TCPC - Earnings call transcript Q4 2024 | BlackRock TCP Capital Corp.

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Operator

Ladies and gentlemen, good afternoon. Welcome, everyone, to BlackRock TCP Capital Corp's Fourth Quarter and Year Ended 2024 Earnings Conference Call. Today's conference call is being recorded for replay purposes. [Operator Instructions] And now I would like to turn the call over to Michaela Murray, a member of the BlackRock TCP Capital Corp. Investor Relations team. proceed. please Michaela,

Michaela Murray

Thank you.

statements that on statements of the the of note conference may management I'll guarantees time call not this estimates such forward-looking begin, performance. based contain we at of Before future are and and assumptions

and statements without Forward-looking forward-looking and results could projected. on are of notice. today this call subject and differ statements uncertainties, actual change from materially involve those as to risks made Any are made

and to sources not Additionally, representation our been today, fourth discussed derived year December the verified. certain we been we quarter for and have Accordingly, ended third-party information XX, independently may or presented from warranty such issued has make no XXXX. and release with earnings respect information. Earlier

with earlier reviewed website refer the These presentation, Relations that Presentations. at tcpcapital.com. We earnings XX-K, on SEC a the to link and a error. also click to posted issue To which conjunction and slide our supplemental documents on release which be we with call, to corrected due the earnings a should please today's Events today. Please will Investor company's shortly select view typographical filed Form in we note we presentation

third been consolidated unrealized paragraph of of operations results has sentence third rather than The corrected the to refer gains. to under losses unrealized

other Phil Tseng. and throughout. I will to CEO, and now presented NAV statistics Our correctly over are Chairman turn the our call

Philip Tseng

outline market will by change Worrell, President, discuss to return up how we historical portfolio call financial Last, I for shareholder-friendly joined the our our and you XXXX. today portfolio we environment. We're we investments our results thank today. all results well our provide returns Michaela, for and over details our the the before Erik as to Dan provide approaching you, and to turn of I fourth have joining construction comments our are Thank Cuellar, describe questions. as will above-market Jason on also full to quarter the for the implemented. I'll CFO, Mehring, also our investment will activity open review year the and Co-CIO. then call call

in net share share for quarter $X.XX. and from We share year. Fourth investment the are as last the plan Annualized was challenges end the $X.XX quarter $X.XX primarily fair reflect was X.X% adjusted per per of income at quarter, markdowns, to an and ROE ROE our of XXXX of in net value with our per The as non-accruals year net prior Securus optimistic the Full XXXX. net previous $X.XX adjusted versus strategic declines lower largest represented income about investment income income investment reflecting portfolio expenses compared and Astra. to flat at and incremental confident compared XXXX. to share, successfully share the in quarter. NAV was per X.X% in presented future Razor, base At $XX.XX was market and investment in year in non-accruals to the the portfolio impact were which the compared per increase the rates XX.X%. investment navigate

to deal market make may the portfolio and a by We to well perform right declining continued as these borrowers are we continues to of vast often conditions, impacted sponsors laser-focused also including take in these our markdowns we working were result resolve resolving and quarters, the experience have some of that spreads the results our are of that way environment majority on our reflective a results Our solutions that are and slower impacted issues. confident best tighter team's with our and consistently rates. produce our said, The resolve issues. Based quickly for a direct execute. interest lending, company. on shareholder always substantial through decisions credit shareholders know that public and in to we that issues from history performance of remain That pleased time not we is will returns non-accruals recent not in attractive experience thoughtful that as XX-year delivering the does returns with and optimized

few share let We Now marked we've on during updates high-level on our each of We me remain we'll in actively forward, of engaged provide markdowns with prior the best additional of can. I'll on on provide path Securus detail Amazon these we down a and aggregators. Astra, the quarter. the and non-accruals and the quickly positions Razor, addressed each calls. management an teams which update when companies

total its this profitability for roughly struggle consolidation resolve these to that runway resolutions challenges, of can and improved its We're Razor these turnaround. and drive always to continues with accounted It XX% inventory may with linear markdowns issues working liquidity. to not which Razor, quarter. for include is impacted our provide First have and time are complete. flow which cash to take closely Again,

