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Capitala Finance (CPTA) Posts Q4 Loss as Revenues Decline Y/Y

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Capitala Finance Corp. incurred fourth-quarter 2020 net investment loss of 2 cents per share. The Zacks Consensus Estimate was pegged at income of 29 cents. The bottom line compared unfavorably with net investment income of 72 cents in the prior-year quarter.

Results were hurt by lower total investment income. However, a decline in expenses provided some support. The company’s portfolio activity remained decent.

In 2020, net investment income was 2 cents per share, which lagged the consensus estimate of 59 cents and was considerably down from $4.86 earned last year.

Total Investment Income & Expenses Decline

Total investment income in the quarter was $5.7 million, down 41.1% year over year. The decline was primarily due to a fall in interest and fee income, and total payment-in-kind interest income. Also, the figure missed the Zacks Consensus Estimate of $6.1 million.

In 2020, total investment income declined 39.9% to $26.4 million. It also missed the consensus estimate of $26.9 million.

Total expenses decreased 25.8% year over year to $5.7 million. This decline was largely due to lower base management fees, and general and administrative expenses.

As of Dec 31, 2020, cash and cash equivalents totaled $49.9 million, down from $62.3 million as of Dec 31, 2019.

Further, as of Dec 31, 2020, the company had SBA-guaranteed debentures outstanding worth $91.0 million, $72.8 million of fixed rate notes and $52.1 million of convertible notes. Also, it had $25.0 million available under its senior secured revolving credit facility.

Net asset value was $40.19 per share, down from $54.84 at the end of December 2019.

Portfolio Activities Decent

The fair value of the company’s total investment portfolio was $247.7 million as of Dec 31, 2020. The company had investments in 36 portfolio companies.

Of the total investments, first lien debt investments represented 60.9% of the portfolio, second lien debt investments represented 14.3%, and equity/warrant investments represented 24.8% of the portfolio, based on fair values.

Our Take

Driven by the rise in demand for financing, Capitala Finance’s investment income is expected to grow in the near term. Moreover, lower expenses are likely to aid profitability.

Capitala Finance Corp. Price, Consensus and EPS Surprise

Capitala Finance Corp. Price, Consensus and EPS Surprise

Capitala Finance Corp. price-consensus-eps-surprise-chart | Capitala Finance Corp. Quote

Currently, Capitala Finance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Performance of Other Finance Stocks

FS KKR Capital Corp.’s (FSK - Free Report) fourth-quarter 2020 net investment income of 72 cents per share beat the Zacks Consensus Estimate of 69 cents. However, the bottom line compared unfavorably with 84 cents in the year-ago quarter.

TriplePoint Venture Growth BDC Corp.’s (TPVG - Free Report) fourth-quarter 2020 net investment income of 39 cents per share outpaced the Zacks Consensus Estimate of 36 cents. However, the bottom line declined 13.3% from the year-ago quarter.

Horizon Technology Finance Corporation’s (HRZN - Free Report) fourth-quarter 2020 net investment income of 21 cents per share lagged the Zacks Consensus Estimate of 28 cents. Also, the bottom line declined 51.2% from the year-ago quarter.

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