QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended June 30, 2023 Washington, D.C. 20549 Form 10-Q (Exact name of Registrant as specified in its charter) (State or other jurisdiction of Incorporation or organization) Delaware 20-5951150 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (I.R.S. Employer Identification Numb ...

Financial Data and Key Metrics Changes - Core investment income for Q1 2023 was $19.3 million, an increase of $1.6 million from $17.7 million in Q4 2022 and an increase of $4.2 million from $15.1 million in Q1 2022 [5][24] - Total investment income increased by $1.7 million to $20.3 million in Q1 2023 compared to $18.6 million in Q4 2022, reflecting the impact of rising rates [23] - Net investment income for Q1 2023 was $8.5 million or $0.89 per share, up from $7.1 million or $0.74 per share in Q4 2022 and $7.9 million or $0.82 per share in Q1 2022 [24][61] Business Line Data and Key Metrics Changes - Net deployment consisted of new fundings of approximately $11.8 million, offset by approximately $44.4 million of repayments and sales [9] - The investment securities portfolio remained highly diversified with investments across 28 different industries and 106 different entities, maintaining an average par balance per entity of approximately $3.3 million [10] - The company had one incremental investment on nonaccrual status compared to December 31, 2022, which is a subordinated note in Lucky Bucks Holdings, valued at 24.75% of par [10] Market Data and Key Metrics Changes - Approximately 89.2% of the debt securities portfolio were floating rate as of March 31, 2023, with 52% linked to LIBOR [8] - The company noted that spreads remain approximately 150 basis points wide compared to the beginning of 2022, with upfront fees increasing by 100 to 200 basis points [6] Company Strategy and Development Direction - The company remains bullish on new investment opportunities and the ability to rotate its portfolio at reduced risk and incremental returns, especially in light of recent bank failures that have increased market volatility [16] - The portfolio is largely in first lien debt and is valued at a meaningful discount to par, indicating potential net asset value upside [17] - The company plans to continue repurchasing shares under its stock purchase program, having repurchased 35,613 shares in Q1 2023 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to take advantage of opportunities arising from the current market environment by being selective in investment decisions [64] - The company anticipates a net positive benefit of approximately $0.06 per share if all assets and liabilities are utilized in the same 3-month benchmark rates for an entire quarter [19] - Management noted that the quality of deal flow has improved, with a focus on add-on acquisitions rather than new leveraged buyouts [49] Other Important Information - The net asset value for Q1 2023 was $225.1 million or $23.56 per share, down from $232.1 million or $24.23 per share in Q4 2022, primarily due to paydown activity and mark-to-market movements [61] - The company raised its dividend for the third consecutive quarter to $0.69 per share, marking the fifth increase over the past seven quarters [26][63] Q&A Session Summary Question: What was the reason for the unrealized depreciation? - Management indicated that a significant markdown was related to one specific asset, Lucky Bucks Holdings, which was credit-specific [72] Question: How does the company view its leverage moving forward? - Management stated that they intend to bring down gross leverage and are comfortable with the current net leverage, planning to take advantage of the deal environment without increasing leverage [73][86] Question: What is the company's philosophy regarding dividends? - The company prefers to pay a higher core dividend that investors can rely on, and they are prepared to pay special dividends if conditions allow [90] Question: What is the outlook on deal flow and pricing? - Management noted that while deal flow is down significantly, the quality of deals has improved, with companies seeking less leverage despite stable purchase prices [111]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 814-00735 Portman Ridge Finance Corporation (Exact name of Registrant as specified in its charter) (State or other jurisdiction of Incorporation or organ ...

Portman Ridge Finance Corporation (NASDAQ:PTMN) Q4 2022 Results Conference Call March 10, 2023 9:00 AM ET Company Participants Ted Goldthorpe - CEO, President & Director Jason Roos - CFO Patrick Schafer - CIO Conference Call Participants Ryan Lynch - KBW Christopher Nolan - Ladenburg Thalmann Operator Welcome to Portman Ridge Finance Corporation's Fourth Quarter and Full Year 2022 Earnings Conference Call. An earnings press release was distributed yesterday, March 9, after market close. A copy of the releas ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Portman Ridge Finance Corporation is an externally managed BDC focused on generating income and capital appreciation by investing in secured debt of U.S. middle-market companies - **Portman Ridge is an externally managed BDC focusing on secured debt in U.S. middle-market companies**, defined as those with EBITDA of $10 million to $50 million[18](index=18&type=chunk)[21](index=21&type=chunk) Portfolio Overview as of December 31, 2022 | Metric | Value | | :--- | :--- | | Total Portfolio Fair Value | $576.5 million | | Number of Industries | 31 | | Number of Entities | 119 | | Average Par Balance per Entity | ~$3.3 million | - The company has completed several strategic transactions, including becoming externally managed in 2019, acquiring GARS in 2020, acquiring HCAP in 2021, and executing a **1-for-10 reverse stock split** in 2021[27](index=27&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - The company has elected to be treated as a **Regulated Investment Company (RIC)** for U.S. federal income tax purposes, which generally allows it to avoid corporate-level income taxes by distributing its income to stockholders[25](index=25&type=chunk)[115](index=115&type=chunk) [Investment Portfolio](index=6&type=section&id=Item%201.%20Business%20-%20Investment%20Portfolio) The company's investment portfolio primarily comprises debt securities, joint ventures, and CLO fund securities, with debt securities constituting 82% of the total fair value Portfolio Composition by Fair Value (December 31, 2022) | Portfolio Segment | % of Total Portfolio (Fair Value) | | :--- | :--- | | Debt Securities Portfolio | ~82% | | CLO Fund Securities | ~3% | | Joint Ventures & Other | ~15% | - The Debt Securities Portfolio is diversified across 31 industries and 119 entities, with an average par balance of approximately $3.3 million per investment. **88%** of this portfolio consists of senior secured loans[50](index=50&type=chunk) - The company holds investments in two key joint ventures: KCAP Freedom 3 LLC (F3C Joint Venture) and Series A – Great Lakes Funding II LLC (Great Lakes II Joint Venture), with fair values of **$18.7 million** and **$40.3 million**, respectively, as of December 31, 2022[47](index=47&type=chunk)[50](index=50&type=chunk) [Advisory and Administration Agreements](index=9&type=section&id=Item%201.%20Business%20-%20Advisory%20and%20Administration%20Agreements) The company is managed by Sierra Crest Investment Management LLC, which receives a base management fee and a two-part incentive fee, while administrative services are provided by BC Partners Management LLC Adviser Compensation Structure | Fee Type | Rate/Structure | | :--- | :--- | | **Base Management Fee** | 1.50% on average gross assets (excluding cash). | | | 1.00% on average gross assets exceeding 200% of NAV. | | **Incentive Fee (Income-Based)** | 17.50% of pre-incentive fee net investment income, subject to a 7.00% hurdle rate. | | **Incentive Fee (Capital Gains)** | 17.50% of cumulative realized capital gains net of losses and unrealized depreciation. | - The Advisory Agreement is subject to annual re-approval by the Board of Directors. It was most recently re-approved on **March 6, 2023**[83](index=83&type=chunk) - The company reimburses the Administrator for costs and expenses related to administrative services, including office space, equipment, and allocable compensation for the CFO and CCO[86](index=86&type=chunk)[87](index=87&type=chunk) [Regulation and Taxation](index=13&type=section&id=Item%201.