nearly for simplified overstock in quarter, having further brands the transformation, On brick-and-mortar. emblematic growing along unprofitable business trimming revenue investing which its Notably, fact the that the of markup a products. by as its SellerX, progress sales it improvements may is its This challenged in hand, while borrowers. other brand year-over-year reducing and experienced effort its company's our time is the doubled top for take diversified in channels and into

the has dynamics our in which and and on names, in to last multi-signal its Renovo continued growth This place that and non-accrual. understand product, towards into in we quarter, a is non-accrual which On status. experienced and businesses experience focus to slowdown the call, that long-term resulting customer company InMoment, improve has solutions decision our we industry their we customer added new quarter, the help experiences, management During believe slowdown transitioning provides InMoment, potential. fourth due mentioned X growth growth to software

worked will softened remodeling spend. engaged deferred company management team and performance to and repair the its actively closely repair company. management while to is remain Renovo resulting demand and team. Renovo, We direct-to-consumer we We a for non-accrual due support on services continue placed this acquisitions, in persistent Renovo's with integrate InMoment financing the declined and other home to both and home collaborate considerations. the monitor remodel has inflation, on residential company and to quarter, performance remodeling as

Given decision dividend our to performance, Board for quarter. regular share the reduce the our first $X.XX to financial recent made our per

dividend income in fourth investment level exceeded believe net While we quarter, our sustainable. the the revised is

and least intend addition, special declared the quarter, for quarters we dividend In Board a in of our special and XXXX, dividend declare $X.XX subject Board each of $X.XX the to second a of first approval. third to at

want of appreciate Next actions discuss and continue trust align We and support shareholders. continued our with you. we to your I to believe patience taking we're are examples how to these

ending September XX, agreed our waive XX, calendar voluntarily quarters These February adviser fees January our earned back XXXX, X/X on X fee on be First, for XXXX, X, on date. of to base and cannot XXXX. at management a beginning later

portfolio's We as the decline are the in NAV. taking acknowledge we action this

-- on interests. do fourth a shareholder-friendly our of Second, structure And well, purchased This fees repurchased shares we designed XX, April to third, average of during fee only align plan XXX,XXX the share intentionally only then. when structure and our well hurdle total as fee weighted ensures do exceeds Directors and quarter, incentive price Board per we return structure to When that incentive was shareholder the earn you pursuant management rate. we incentive shareholders our -- our XXXX. reapproved at the $X.XX, know,

to TCPC consistent, new a results that clear As attractive we a management the long-term team, position in way path have returns. in

we on focus approach core to market primarily proactive middle First, an underwriting. will to continue and the industry-driven with sourcing

use highly middle with and the companies deal opportunistically invest lending delivered the both returns. strong in syndicated area will relationship-driven upper an an available our capital. of many are industry historically strategy, for in has market knowledge less our deep lower segment companies financing need an that expertise are risk-adjusted It's in relationships We solutions It's structuring direct efficient benefits valued in and market broadly middle customized ensure the underserved competition market. that also creating capital. There and align with growth and our where also that attractive to are than and

subsectors. diversified exposure will we portfolio limit and maintain a to Second, highly industry

and diverse maintaining where industries have healthcare, portfolio technology we focused well on sources like and always know established relationships, verticals have an We referral borrower fintech. in we ecosystem of a and including

we one industry in subsector will any avoid such aggregators. Amazon concentrations Going as forward, meaningful also

and are a we protection. continue or investing that Third, first prioritize will second where at at in borrowers know significant of relationship having We to downside consider we provides lien those loans influence. where seat least lien the we lender with will emphasize we direct table a a loans,

connections we platform. will our the continue BlackRock broader to to and deepen Finally, leverage

resources full of draw relationships advantage. a ability is and the Our distinct to platform on competitive extensive the

as investment substantial have As to access part platform as of a we team resources. well and broader BlackRock, origination

to am us current a successfully patience flow In of the amount will appreciate performance portfolio throughout experienced significant work process. and our plan. to unparalleled historical shareholders' in make. With be selective investments and right the we deal the We confident see levels. continued believe this allows we the of our talented BlackRock the that highly proprietary platform, team I the we team that that and addition, resources have We our through return right challenges we

quarter review I'll activity Now during Jason, market our environment. who over investment and will to the it turn the

