Earnings call transcript Q4 2022

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Q4 2022 Crescent Capital BDC, Inc. Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 23, 2023. I would now like to turn the conference over to Dan McMahon. Please go ahead.

Dan McMahon

to December BDC, call. XX, welcome and fourth and ended year XXXX morning, Crescent Inc.'s Capital quarter Good earnings conference

note or BDC, as Capital call. that be Please to referred Inc. CCAP, company the may BDC throughout the Crescent Crescent

start and begin, important some expressed risks company's uncertainties. are course subject I'll over webcast may actual reminders. call The differ those this to conference Before and made materially results contain the with we Comments statements to in including Please listed of such forward-looking forward-looking from guarantee performance reason, could statements such for company future a those not past statements. of in any The or results. filings. assumes forward-looking is market also that its update SEC note no information and obligation any

discuss that conference NII non-GAAP share NII condition SEC company financial net call, defined by as may method its one believes G, or provides uses investment operations. and performance information income investors this the to of company as adjusted we Regulation measure The results regarding measures such financial adjusted to because per it's useful share. certain per During

can most A comparable net investment the share reconciliation GAAP investment to presentation adjusted per the share, financial call. of per income accompanying in net income be measure slide this found directly for

measure In also addition, earnings be reconciliation of may release. a this found in our

SEC. the its XX-K XX, of release for in www.crescentbdc.com. yesterday press Section with company's and December at presentation company the earnings the ended posted the XXXX, filed and be Yesterday, The issued after a the Form reviewed website with market the quarter year presentation conjunction its closed, should IR fourth to

recorded being As a purposes. call replay reminder, this for is

now Financial and President will Breaux; like call to Executive over Gerhard Jason. it I'd Chung. be Managing Lombard; today's Officer, Chief to With Jason and that, Henry on turn Speaking CCAP's Officer; Director, Chief

Jason Breaux

and appreciate CCAP. your for earnings continued thank you, morning, joining Thank you our in interest Good everyone, Dan. call. We

our detail. in on performance fourth to positioning then highlights, review fourth activity full financial then and quarter. to some will and quarter current I'll turn more portfolio it Gerhard year the touch recent provide Henry our during our over and review

Please to income to continues higher share a results. per ended see you'll per from our Total its spreads. base XX% quarter by and investment increased This Adjusted primarily absolute for $X.XX highest recurring income So Slide XX, X, and turn dollars $X.XX both rising revenue, which net in summary of September was and reached the increase will let's begin. total a color inception where XXXX. as rates provide driven income more of on. level our again to investment yield Gerhard related since grow investment percentage share

$X.XX. incentive On net appreciation. a noncash capital net GAAP on difference relates per our a share fees The quarter of investment unrealized income basis, capital fourth gains-based was and realized reversal to

of this GAAP expense As has year-end, fully been accrual reversed.

and Our ended down in wider net prior to to the volatility quarter. markets asset X.X% the fourth within unrealized primarily we reflect the year at finance $XX.XX, the continued quarter. credit The value as equity per relates share compared to market spreads losses leveraged decline took the as during

results. important less net generated and believe, year gains longer-term losses, realized impact full unrealized our performance gains and on Realized of than gains realized has we Importantly, our a in losses, gains for XXXX, excess delivering is positive losses. more which our in meaningfully the we grading metric

to we of to NAV credit inception In track strong investment process our performance shareholders. of deliver stability our as the record work merits view, our results attractive long-term proven since demonstrates our and

the size nearly ended our $X.X value with portfolio year X% Please of turn across at with the diversified investments average portfolio. XX highlights of to of XXX investment an which certain presentation, portfolio. of Slides billion the fair total companies less of and We than XX characteristics

up investment across of equity-backed continues well lend portfolio to in prior representing primarily fair lien and continue portfolio as XX% of portfolio value, first and XX with the XX% of industries private year-end. exclusively loans, to our companies at almost remain collectively And to companies XX% secured Our diversified in we lien first of sponsor-backed from senior unitranche consist the quarter. debt

in We generally volatility, long-term particularly their private believe that and of heightened during are which equity companies partners to like is operational one provide support we portfolio valuable for creation, periods our strengthen today. investing financial the value

XX% For of investments and made scheduled the full our payments. total over at principal fair debt fourth interest quarter, value