%20Business%20-%20Regulation%20and%20Taxation) As a BDC, the company must invest primarily in qualifying assets, maintain a 150% asset coverage ratio, and distribute at least 90% of taxable income to maintain RIC tax status - The company must maintain an asset coverage ratio of at least **150%**, a requirement that became effective March 29, 2019, allowing for increased leverage compared to the previous 200% requirement[104](index=104&type=chunk) - To qualify as a RIC, the company must meet a **90%** Income Test (deriving at least 90% of gross income from specific investment sources) and Diversification Tests at the end of each quarter[119](index=119&type=chunk) - The company is also subject to a **4%** nondeductible U.S. federal excise tax unless it distributes at least **98%** of its net ordinary income for the calendar year and **98.2%** of its capital gain net income for the one-year period ending October 31[117](index=117&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, structural, leverage, investment, and market risks, including conflicts of interest, illiquid portfolio valuations, and interest rate fluctuations - **Business & Structural Risks:** **Conflicts of interest may arise from the Adviser's compensation structure**. The company operates in a highly competitive market and relies on key personnel from the Adviser[141](index=141&type=chunk)[152](index=152&type=chunk)[157](index=157&type=chunk) - **Leverage Risks:** Borrowing money **magnifies gains and losses**. The company may default on its credit facilities or notes, which contain restrictive covenants that could hinder operations and distributions[188](index=188&type=chunk)[193](index=193&type=chunk) - **Investment Risks:** The portfolio consists of **illiquid, speculative, and below-investment-grade securities**. Valuations are determined in good faith and are **subject to uncertainty**. The company is **non-diversified**, increasing risk from individual issuer defaults[214](index=214&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) - **Market & Economic Risks:** **Economic recessions, capital market disruptions, inflation, and interest rate changes** could adversely affect portfolio companies and the company's financial results. The discontinuation of LIBOR presents transition risks[166](index=166&type=chunk)[213](index=213&type=chunk)[266](index=266&type=chunk) - **Common Stock Risks:** Shares of BDCs frequently **trade at a discount to their net asset value**. The company may not be able to pay distributions, and a portion of distributions may be a return of capital[240](index=240&type=chunk)[244](index=244&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - **None**[279](index=279&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) The company does not own any real estate or other real property - The company does not own any real estate[280](index=280&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in two stockholder class action lawsuits alleging breaches of fiduciary duties related to the HCAP acquisition, with an indeterminable outcome - The company is a defendant in **two stockholder class action lawsuits** related to the HCAP merger, alleging breaches of fiduciary duties by former HCAP officers and directors[282](index=282&type=chunk) - As the surviving corporation of the HCAP merger, Portman Ridge is responsible for any claims against HCAP and indemnification for its former officers and directors[283](index=283&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[285](index=285&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Portman Ridge's common stock trades on NASDAQ, consistently traded at a discount to NAV, and the company maintains a quarterly distribution policy and a stock repurchase program Stock Price vs. NAV per Share (2022) | Period | NAV per Share | High Closing Price | Low Closing Price | High as % of NAV | Low as % of NAV | | :--- | :--- | :--- | :--- | :--- | :--- | | Q4 2022 | $24.23 | $23.00 | $19.61 | (5.08)% | (19.07)% | | Q3 2022 | $26.18 | $24.38 | $20.00 | (6.88)% | (23.61)% | | Q2 2022 | $27.26 | $24.08 | $21.86 | (11.66)% | (19.80)% | | Q1 2022 | $28.76 | $25.15 | $23.29 | (12.55)% | (19.02)% | - The company intends to continue making **quarterly distributions**, determined by the Board, to maintain its RIC status[291](index=291&type=chunk) Stock Repurchase Program Activity | Period | Shares Purchased | Average Price Paid | Dollar Value Remaining | | :--- | :--- | :--- | :--- | | **2022 Total** | **167,017** | **~$22.90** | **$6,169 thousand** | | **2021 Total** | **75,377** | **~$24.23** | **$8,174 thousand** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, the company experienced decreased investment income and increased expenses, resulting in a net decrease in net assets from operations, while maintaining a compliant asset coverage ratio Key Operational Results (Years Ended Dec 31) | ($ in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Investment Income | $69,614 | $80,086 | $42,764 | | Total Expenses | $40,724 | $38,082 | $26,321 | | Net Investment Income | $28,890 | $42,004 | $17,000 | | Net Realized (Loss)/Gain | ($31,185) | ($4,258) | $7,605 | | Net Unrealized (Depreciation)/Appreciation | ($17,915) | ($8,443) | $6,813 | | **Net (Decrease)/Increase in Net Assets** | **($20,996)** | **$26,026** | **$31,573** | Financial Condition (As of Dec 31) | ($ in thousands, except per share) | 2022 | 2021 | | :--- | :--- | :--- | | Total Investments (Fair Value) | $576,478 | $549,985 | | Total Assets | $619,486 | $648,301 | | Total Liabilities | $387,363 | $368,179 | | **Net Assets** | **$232,123** | **$280,122** | | **NAV per Share** | **$24.23** | **$28.88** | - The company's asset coverage ratio was **160%** as of December 31, 2022, exceeding the **150%** minimum required by the 1940 Act[386](index=386&type=chunk) - The company's critical accounting policy is the **valuation of its portfolio investments**, which are primarily **illiquid Level III assets**. The Adviser is designated as the valuation designee, using methodologies like discounted cash flow and enterprise value, with oversight from the Board and input from independent valuation firms[407](index=407&type=chunk)[409](index=409&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations, with 90% of the debt portfolio being floating rate, and portfolio valuation risk due to illiquid investments - As of December 31, 2022, **90.0%** of the company's Debt Securities Portfolio (at par) was **floating rate**, making investment income sensitive to interest rate changes[440](index=440&type=chunk) Annualized Impact of Interest Rate Changes on Net Investment Income | ($ in thousands) | +1% Change | +2% Change | +3% Change | | :--- | :--- | :--- | :--- | | **Increase in Interest Rate** | $1,963 | $3,927 | $5,890 | | **Decrease in Interest Rate** | ($1,963) | ($3,927) | ($5,625) | - Portfolio valuation risk is significant due to the **illiquid nature** of the company's investments. Fair value is determined in good faith by the Adviser, as the designated valuation designee, with Board oversight and the use of third-party valuation firms[447](index=447&type=chunk)[448](index=448&type=chunk) [Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the company's audited consolidated financial statements and supplementary data, which begin on page F-1 - The company's financial statements are annexed to the Annual Report beginning on page F-1[449](index=449&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[450](index=450&type=chunk) - Management concluded that the company maintained **effective** internal control over financial reporting as of December 31, 2022, based on the COSO framework[454](index=454&type=chunk) [Other Information](index=52&type=section&id=Item%209B.