Jason Mehring

companies Investment a size floating XX.X% our value effective quarter sectors Thanks, a than weighted was diverse our with of our our to end, in $X.X in each loans, broadly which were last than industry $XX.X of billion million. start of year-end, overview average market and the was with secured portfolio distributed position XX Phil. rate. than brief our companies to approximately was more my total. At At portfolio of portfolio X% senior of XX XX.X% invested XXX less fair income across XX.X% yield had with portfolio I'll of portfolio an quarter. contributing of our comments across portfolio. more XX.X% compared the average invested

decline exited during base had average statistics while These of average a weighted had investments XX%. XX.X%, of and that some reflect the reduction a period. spread the we New weighted rates in those yield yield

In emphasized second addition, more recently. that a portion in repayments of not deals quarter have the from higher-priced were we lien our

structure, a into new million a of healthy portfolio capital capital $XXX in companies. we below deployed total emphasizing influence. diversity opportunities existing lender selective highly M&A in X volumes approach where the seniority are and overall of transactions portfolio see and We flow continue of a X to to the investment quarter While the took remained expectations, new investing, we a of during and quarter

our to were involvement investments the include of believe XX.X% up quarter. In loans, at weaker the several and outweighed first deals loans in that not reward. quarter maintain lien in to prior the the in XX.X% risk portfolio our that or lien from we chose were was amended new where repriced yields at lower end, were of we covenants All first instances, potential

understand competitive important in an we allocating perspective, additional of on new relationships, our and focus risk quarter At origination businesses we accounted time, XX% companies to a our investment healthy nearly aligned industries management a As same portfolio know capital from level our beneficial. remains for are the opportunities strategy. deeply is for result TCPC. of have of that and a with and advantage Investments seen direct From borrower incumbency borrowers fourth activity. existing well

Now X investments I'll from quarter. the discuss specific

high strategy, and from first with in largest a attractive Global new was levels million opportunity contracts the and and trade We revenue XXXX, global global within a include exhibitions, or to industry. $XX-plus lien exhibition view loan services Its invest client in Specialists a investment end-to-end events. Experience company billion services conferences a this company highly management long-term design, Our recurring of portfolio show production Founded that GES to as leader in logistics. provides is live a GES. creative, exhibition for $XX.X

a released of into experts test $XX.X investment testing crowd was Applause, and to the connects to an of consumers. quality company with they during before digital million portfolio existing to software largest global the community developers are company applications Our that ensure a loan quarter

expanded Since advancements, in have financing buyout partners a customer of We AI a has its year. originally driven investment, invested recurring partner support subsequent annual to company long-time been in strategic performed initial well our growth in last significantly We October in by has revenue, leverage transaction to and expansion. Applause XXXX the Applause. led and and

it M&A rates. by As XXXX. pipeline, and to have most our driven heading relates interest that into not in market in seen has we expected been the of This increase the activity part overall level

has While reductions cut pace than had overall rates, for. less been the many has hoped of Fed the level and

outlook adjusted. some rate market Our be is the and lift there's likely the view overall that that is implied digesting for as activity in expectations to XXXX are

that to election more policy the While reasonable determined regulatory cannot be that environment be activity levels noting volumes. U.S. the to as that sponsors but influence potential drive rates it's to hold on more equity continue dry activity, valuation sellers have powder, narrow favorable of endeavor following many ignored. There's clearly much to a have think deal further is to the should for front, may on which worth significant gaps existed buyers private recently. and other that also It's shifts contribute this record transaction

in core level market. relates while an lending we to debt difficult continue middle between to both and ongoing have our increased compression, well think the and that to activity, we it's borrowers private been of mentioned specifics economy credit to With that are sources. it a stabilization has spread capital and by related Overall, of Phil refinanced previously, have companies that to strong many competition ahead. this segment suggesting positioned As which is to point, market provide predict or deal traditional theme driven said, their repriced at this I

