of it as kind of a regular way process for us.
Christopher Nolan, Analyst, Ladenburg Thalmann: Okay. The only reason I ask all this is just because of all the uncertainty in the economy, is this one of these things where the discount rate can be increased more than otherwise, things like that?
Ted Goldthorpe, Chief Executive Officer, President and Director, Logan Ridge Finance Corporation: The short answer is it’s linked to liquid benchmarks usually, which quite frankly have been relatively muted. So credit really hasn’t widened that much since the last quarter. So we think there’ll be a huge impact. If it impacts Logan, it’ll impact Portman as well.
Christopher Nolan, Analyst, Ladenburg Thalmann: Okay. That’s it for me. Thanks, guys.
Ted Goldthorpe, Chief Executive Officer, President and Director, Logan Ridge Finance Corporation: Good question, though.
Conference Operator: And your next question comes from the line of Stephen Martin with Plater Capital. Stephen, please go ahead.
Stephen Martin, Analyst, Plater Capital: All right. Thanks a lot. I’ll ask the same question here. Can you talk about the non accruals and what the prospect is for recovering some of that and what’s left in the portfolio that has that kind of risk? You talked about what you inherited when took over the portfolio, but the NAV was about $42 a share then and it’s $30 now.
Christopher Nolan, Analyst, Ladenburg Thalmann: Yeah. So Steve, I would say like far and away,
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: the biggest asset in our calls was always been Sequoia. So I think from that perspective, I don’t think we expect sort of meaningful recovery and sort of a turn back on of interest from now on. Again, it’s been a non accrual since even before we took over management. So I would think generally speaking that I would say there’s not a lot of incremental upside from the non accrual book converting onto accruals. With respect to the rest of the book, mean, again, we kind of in the notes, over 70% of the portfolio is originated and then you can get 10% of equity portfolio, which is largely sort of legacy versus.
So if you think about it, there’s maybe 20% of the portfolio that is sort of legacy Capitola names and vast majority is an investment in Eastport, which is generally performing pretty well and pretty stable. So I would say there’s not a ton of risk on sort of the legacy Capitala portfolio from a non accrual perspective, but acknowledge that they do have sort of one there is one large position on the debt side, but that is generally performing well.
Stephen Martin, Analyst, Plater Capital: Okay. And you guys have sourced 75%, eighty % of the book now of the debt book. Are any of the BC loans in non accrual and what’s the status of the BC loans?
Brandon Satoran, Chief Financial Officer, Logan Ridge Finance Corporation: Yeah, so in terms of BC names on non accrual. So, and again, are three, it’s MMI, which is a legacy name, Sequoia legacy name and then Lucky Bucks, which has been on non accrual for close to two years now.
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: And that would be a BC name. So, see the answer is one of three.
Stephen Martin, Analyst, Plater Capital: And what about in general, obviously, don’t have this probably at hand. If you looked at the BC sourced book, what is the discount to par? Or how would you characterize the mark on the BC sourced book?
Patrick Schafer, Chief Investment Officer, Logan Ridge Finance Corporation: Yeah. I mean, the short answer that, I’d get back to you with the specific one. The long answer is if you strip out lucky bucks, which is kind of on the non accrual, I think there’s maybe one name that I can think of off the top of my head that is marked at something that is less than sort of 90, and that would be DataLink, which is in the high 80s. And then we do have some liquid names in the book similar to Portman. So again, I can get back to you, Steve, with the number.
I don’t have one off the top of my head, though.
Stephen Martin, Analyst, Plater Capital: Okay. Thanks a lot.
Conference Operator: That concludes our question and answer session. I would now like to turn the call over to Ted Goldfarb for closing remarks. Ted?
Ted Goldthorpe, Chief Executive Officer, President and Director, Logan Ridge Finance Corporation: Thanks, everyone, for joining us today. We’ll continue to provide our shareholders with updates about the proposed merger with Portman Ridge as those become available. As always, please reach out to us with any questions, which we’re happy to discuss. We look forward to speaking to you guys again soon. Thank you.
Conference Operator: That concludes today’s conference call. You may now disconnect.
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