%20Other%20Information) This section details estimated annual expenses as a percentage of net assets, totaling 18.03% for 2022, and provides a hypothetical expense illustration Annual Expenses (as a percentage of net assets) | Expense Category | Percentage | | :--- | :--- | | Base management fee | 3.60% | | Incentive fee | 2.64% | | Interest payments on borrowed funds | 7.63% | | Other expenses | 3.68% | | Acquired fund fees and expenses | 0.48% | | **Total annual expenses** | **18.03%** | - A hypothetical **$1,000** investment with a 5% annual return would incur approximately **$149** in expenses in the first year and **$612** over five years[461](index=461&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees](index=54&type=section&id=Items%2010-14) Information for Items 10 through 14, covering governance, compensation, and ownership, is incorporated by reference from the 2023 proxy statement - Information for Part III (Items 10, 11, 12, 13, and 14) is **incorporated by reference** from the company's definitive proxy statement for the 2023 annual meeting of stockholders[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=55&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of the financial statements and other required exhibits filed with the report - This section provides an index of the financial statements and exhibits filed with the report[474](index=474&type=chunk)[475](index=475&type=chunk) Financial Statements [Consolidated Balance Sheets](index=59&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2022, the company reported total assets of $619.5 million, total liabilities of $387.4 million, and net assets of $232.1 million, with a decrease in NAV per share from 2021 Consolidated Balance Sheet Summary | ($ in thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Investments at Fair Value | $576,478 | $549,985 | | Total Assets | $619,486 | $648,301 | | Total Liabilities | $387,363 | $368,179 | | **Total Net Assets** | **$232,123** | **$280,122** | | **Net Asset Value Per Share** | **$24.23** | **$28.88** | [Consolidated Statements of Operations](index=60&type=section&id=Consolidated%20Statements%20of%20Operations) For 2022, the company reported $69.6 million in total investment income, resulting in a net investment income of $28.9 million and a net decrease in net assets from operations of $21.0 million Statement of Operations Summary (Year Ended Dec 31, 2022) | ($ in thousands) | Amount | | :--- | :--- | | Total investment income | $69,614 | | Net expenses | $40,724 | | **Net investment income** | **$28,890** | | Net realized loss on investments | ($31,185) | | Net unrealized depreciation on investments | ($17,915) | | **Net decrease in net assets from operations** | **($20,996)** | [Consolidated Schedules of Investments](index=63&type=section&id=Consolidated%20Schedules%20of%20Investments) As of December 31, 2022, the company's $576.5 million investment portfolio was primarily composed of senior and junior secured loans, diversified across 31 industries Portfolio Composition by Fair Value (Dec 31, 2022) | Security Type | Fair Value ($ in thousands) | % of Portfolio | | :--- | :--- | :--- | | Senior Secured Loan | $418,722 | 73% | | Junior Secured Loan | $56,400 | 10% | | Joint Ventures | $58,955 | 10% | | Equity Securities | $21,905 | 4% | | CLO Fund Securities | $20,453 | 3% | | **Total** | **$576,478** | **100%** | Top Industry Concentrations by Fair Value (Dec 31, 2022) | Industry | Fair Value ($ in thousands) | % of Portfolio | | :--- | :--- | :--- | | Banking, Finance, Insurance & Real Estate | $78,264 | 14% | | High Tech Industries | $73,994 | 13% | | Services: Business | $66,207 | 11% | | Joint Ventures | $58,955 | 10% | | Healthcare & Pharmaceuticals | $50,566 | 9% | [Notes to Consolidated Financial Statements](index=79&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, investment valuation, debt structure, and the accounting treatment of the GARS and HCAP acquisitions - The company's valuation policy designates the Adviser as the "**valuation designee**" under SEC **Rule 2a-5**, responsible for fair value determinations of the portfolio, with Board oversight[580](index=580&type=chunk) Borrowings as of December 31, 2022 | Debt Instrument | Carrying Value ($ in thousands) | | :--- | :--- | | 2018-2 Secured Notes | $176,937 | | 4.875% Notes Due 2026 | $105,478 | | Revolving Credit Facility | $90,893 | | **Total** | **$373,308** | - The acquisitions of GARS (2020) and HCAP (2021) were accounted for as **asset acquisitions**, resulting in purchase discounts of **$40.4 million** and **$3.8 million**, respectively, which are amortized into interest income over the life of the acquired investments[757](index=757&type=chunk)[762](index=762&type=chunk)

Financial Data and Key Metrics Changes - Total investment income for Q3 2022 was $19 million, an increase of $3.6 million from $15 million in Q2 2022, driven by rising rates [19][4] - Net investment income for Q3 2022 was $8.4 million or $0.87 per share, compared to $5.5 million or $0.57 per share in Q2 2022 [21] - Total expenses for Q3 2022 were $10.6 million, up from $9.1 million in Q2 2022, primarily due to increased interest expenses [22] - Net asset value at the end of Q3 2022 was $251.6 million or $26.18 per share, down from $261.7 million or $27.26 per share in Q2 2022 [22] Business Line Data and Key Metrics Changes - Net deployments for the quarter were approximately $2.4 million, with new fundings of $44.3 million offset by $41.9 million in repayments [15][10] - The average interest coverage in the portfolio was 3.5x, with LTM revenues growing by 4.5% [10] Market Data and Key Metrics Changes - Leveraged loan new issue volume declined over 80% year-over-year, and loan prices fell from 95% of par in August to 92% by the end of September [6][7] - Approximately 89.3% of the debt securities portfolio were floating rate, with 71% linked to LIBOR [12] Company Strategy and Development Direction - The company is focused on being selective and resourceful in investment decisions, taking advantage of opportunities arising from the current market environment [11] - The management emphasized a cautious investment strategy due to economic uncertainty, while also indicating a strong position for future growth [11][25] Management's Comments on Operating Environment and Future Outlook - Management noted that the current economic environment is challenging, but they expect strong financial performance to continue in future quarters [4][28] - There is a positive outlook on interest income as rates continue to rise, with expectations for incremental income generation [34][35] Other Important Information - The company announced a quarterly dividend increase of 6% to $0.67 per share, reflecting strong financial performance [5][26] - The debt-to-equity ratio was 1.5x on a gross basis and 1.3x on a net basis, with an asset coverage ratio of 167% [25] Q&A Session Summary Question: Were there any non-recurring items in earnings? - Management indicated that there were no significant non-recurring items, and the quarter reflected a normal run rate [31][32] Question: Is the new dividend of $0.67 potentially low? - Management acknowledged the uncertainty in the environment but noted that there are no current credit quality issues, suggesting a potential for future dividend increases [35][36] Question: Can you explain the significant jump in projected earnings? - Management clarified that the projection included purchase accounting accretion and was based on changing benchmark rates without additional assumptions [42][44] Question: What is the expectation for future dividend increases? - Management expressed a desire to be conservative while also indicating a positive momentum for future dividend increases [49][50] Question: How is the deal flow and quality of deals changing? - Management noted that the market has improved, with wider spreads and better quality deals available compared to six months ago [58][59] Question: What is the status of the joint ventures? - Management explained that there was a temporary return of capital due to the expiration of the investment period in a joint venture, but they expect to return to previous levels soon [54][56]