I'll turn who the financial results, over to and Erik, conversation our discuss position. liquidity will Now capital

Erik Cuellar

Jason. Thank you,

Let financial for me the begin quarter. with results our

noted, investment net Phil per As income for the adjusted $X.XX the per for XXXX. quarter share fourth year share full and $X.XX was

expenses income. adjusted non-GAAP purchase release, debt earnings the in accordance included of net amount as press net financial full income amortization $X.XX, with income well and $X.XX recurring fourth PIK GAAP quarter of $X.XX, XX-K. Gross income the was Operating income merger This BCIC resulting share the of PIK included and amortization interest discount from investment release as to income reconciliation share of detailed income and interest income share. is our $X.XX income other metrics investment for other dividend discount adjusted and expenses. fourth included quarter per in were XX.X% the A quarter and for $X.XX our is accounting non-recurring investment interest in As investment of investment was earnings cash total of calculated net our GAAP. with of per $X.XX for and $X.XX, per recurring per of share. $X.XX fee of excludes

cumulative did was no the X company's the December XXXX. As not XXXX, as months XX, return total of incentive total ended result, And compensation the December accrued return hurdle. XX, for a exceed

X/X the than less mentioned, XXXX. Net $X,XXX of quarters Phil per has X, quarter quarter as Additionally, losses our decrease discussed were unrealized for share, $XX adviser reflecting share. and Net in September approximately net the management the XX, base realized waive share. X totaled $XX or losses agreed per on our markdowns primarily on on beginning January the fees for for $X.XX in quarter investments XXXX, per unrealized to fourth million million or X or ending Phil $X.XX was net earlier. $X.XX assets The

cost. value non-accrual December on portfolio XX, of companies at of As status, representing were fair at XX X.X% the and XX.X% portfolio

possible As sponsors well. Phil noted, for we the performing of and with with our outcomes closely portfolio issues are shareholders. borrowers, best their working our our The remainder creditors resolve is to

liquidity. our to Turning

our available Unfunded portfolio and $XXX solid, of billion X.Xx. our at million liquidity regulatory $XX quarter investment million remains X% million at the was million of $X.X our end $XXX range positioning leverage leverage X.XXx, were total including cash. $XX approximately which of $XXX in the revolver and to is portfolio X.X of target million, within quarter or only year-end commitments. Net to end, with of loan at sheet commitments balance Our increased companies to

program, X.X%, the at of We credit our SBA which note debt from quarter X.X% facilities, quarter. have on investments The the end ample the flexible with unsecured an financing of includes options prior issuances rate weighted diverse X the down at to low-cost interest and fund was end average and new outstanding program. leverage X

operator up questions. over back to for the Now I'll turn call open line the to the

Operator

Our [Operator O'Shea Fargo first comes Securities. Wells today Finian from Instructions] with question

Finian O'Shea

you and On And the the level be? you spillover now? will if dividend gave target I color specials, some that your on can give what already. us the apologize

Erik Cuellar

in I'll special quarter. QX $X.XX address into full did declared the prior the Yes, have Fin, of amount. or this the a We I'll address distribute We But let $X.XX We probably we recall, dividend you spillover. quarter -- carryover of first so from level. the Phil of not about XXXX. as

Philip Tseng

here Fin, level. very to really thoughtful Yes, regular the tried on we be dividend

been of impact over it's ongoing think, base tightening, the coming was in I a course, have spread lower environment, to they But rates down, of to on Obviously, we there of level than sustainable to approach few years. based current of that Our the coming today a number up really And make they're earnings the been past today. considerations, right, industry as come about recognize. the are most in think had portfolio to have decision. this power the the

we as new income. And some into repayments so And seeing we less portfolio interest yielding are time of spread from deployments, course, non-accruals our up over will the rotate there. end compression

really sustainable here and and we what want accordingly understand for course, lies the of that's around here and arrived. be and that around strong therein regular we is to provide So to total level, QX want and we try do thoughtful specials true approach QX. our do returns guidance a where shareholder But, dividend the we