[General Information](index=1&type=section&id=General%20Information) This section provides foundational details about Portman Ridge Finance Corporation's regulatory filings, corporate structure, and cautionary statements regarding forward-looking information [Filing Details and Registrant Information](index=1&type=section&id=Filing%20Details) This section details Portman Ridge Finance Corporation's Form 10-Q filing, including corporate identity, NASDAQ listings, and non-accelerated filer status - Registrant: **Portman Ridge Finance Corporation**, a Delaware corporation[2](index=2&type=chunk) - The registrant is a **non-accelerated filer**[5](index=5&type=chunk) Securities Registered on NASDAQ | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | PTMN | The NASDAQ Global Select Market | [Forward-Looking Statements and Disclosures](index=2&type=section&id=Forward-Looking%20Statements%20and%20Disclosures) This section outlines the company's forward-looking statement policy, emphasizing potential material differences in actual results due to various risks - Forward-looking statements are identified by terms such as 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'could,' 'intends,' 'target,' 'projects,' 'outlook,' 'believes,' 'estimates,' 'predicts,' 'potential' or 'continue' or the negative of these terms or other similar words[10](index=10&type=chunk) - Key factors that could cause actual results to differ include: future operating results, business prospects of portfolio companies, return or impact of current and future investments, contractual arrangements, dependence on general economy, financial condition of portfolio companies, expected financings, ability to operate as a BDC/RIC, liquidity, timing of cash flows, ability of the Adviser to locate/monitor investments, conflicts of interest with the Adviser, legal/tax/regulatory changes, impact of declining credit markets, interest rate fluctuations, valuation of illiquid investments, ability to recover unrealized losses, market conditions, effects of COVID-19, and timing/form/amount of dividend distributions[12](index=12&type=chunk) - Investors should not place undue reliance on forward-looking statements, and the company undertakes no obligation to update them[11](index=11&type=chunk) [Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This part presents the comprehensive financial statements and management's analysis of Portman Ridge Finance Corporation's financial performance and condition [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section provides Portman Ridge Finance Corporation's unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and net assets as of September 30, 2022, and December 31, 2021 Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | September 30, 2022 (Unaudited) | December 31, 2021 | | :-------------------------------------------------------- | :----------------------------- | :---------------- | | Investments at fair value | $571,656 | $549,985 | | Cash and cash equivalents | $16,871 | $28,919 | | Restricted cash | $22,183 | $39,421 | | Total Assets | $629,525 | $648,301 | | LIABILITIES (in thousands) | | | | 2018-2 Secured Notes (net) | $162,593 | $162,460 | | 4.875% Notes Due 2026 (net) | $105,301 | $104,892 | | Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net) | $95,908 | $79,839 | | Total Liabilities | $377,943 | $368,179 | | NET ASSETS (in thousands) | | | | Total Net Assets | $251,582 | $280,122 | | NET ASSET VALUE PER COMMON SHARE | $26.18 | $28.88 | - Total Assets decreased by approximately **$18.78 million** from **$648.301 million** at December 31, 2021, to **$629.525 million** at September 30, 2022[14](index=14&type=chunk) - Total Net Assets decreased by approximately **$28.54 million** from **$280.122 million** at December 31, 2021, to **$251.582 million** at September 30, 2022, leading to a decrease in Net Asset Value per Common Share from **$28.88** to **$26.18**[14](index=14&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance, showing investment income, expenses, and net assets from operations for specified periods Consolidated Statements of Operations (in thousands, except share and per share amounts) | (in thousands, except share and per share amounts) | For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total investment income | $19,009 | $22,911 | $50,997 | $62,761 | | Total expenses | $10,617 | $9,193 | $29,175 | $29,120 | | NET INVESTMENT INCOME | $8,392 | $13,718 | $21,822 | $33,641 | | Net realized gain (loss) on investments | $(9,087) | $(3,931) | $(28,631) | $(11,373) | | Net unrealized gain (loss) on investments | $(2,968) | $(642) | $(712) | $7,593 | | NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(4,205) | $9,145 | $(8,580) | $28,026 | | Basic and Diluted EPS | $(0.44) | $1.00 | $(0.89) | $3.41 | | Net Investment Income Per Common Share | $0.87 | $1.50 | $2.26 | $4.10 | - Net Investment Income decreased significantly for both the three-month period (from **$13.718 million** to **$8.392 million**) and the nine-month period (from **$33.641 million** to **$21.822 million**) year-over-year[18](index=18&type=chunk) - The company experienced a net decrease in net assets from operations for the three and nine months ended September 30, 2022, primarily due to substantial net realized losses and net unrealized depreciation on investments[18](index=18&type=chunk) [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) This section details the changes in the company's net assets, reflecting operational results, distributions, and capital share transactions over time Consolidated Statements of Changes in Net Assets (in thousands, except share and per share amounts) | (in thousands, except share and per share amounts) | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net investment income | $21,822 | $33,641 | | Net realized gains (losses) from investment transactions | $(28,631) | $(11,373) | | Net change in unrealized appreciation (depreciation) on investments | $(712) | $7,593 | | Net increase (decrease) in net assets resulting from operations | $(8,580) | $28,026 | | Stockholder distributions | $(18,223) | $(14,573) | | Net increase (decrease) in net assets resulting from capital share transactions | $(1,737) | $41,331 | | Net assets at end of period | $251,582 | $271,048 | | Net asset value per common share | $26.18 | $29.71 | - Net assets decreased by **$28.54 million** for the nine months ended September 30, 2022, primarily driven by net decrease from operations and stockholder distributions, contrasting with a net increase of **$54.78 million** in the prior year[22](index=22&type=chunk) - Capital share transactions resulted in a net decrease of **$1.737 million** in 2022, compared to a significant net increase of **$41.331 million** in 2021, reflecting changes in stock issuance and repurchases[22](index=22&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Consolidated Statements of Cash Flows (in thousands, except share and per share amounts) | (in thousands, except share and per share amounts) | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash (used in) provided by operating activities | $(25,021) | $47,777 | | Net cash (used in) provided by financing activities | $(4,265) | $(81,089) | | CHANGE IN CASH AND RESTRICTED CASH | $(29,286) | $(33,313) | | CASH AND RESTRICTED CASH, END OF PERIOD | $39,054 | $49,591 | - Operating activities shifted from providing **$47.777 million** in cash in 2021 to using **$25.021 million** in 2022, primarily due to increased purchases of investments and net realized losses[26](index=26&type=chunk) - Financing activities used less cash in 2022 (**$4.265 million**) compared to 2021 (**$81.089 million**), largely due to significant debt repayments and repurchases in the prior year[26](index=26&type=chunk) [Consolidated Schedules of Investments](index=8&type=section&id=Consolidated%20Schedules%20of%20Investments) This section provides a detailed breakdown of the company's investment portfolio by security type and fair value at specified reporting dates Consolidated Schedules of Investments (in thousands) | Security Type (in thousands) | September 30, 2022 Fair Value | December 31, 2021 Fair Value | | :--------------------------- | :---------------------------- | :--------------------------- | | Senior Secured Loan | $415,819 | $364,701 | | Junior Secured Loan | $61,535 | $70,549 | | Equity Securities | $24,487 | $22,586 | | CLO Fund Securities | $24,623 | $31,632 | | Joint Ventures | $45,141 | $60,474 | | Total Investments | $571,656 | $547,573 | - The total investment portfolio at fair value increased by approximately **$24.08 million** from **$547.573 million** at December 31, 2021, to **$571.656 million** at September 30, 2022[37](index=37&type=chunk)[60](index=60&type=chunk) - Senior Secured Loans increased by **$51.118 million**, while Junior Secured Loans and CLO Fund Securities decreased by **$9.014 million** and **$7.009 million**, respectively[37](index=37&type=chunk)[60](index=60&type=chunk) [Consolidated Financial Highlights](index=21&type=section&id=Consolidated%20Financial%20Highlights) This section summarizes key financial metrics, including per share data, returns, and ratios, for the nine months ended September 30, 2022 and 2021 Consolidated Financial Highlights (Per Share Data and Ratios) | Per Share Data | 2022 (Nine Months Ended Sep 30) | 2021 (Nine Months Ended Sep 30) | | :----------------------------- | :------------------------------ | :------------------------------ | | Net asset value, at beginning of period | $28.88 | $28.77 | | Net investment income | $2.26 | $4.09 | | Net realized gains (losses) from investments | $(2.97) | $(1.38) | | Net change in unrealized (depreciation) appreciation on investments | $(0.07) | $0.92 | | Net (decrease) increase in net assets resulting from operations | $(0.89) | $3.41 | | Net asset value, end of period | $26.18 | $29.71 | | Total net asset value return | (1.6)% | 9.4% | | Total market return | (8.0)% | 47.7% | | Ratio/Supplemental Data | | | | Portfolio turnover rate | 25.0% | 41.8% | | Asset coverage ratio | 167% | 178% | | Ratio of net investment income to average net assets (annualized) | 11.0% | 18.4% | | Ratio of total expenses to average net assets (annualized) | 14.7% | 16.0% | - Net asset value per share decreased from **$28.88** to **$26.18**, resulting in a negative total net asset value return of **(1.6)%** for the nine months ended September 30, 2022, compared to a positive **9.4%** return in the prior year[65](index=65&type=chunk) - The asset coverage ratio decreased from **178%** to **167%** year-over-year, while the portfolio turnover rate also decreased from **41.8%** to **25.0%**[65](index=65&type=chunk) [Notes to Consolidated Financial Statements](index=22&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, investments, and debt [Note 1. Organization](index=23&type=section&id=Note%201.%20ORGANIZATION) This note describes Portman Ridge Finance Corporation's structure as a BDC and RIC, its investment strategy, and significant corporate events - Portman Ridge Finance Corporation operates as an externally managed, non-diversified closed-end investment company, regulated as a **Business Development Company (BDC)** and a **Regulated Investment Company (RIC)**[70](index=70&type=chunk)[72](index=72&type=chunk) - The company's asset coverage requirement for senior securities changed from **200%** to **150%** effective March 29, 2019, following Board approval under the Small Business Credit Availability Act (SBCA)[73](index=73&type=chunk) - Key acquisitions include **Garrison Capital Inc. (GARS)** on October 28, 2020, and **Harvest Capital Credit Corporation (HCAP)** on June 9, 2021, which significantly expanded the company's portfolio[80](index=80&type=chunk)[81](index=81&type=chunk) - A **1-for-10 reverse stock split** became effective on August 26, 2021, retroactively adjusting all share and per share values presented[87](index=87&type=chunk)[90](index=90&type=chunk) [Note 2. Significant Accounting Policies](index=24&type=section&id=Note%202.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methodologies applied in preparing the consolidated financial statements, including investment valuation - The financial statements are prepared on the accrual basis in conformity with **U.S. GAAP** for interim financial information, following ASC topic 946 – Financial Services – Investment Companies[91](index=91&type=chunk) - The Board has designated the Adviser as its 'valuation designee' responsible for fair value determinations of all investments, with the Board retaining ultimate oversight[100](index=100&type=chunk) - The company utilizes independent valuation firms for third-party valuations of material illiquid securities at least once every 12 months[101](index=101&type=chunk) - Recent accounting pronouncements include **ASU 2020-04 (Reference Rate Reform)** and **ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions)**, with the latter effective for fiscal years beginning after December 15, 2023, and not expected to have a material impact[97](index=97&type=chunk)[98](index=98&type=chunk) [Note 3. Earnings (Losses) Per Share](index=28&type=section&id=Note%203.%20EARNINGS%20(LOSSES)%20PER%20SHARE) This note details the calculation of basic and diluted net increase (decrease) in net assets per share for the reported periods Earnings (Losses) Per Share (in thousands) | ($ in thousands) | For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :----------------------------------------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net increase (decrease) in net assets resulting from operations | $(4,205) | $9,145 | $(8,580) | $28,026 | | Weighted average number of common and common stock equivalent shares outstanding | 9,602,712 | 9,131,456 | 9,644,870 | 8,213,661 | | Net increase (decrease) in net assets per basic common shares and diluted shares | $(0.44) | $1.00 | $(0.89) | $3.41 | - For the three months ended September 30, 2022, net assets per basic and diluted share decreased by **$0.44**, a significant decline from an increase of **$1.00** in the same period of 2021[131](index=131&type=chunk) - For the nine months ended September 30, 2022, net assets per basic and diluted share decreased by **$0.89**, compared to an increase of **$3.41** in the prior year, reflecting a negative shift in operational performance[131](index=131&type=chunk) [Note 4. Investments](index=28&type=section&id=Note%204.