Finian O'Shea

And platform the and we've then it just portfolio sure sort to becomes or of roll a appears cetera, HPS theirs. unit up I'm to management, discuss, et your investment you of but extent that seen a can that function acquisition, be all HPS, will TCP and part what BlackRock question. not means

investment -- do brace anything So change like should or your for have any that? strategy strategic any we you say, like in,

Philip Tseng

know, much into regulatory to out is business there December. closed really acquisition a our back HPS it this expect fair meaningful be a middle this direct there U.S., given our enhanced borrower close broader and credit portfolio private growing agreed approvals. can't their the to think change. acquisition to The been platform. our of to yet, team the But well in private of I these as of question. to existing some I performance-related commitment of HPS we relationships I issues. But laser-focused just detail as HPS and in go deep headline to through on don't has credit year, as Yes, I of and business, some as at And portfolio point that's since bring Fin, the and it the expect around the scale. in particularly including seeing hasn't our capabilities transaction usual, expanded much and network subject BlackRock particularly that will does given very highlight to a think lending, sourcing expertise it resources importantly, you BlackRock's

very we're So excited.

one of of the transaction direct as think the I as the the how aspects lending businesses are. HPS well compelling BlackRock private markets is business U.S. complementary

So I excited. know we're

forward excited. how being Our if benefits of team larger platform we've any understanding the is to having part the get platform date And we're HPS much indication, that to looking I that. of part experienced to very as think as a of BlackRock is

Finian O'Shea

to -- co-invest cross-pollination funds But sort And together the we -- everything TCP, follow-up to as I perhaps, blanket -- you order be the point where mandate. your applies co-invest When entitled a see just like your claim in of like is there. like example, that you everything think order. Is a some is fits your HPS that Board acquired funds should deals? there's you're and of if and that determined in BlackRock that that assume out, be for will

Philip Tseng

look when to that a this to deal question, We we a for close. details forward can't the closer to more comments. later comes But Thanks at date, providing Yes. time, make Fin. at

Operator

Raymond Robert next comes from Dodd question with Our James.

Robert Dodd

the can terms level mean, on confidence SellerX we right? But an big Amazon while is about volatility, it, the is is a pathway, portfolio? mean, so this markdown. obviously, open be should you're Or point, be of how things I right? in been the what even was understand might we problem speak, you there the to being Razor much should write-downs, this it's in level? we as confidence a that can And should the aggregators that I I I of have more realistic a just while. be floor worried NAV But -- for a to have mean but assets. not as improving, your have there

Philip Tseng

went non-accruals vast Razor that's recent fair to the was to a positions in as ago manage have there the for a that meaningful that the the markdowns which investor markdowns. direction. to different was did just The the obviously markdown. majority came of Robert, supporting X Yes. us. on question. that surprise shown markdown, come trying about quarters the was existing continue business, the expectation the an in and We're meaningful Partly that quarter, laser-focused going Hence, a equity but

the been have particular. Aside of came from on on the so existing from list non-accrual list, that, of most cohort speak, to that markdowns the the assets in

potential centered there discussing. be, non-accruals? outside will of we've markdowns the that been may There largely think So those names, assets ongoing be but around it's or been I

Robert Dodd

as faces appreciate and at your lot I -- I non-accrual to forward are to was but of maybe from -- point, slower have restricted tariffs exposure the mean demand, China tariffs there's it. so ones? a of as that look I new the there's the existing risk one that now China obviously to incremental the that I the seeing issues maybe on going than that's that, lumber like it like group new what's to assume a there But remodeling, I rather maybe if remodeling mean that, some ones, Renovo, but well. just and and something been products new what's have deterioration well. tariffs

Jason Mehring

on the as home to dollar Sure. the redos to one in been to take This have that amount that opposed thing time a consumer the certainly to something part issues, some about comprehensive we of projects, I the or of at off remodels. easier execution on sort about been platform address. inflation smaller is operational of at front, of particular and appetite think but there have also that home just this sorts try investment happy issues focus And our issues Jason. which probably thought because they is of with are bite it's and swing are projects there sort The answer. I'm underlying and Renovo initial

a #X, like our the of So windows, it ought that for are less things come from focus that on come then is there as domestic secondarily, abroad. elsewhere. little market lot to as supply based and opposed coming within on experience they example, our -- And chains work volatility a from are that from be to

to issue mean right materials. and Obviously, staying commodity that doesn't tariffs everything But insulated move But tariffs the what material getting a they're top the that name that now prices crosshairs the read don't are with that on our related new moment. think underlying we to they're Now of that at XXX% where the specific necessarily is of current around, from continues it. they're happen we're trouble context moment, broadly. in might or not of necessarily specifically in the at significant of because