%20INVESTMENTS) This note provides a comprehensive breakdown of the investment portfolio, including security types, industry concentration, and fair value measurements Investments by Security Type (in thousands) | Security Type (in thousands) | September 30, 2022 Fair Value | December 31, 2021 Fair Value | | :--------------------------- | :---------------------------- | :--------------------------- | | Senior Secured Loan | $415,819 | $364,701 | | Junior Secured Loan | $61,535 | $70,549 | | Equity Securities | $24,487 | $22,586 | | CLO Fund Securities | $24,623 | $31,632 | | Joint Ventures | $45,141 | $60,474 | | Total Investments | $571,656 | $547,573 | - The weighted average contractual interest rate on the interest-earning Debt Securities Portfolio increased from approximately **8.1%** at December 31, 2021, to **10.0%** at September 30, 2022[325](index=325&type=chunk) - As of September 30, 2022, **89.3%** of the Debt Securities Portfolio were floating rate with a spread to an interest rate index, and **74.8%** of these floating rate loans contained LIBOR floors ranging between **0.50%** and **2.00%**[427](index=427&type=chunk) - A significant portion of the company's investments are classified as **Level III** (unobservable inputs), totaling **$478.236 million** at September 30, 2022, reflecting the illiquid nature of BDC investments[175](index=175&type=chunk)[178](index=178&type=chunk) [Note 5. Related Party Transactions](index=37&type=section&id=Note%205.%20RELATED%20PARTY%20TRANSACTIONS) This note describes transactions with related parties, including advisory and administration fees, and co-investment arrangements - The Adviser receives a Base Management Fee of **1.50%** of average gross assets (excluding cash and cash equivalents) and an Incentive Fee with a **7.00%** hurdle rate, consisting of an Income-Based Fee (**17.50%** of pre-incentive fee net investment income) and a Capital Gains Fee (**17.50%** of cumulative realized capital gains, net of losses and depreciation)[199](index=199&type=chunk) Related Party Fees (in thousands) | Fees (in thousands) | For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Management fees | $2,082 | $2,065 | $6,305 | $5,772 | | Performance-based incentive fees | $1,780 | $1,939 | $4,627 | $6,333 | | Administrative services expense | $862 | $760 | $2,531 | $2,092 | - The SEC granted exemptive relief on October 23, 2018, allowing BDCs managed by the Adviser to co-invest with other affiliated funds in certain private placement transactions, subject to Board approval and fairness conditions[216](index=216&type=chunk)[217](index=217&type=chunk) - For the nine months ended September 30, 2022, the Company purchased **$4.0 million** in total investments from a fund managed by an affiliate of the Investment Advisor under Rule 17a-7 of the 1940 Act[218](index=218&type=chunk) [Note 6. Borrowings](index=40&type=section&id=Note%206.%20BORROWINGS) This note details the company's debt obligations, including secured notes and revolving credit facilities, their terms, and covenant compliance Debt Obligations (in thousands) | Debt Obligations (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------------------------------------------------------ | :----------------- | :---------------- | | 2018-2 Secured Notes (net) | $162,593 | $162,460 | | 4.875% Notes Due 2026 (net) | $105,301 | $104,892 | | Great Lakes Portman Ridge Funding LLC Revolving Credit Facility (net) | $95,908 | $79,839 | | Total | $363,802 | $347,191 | | Weighted average stated interest rate | 5.0% | 3.2% | | Weighted average maturity | 5.2 years | 5.4 years | - The **4.875% Notes Due 2026** were issued in 2021, with **$108.0 million** aggregate principal outstanding, maturing on April 30, 2026, and bearing interest at **4.875%** annually. The company was in compliance with all debt covenants[220](index=220&type=chunk)[222](index=222&type=chunk)[231](index=231&type=chunk)[377](index=377&type=chunk) - The Revolving Credit Facility was amended on April 29, 2022, replacing three-month LIBOR with SOFR as the benchmark interest rate, reducing the margin to **2.80%**, and extending the reinvestment period to April 29, 2025, and the scheduled termination date to April 29, 2026[242](index=242&type=chunk) - As of September 30, 2022, the company's asset coverage ratio was **167%**, compliant with the minimum **150%** required for a BDC[375](index=375&type=chunk) [Note 7. Distributable Taxable Income](index=43&type=section&id=Note%207.%20DISTRIBUTABLE%20TAXABLE%20INCOME) This note explains the company's RIC status, its policy on distributing taxable income, and reconciliation of GAAP net assets to taxable income - As a RIC, the company aims to distribute substantially all of its taxable income and gains to stockholders to avoid federal income tax at the corporate level[260](index=260&type=chunk) Distributable Taxable Income (in thousands) | ($ in thousands) | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | | :-------------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Net (decrease) increase in net assets resulting from operations | $(8,580) | $28,026 | | Taxable income before deductions for distributions | $22,092 | $20,482 | | Taxable income per weighted average basic and diluted shares | $2.29 | $2.49 | - The company had a net capital loss carryforward of **$416.3 million** at September 30, 2022, which is not subject to expiration, to offset future net capital gains[266](index=266&type=chunk) - Taxable subsidiaries' activity resulted in a provision for income taxes of **$1.1 million** for the nine months ended September 30, 2022, with no deferred tax assets and **$2.9 million** in deferred tax liabilities[267](index=267&type=chunk) [Note 8. Commitments and Contingencies](index=44&type=section&id=Note%208.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's off-balance sheet arrangements, including unfunded commitments and ongoing legal proceedings - As of September 30, 2022, the company had **$54.4 million** in unfunded commitments to extend credit to portfolio companies, an increase from **$47.9 million** at December 31, 2021[269](index=269&type=chunk)[273](index=273&type=chunk) - A significant portion of these commitments includes a **$21.7 million** unfunded commitment to the Great Lakes II Joint Venture[270](index=270&type=chunk)[273](index=273&type=chunk) - The company is involved in the Delaware Actions, putative stockholder class action lawsuits concerning the HCAP merger, and intends to vigorously defend itself, with the outcome and potential losses currently indeterminable[271](index=271&type=chunk)[442](index=442&type=chunk) [Note 9. Stockholders' Equity](index=45&type=section&id=Note%209.%20STOCKHOLDERS%27%20EQUITY) This note details changes in stockholders' equity, including net income, distributions, capital share transactions, and stock repurchase programs Stockholders' Equity (in thousands) | (in thousands) | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | | :------------------------------------------------------- | :----------------------------------- | :----------------------------------- | | Balance, January 1 | $280,122 | $216,264 | | Net investment income | $21,822 | $33,641 | | Net realized (losses) from investment transactions and extinguishment of debt | $(28,631) | $(11,373) | | Net change in unrealized appreciation on investments | $(712) | $7,593 | | Distributions to Stockholders | $(18,223) | $(14,573) | | Reinvested Dividends | $888 | $444 | | Stock-repurchase | $(3,004) | $(1,827) | | Private placement and other | $379 | $42,714 | | Balance, September 30 | $251,582 | $271,048 | - The Board authorized a renewed stock repurchase program of up to **$10 million** in March 2022, effective until March 31, 2023. For the nine months ended September 30, 2022, the company repurchased **129,617 shares** for approximately **$3.0 million**[276](index=276&type=chunk)[278](index=278&type=chunk) - The total number of common shares outstanding decreased from **9,699,695** at December 31, 2021, to **9,608,913** at September 30, 2022[277](index=277&type=chunk) [Note 10. Acquisitions of Garrison Capital Inc. and Harvest Capital Credit Corporation](index=46&type=section&id=Note%2010.%20ACQUISITIONS%20OF%20GARRISON%20CAPITAL%20INC.%20AND%20HARVEST%20CAPITAL%20CREDIT%20CORPORATION) This note describes the acquisitions of Garrison Capital Inc. and Harvest Capital Credit Corporation, including purchase consideration and acquired assets - The GARS acquisition (October 28, 2020) involved cash and company common stock, with a total purchase consideration of **$64.033 million** and a purchase discount of **$(40.422) million**[279](index=279&type=chunk)[281](index=281&type=chunk) - The HCAP acquisition (June 9, 2021) also involved cash and company common stock, with a total purchase consideration of **$58.632 million** and a purchase discount of **$(3.809) million**[282](index=282&type=chunk)[287](index=287&type=chunk) - In connection with the HCAP acquisition, the company assumed **$28.75 million** in HCAP Notes, which were subsequently redeemed in full on July 23, 2021[288](index=288&type=chunk)[290](index=290&type=chunk) [Note 11. Subsequent Events](index=48&type=section&id=Note%2011.%20SUBSEQUENT%20EVENTS) This note discloses material events occurring after the reporting period, specifically a declared cash distribution to common stockholders - On November 8, 2022, the Board declared a cash distribution of **$0.67 per share** of common stock, payable on December 13, 2022, to stockholders of record as of November 24, 2022[291](index=291&type=chunk) - Management has determined that no other material subsequent events occurred after September 30, 2022, that would require adjustment to, or disclosure in, the unaudited consolidated financial statements[292](index=292&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial performance, liquidity, capital resources, and critical accounting policies [General Overview](index=49&type=section&id=General) This section provides an overview of Portman Ridge Finance Corporation's investment objective, BDC status, and significant corporate transactions - Portman Ridge Finance Corporation is an externally managed BDC, regulated under the **1940 Act**, with Sierra Crest Investment Management LLC serving as its investment adviser[295](index=295&type=chunk) - The company's investment objective is to generate current income and capital appreciation primarily from secured term loans, mezzanine debt, and selected equity investments in privately-held middle-market companies (EBITDA **$10 million-$50 million**, total debt **$25 million-$150 million**)[297](index=297&type=chunk) - The company maintains RIC status for U.S. federal income tax purposes, intending to distribute substantially all net ordinary taxable income and capital gains to stockholders[300](index=300&type=chunk) - Significant corporate events include the Externalization of management in April 2019, the acquisition of **Garrison Capital Inc. (GARS)** in October 2020, and the acquisition of **Harvest Capital Credit Corporation (HCAP)** in June 2021, followed by a **1-for-10 reverse stock split** in August 2021[302](index=302&type=chunk)[304](index=304&type=chunk)[306](index=306&type=chunk)[312](index=312&type=chunk) [Portfolio and Investment Activity](index=50&type=section&id=Portfolio%20and%20Investment%20Activity) This section details the company's investment portfolio composition, activity, and changes in fair value for various security types Portfolio and Investment Activity (in thousands) | Security Type (in thousands) | Fair Value at December 31, 2021 | Purchases / originations / draws (2022) | Pay-downs / pay-offs / sales (2022) | Increase (decrease) in fair value (2022) | Fair Value at September 30, 2022 | | :--------------------------- | :------------------------------ | :-------------------------------------- | :---------------------------------- | :--------------------------------------- | :------------------------------- | | Senior Secured Loan | $364,701 | $179,217 | $(125,901) | $(5,088) | $415,819 | | Junior Secured Loan | $70,549 | - | $(8,036) | - | $61,535 | | Equity Securities | $22,586 | $7,763 | $(8,036) | $903 | $24,487 | | CLO Fund Securities | $31,632 | - | $(5,571) | $7,140 | $24,623 | | Joint Ventures | $60,474 | $1,700 | $(10,400) | $(6,107) | $45,141 | | Total Portfolio | $547,573 | $188,680 | $(147,833) | $(712) | $571,656 | - The total investment portfolio increased by **$24.083 million** from December 31, 2021, to September 30, 2022, driven by **$188.680 million** in purchases/originations/draws and offset by **$147.833 million** in pay-downs/sales[318](index=318&type=chunk) - The weighted average contractual interest rate on the interest-earning Debt Securities Portfolio increased from approximately **8.1%** at December 31, 2021, to **10.0%** at September 30, 2022[325](index=325&type=chunk) - As of September 30, 2022, **three investments** were on non-accrual status, a decrease from **seven** at December 31, 2021[326](index=326&type=chunk) [Results of Operations](index=54&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including investment income, expenses, and net assets from operations for the reported periods Results of Operations (in thousands) | (in thousands) | For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total investment income | $19,009 | $22,911 | $50,997 | $62,761 | | Total expenses | $10,617 | $9,193 | $29,175 | $29,120 | | NET INVESTMENT INCOME | $8,392 | $13,718 | $21,822 | $33,641 | | Net realized gain (loss) on investments | $(9,087) | $(3,931) | $(28,631) | $(11,373) | | Net unrealized gain (loss) on investments | $(2,968) | $(642) | $(712) | $7,593 | | Net increase (decrease) in net assets resulting from operations | $(4,205) | $9,145 | $(8,580) | $28,026 | - Total investment income decreased by **$3.902 million (17.0%)** for the three months and **$11.764 million (18.7%)** for the nine months ended September 30, 2022, compared to the prior year[349](index=349&type=chunk) - Net investment income decreased by **$5.326 million (38.8%)** for the three months and **$11.819 million (35.1%)** for the nine months ended September 30, 2022, year-over-year[349](index=349&type=chunk) - The company reported a net decrease in net assets from operations of **$(4.205) million** for the three months and **$(8.580) million** for the nine months ended September 30, 2022, a significant reversal from positive results in 2021[349](index=349&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=57&type=section&id=Financial%20Condition%2C%20Liquidity%2C%20and%20Capital%20Resources) This section discusses the company's financial position, cash management, debt obligations, and capital availability Financial Condition, Liquidity, and Capital Resources (in thousands) | (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $16,871 | $28,919 | | Restricted Cash | $22,183 | $39,421 | | Total Investments | $571,656 | $547,573 | | Total Debt Outstanding (par value) | $368,934 | $352,434 | | Asset coverage ratio | 167% | 178% | - The company's asset coverage ratio was **167%** at September 30, 2022, remaining compliant with the **150%** minimum required for a BDC[375](index=375&type=chunk) - Total outstanding borrowings (par value) increased by **$16.5 million** from **$352.434 million** at December 31, 2021, to **$368.934 million** at September 30, 2022[375](index=375&type=chunk) - The Board authorized a renewed **$10 million** stock repurchase program in March 2022, effective until March 31, 2023, with **$6.996 million** remaining under the program as of September 30, 2022[395](index=395&type=chunk)[446](index=446&type=chunk) [Critical Accounting Policies](index=60&type=section&id=Critical%20Accounting%20Policies) This section highlights the key accounting policies requiring significant judgment and estimation, particularly investment valuation and income recognition - The most significant estimate in financial statements is the valuation of investments and related unrealized appreciation/depreciation, with fair value determined in good faith by the Board[401](index=401&type=chunk)[402](index=402&type=chunk) - Investments