Robert Dodd

the moment. I decision X One my the for X/X But waive the fall fees to the first box in to hat quarters and of in at more, year, if base tin through positive shareholders. can, keep I'm going management the

into So HPS to that. close. seem is reading I'm the it, acquisition time same but the time, time much the maybe expiring I that the applaud at too It supposed that's is roughly

the and So is that laid being it is I management landscape? -- that kind close it new coincidental? what's that mean, is until Or Is then review some out of here? just fees waiving

Philip Tseng

TCPC. It's try the really has management thoughtful support done coincidental. to think into of a is and the did little a I that I looking think, that fee decline NAV much. take and and and We to creativity, it try too several is approach appreciate Robert, really I not insightfulness acknowledge one but waiver bit adviser things the your

management from merits As past universe. there to showed X.XX was really you our aligned structure, I be that reduction our X.X the incentive quarter. peer this then know, think with year more to its last in a fee And shareholder-friendly

or I around adviser other sorry, trying timing matters. think support collection it's that coincidental the about to specific nothing is there's to of any there's So ways TCPC but here, HPS a nothing the --

Operator

next Christopher Thalmann. comes Our from question Ladenburg with Nolan

Christopher Nolan

a fee the I applaud waiving I Robert and dividend. management in reduction terms the -- echo also of in the

are a hairy note. Given appreciate have really everything large a I maturity and that's on, handling debt million, and X.XX% that's you pretty going in $XXX you XXXX, guys a situation,

or to recall, -- year you're for lower you we as that's grade. prepare for should I refinance? going to but take to, watch steps I should through we you What so? want the able Or what keep leverage grade As presume investment if investment that look the

Erik Cuellar

Yes.

we're As investment-grade in rating of you be the capital notes, with that next We out, issuances. helps access Obviously, when those maintaining a focused the -- doing that be that terms But have pointed coming similar certainly, we well. to agencies. rating sizes looking that from we to large closer our issue -- of our it's believe piece really We're And small December combined is that going what as well. we in process actually on as due a basis we XXXX we'll post-merger, maturity. to date. markets definitely on

Christopher Nolan

So you're grade? investment currently anticipating maintaining the

Erik Cuellar

Yes.

no discussions rating otherwise. with our agencies, to continue have close We reason have to we think and

Christopher Nolan

question. And guess of a kind I pointed

that's the from overhead earlier. changed? XX% being BlackRock? I case, helpful. know additional management of be performance. And so may the has you of year you could the NAV XXXX in X% was versus there And if Your would what be the -- -- acquisition. is in if guys that well on comment share it there per part not Anything decreased terms Is serving

Philip Tseng

Yes.

in rapid the in There these of the obviously the of half through a think I factors portfolios. back it's and increase 'XX into that go broader was rates XXXX. result

not for pressure but burden. that That on with these rates a higher just example. environment, number is companies a think operating interest having pre-rate putting and I it's with, that growth a coupled higher coupled across significant globally, levered impact course, who borrowers were slower given the of the on U.S. of rise,

impact lot businesses it's what think these different that's largely in I a to that's of So come and seeing. ways, that we're

right, think you're that was So of is XXXX, of as you that. a reflection and that lot a in mentioned, I

Operator

we have questions. no At this time, further

remarks. back hand I'll to Philip closing so the for And call Tseng

Philip Tseng

entire continued and our questions. out thank Corp. work Please for your reach at analysts us team investors to you. want I TCP their and Thank and all for support. our closing, with any trust hard In Capital BlackRock to

Operator

for joining today. concludes lines. call, This may our us you everyone, and you, Thank disconnect now your

BlackRock TCP Capital (TCPC) 27 Feb 252024 Q4 Earnings call transcript