are classified into a three-level hierarchy (Level I, II, III) based on the transparency of inputs to fair value measurement, with a majority of the company's investments being **Level III** due to unobservable inputs[406](index=406&type=chunk) - Interest income is recognized on an accrual basis, but loans are placed on non-accrual status if 90 days or more past due or if collectibility is not expected. As of September 30, 2022, **three investments** were on non-accrual status[417](index=417&type=chunk) - Investment income on CLO equity investments is recorded using the effective interest method based on anticipated yield and estimated cash flows, differing from tax-basis income and cash distributions[419](index=419&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the company's exposure to market risks, focusing on interest rate fluctuations and their potential impact on net investment income - The company's principal market risks are fluctuations in interest rates and the valuations of its investment portfolio[424](index=424&type=chunk) - As of September 30, 2022, approximately **89.3%** of the Debt Securities Portfolio consisted of floating-rate loans, with **74.8%** of these having LIBOR floors ranging from **0.50%** to **2.00%**[427](index=427&type=chunk) Impact on Net Investment Income from a Change in Interest Rates (in thousands) | Impact on net investment income from a change in interest rates at: (in thousands) | 1% Increase | 2% Increase | 3% Increase | | :--------------------------------------------------------------------------------- | :---------- | :---------- | :---------- | | Increase in interest rate | $2,100 | $4,029 | $5,957 | | Decrease in interest rate | $1,340 | $(561) | $(2,493) | - The fair value of investments, especially those without readily available market quotations, is determined in good faith by the Board using a consistent valuation policy, often with assistance from independent valuation firms[433](index=433&type=chunk)[434](index=434&type=chunk) [Item 4. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=63&type=section&id=Item%204.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This section confirms the absence of any changes in or disagreements with accountants regarding accounting and financial disclosure matters - There have been no changes in and disagreements with accountants on accounting and financial disclosure[435](index=435&type=chunk) [Item 5. Controls and Procedures](index=63&type=section&id=Item%205.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and the absence of material changes in internal control over financial reporting - The company's CEO and CFO concluded that the disclosure controls and procedures were effective as of September 30, 2022[436](index=436&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[437](index=437&type=chunk) [Part II. Other Information](index=64&type=section&id=Part%20II.%20Other%20Information) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other miscellaneous information [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses the company's involvement in putative stockholder class action lawsuits related to the HCAP merger - The company is a defendant in two putative stockholder class action lawsuits (the "Delaware Actions") alleging breaches of fiduciary duties related to the HCAP merger[440](index=440&type=chunk)[441](index=441&type=chunk) - The company became responsible for claims against HCAP and its former officers/directors after the merger[441](index=441&type=chunk) - The outcome of the lawsuits and an estimate of reasonably possible losses are not determinable at this time, but the company maintains directors' and officers' insurance[442](index=442&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) This section states that there are no material changes to previously disclosed risk factors from the annual report - No material changes to risk factors were identified during fiscal 2021, beyond those in the Annual Report on Form 10-K for December 31, 2021[443](index=443&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered sales of equity securities through the DRIP and share repurchases under authorized programs - During the nine months ended September 30, 2022, the company issued **38,835 shares** of common stock under its dividend reinvestment plan (DRIP) for approximately **$888 thousand**[444](index=444&type=chunk) Share Repurchase Program (in thousands) | Period | Total Number of Shares Purchased | Average Price Per Share | Dollar Value of Shares that May Yet Be Purchased Under the Program (Thousands) | | :------------------------- | :------------------------------- | :---------------------- | :----------------------------------------------------------------------------- | | March 11-March 31, 2021 | - | - | $10,000 | | April 1-June 30, 2021 | 15,718 | $24.20 | $9,620 | | July 1-September 30, 2021 | 59,659 | $24.24 | $8,174 | | October 1-December 31, 2021| - | - | $8,174 | | Total, December 31, 2021 | 75,377 | | | | March 17-March 31, 2022 | 22,990 | $23.72 | $9,455 | | April 1-April 30, 2022 | 39,014 | $23.75 | $8,528 | | May 1-May 31, 2022 | 42,426 | $22.73 | $7,564 | | June 1-June 30, 2022 | 25,187 | $22.53 | $6,996 | | July 1-September 30, 2022 | - | - | $6,996 | | Total, September 30, 2022 | 129,617 | | | | Total | 204,994 | | | - During the nine months ended September 30, 2022, the company repurchased **129,617 shares** under its Renewed Stock Repurchase program at an aggregate cost of approximately **$3.0 million**[278](index=278&type=chunk)[396](index=396&type=chunk) [Item 3. Defaults Upon Senior Securities](index=65&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[448](index=448&type=chunk) [Item 4. Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[449](index=449&type=chunk) [Item 5. Other Information](index=65&type=section&id=Item%205.%20Other%20Information) This section states that no other material information requires reporting - No other information is reported[450](index=450&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the report, including corporate governance documents and officer certifications - The exhibits include Certificates of Amendment to the Certificate of Incorporation (Form N-2, Form 8-K filings), Third Amended and Restated Bylaws, and certifications from the CEO and CFO (pursuant to Rule 13a-14(a) and 18 U.S.C. 1350)[453](index=453&type=chunk) [Signatures](index=66&type=section&id=Signatures) This section contains the official signatures of the company's President, CEO, and CFO, certifying the report's submission - The report is signed by Edward Goldthorpe, President and Chief Executive Officer, and Jason Roos, Chief Financial Officer, on November 8, 2022[455](index=455&type=chunk)

Portman Ridge Finance Corporation (NASDAQ:PTMN) Q2 2022 Earnings Conference Call August 10, 2022 9:00 AM ET Company Participants Ted Goldthorpe - Chief Executive Officer Patrick Schafer - Chief Investment Officer Jason Roos - Chief Financial Officer Conference Call Participants Christopher Nolan - Ladenburg Thalmann & Co. Inc. Ryan Lynch - Keefe, Bruyette, & Woods, Inc. Steven Martin - Slater Capital Management, LLC Operator Welcome to the Portman Ridge Finance Corporation Second Quarter 2022 Earnings Confe ...

PORTMAN 2022 Q2 Earnings Presentation August 10, 2022 Important Information Cautionary Statement Regarding Forward-Looking Statements This presentation contains forward-looking statements. The matters discussed in this presentation, as well as in future oral and written statements by management of Portman Ridge Finance Corporation ("PTMN", "Portman Ridge" or the "Company"), that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 814-00735 Portman Ridge Finance Corporation (Exact name of Registrant as specified in its charter) Delaware 20-5951150 (State or other jurisdiction of Inc ...