Two more credit trends highlight. to

nonaccrual levels. Continued low strong ratings performance and

quarters, as accounted was for compared average unchanged last modestly few portfolio percentage portfolio the companies investments, XX% of fair highest weighted ratings of one and portfolio receive past to the the down of two from value, the grade at and can quarter. Our X.X our rated risk

fair As with of representing at quarter, status, value, total on nonaccrual X.X% we X.X% our had portfolio year-end, companies in and consistent debt investments the prior respectively. investments four of cost and

Henry. it more to I few updates over before A turn

merger to BDC determined cash and for asked of be stock plan values two, exchange respective the asset a we a its our adjustments will Crescent couple the will of customary targeting March the Crescent First, BDC merger and the relates First A First of whereby they the each unanimously And have BDC One, Eagle and by reminders it from ratio BDC transaction. agreement the the quarter. Boards the to of Eagle merger. X, amount Eagle net First special are transaction. BDC Directors this approved adopt be of with consideration Eagle and days is merger the component BDC and the meeting to announced on First closing. stockholders And prior of of two as closing conducting of Crescent

combined this the investors company. to acquisition in provides many statement very financial believe today, not additional excited of transaction about January. we any call filed details remain proxy we be outlining the will the on and We We the interest the that was as and direct strategic to benefits combination

being quarter Senior Next, dissolved down was Loan largely venture quarters. formally in recent joint our CBDC the Fund, wound during after fourth

the redeployed of proceeds monetization Crescent originated activity the credit primarily from directly this into majority opportunities. higher spread private We

share Board will be XXXX, March a our quarterly April for $X.XX XXXX, which per first quarter XX, to XX, declared of as dividend, of XXXX. Finally, record paid on cash of stockholders the

now discuss activity. Henry our over QX like to I'd turn to investment to Henry? it

Henry Chung

Thanks, turn Jason. fourth to Slide Please the deployment XX highlight we activity. where Gross million. recent was in $XX our quarter

was investments. no believe capital in private portfolio of the on senior the company full the on advance Eagle we credit see during First to to year. can existing side acquisition. revolver portfolio over you five total, investments investments deleveraging and over page, prudent with draw closed and active for This design $X.X add-on in the That In XX% being as and prioritize an and As new the first of the left-hand secured remained the unitranche $XXX fundings lien several was it by fourth said, quarter new delayed of committed platform is with billion million we broader Crescent quarter. over

deployment million venture, is approximately $XX the aggregate final in repayments in joint The million of noted, fully and liquidating from as in exits, to $XX dissolved. our quarter, gross capital return which, sales compares Jason a $X now million inclusively

fair a the unitranche year our to right-hand to our portfolio, the of the at for become year-end XX% more total XX% you'll to lien prominent value compared that side see have prior. accounting investments total percentage first of Moving page, portfolio continued of

us opportunity a certainty capital even to be execution unitranche equity to focus yield top has enhance opportunities offer Our on in environment. and to greater the sponsors to current competitive at This remaining private proven enables stack. allows the of us our our while particularly the advantage, of lending

to XX. Turning Slide

rate and of basis yield cost average the year-over-year. at weighted interest points up increased XXX X.X% the on to income Reserve's that heels see of XX.X% producing quarter-over-quarter can is from meaningfully You securities the Federal hikes

As to investments at rate debt value XX, no with floor based points, XX% our XX% on liability drawn a which rate structure XX December of average floating were of fair debt floors. compares floating with of basis weighted our

average case continued as This is in situates rates well quarter us item. base increases income this from benefit our floors interest above the our with line growth to in

U.S. beneficial portfolio. certainly earnings we the generally more an stress from fact a is are create slower perspective, it which can the While also environment that correlated economy with of cognizant rate higher the in is together

Consistent consists select with the have the that past over macroeconomic environment current constructed through and companies that approach of a it to warranted. situations record believe XX-plus of we a may we taken portfolio liquidity have cycles years, investing in proactive Crescent's are bolstering address be track adequately capitalized to where

for highly portfolio to interest our average in a Our rates credit interest portfolio. several metrics Using was preservation invested largely industries. the highlighting. at worth Jason related A the has of diversified to X.Xx. couple coverage capital on more portfolio market weighted total culture reviewed led year-end, focused resilient

benefit XX%, to provides well in substantial continues our time equity weighted value loan-to-value support our in available portfolio perspective the companies. our strength Additionally, capitalized from tranche that of which our to same portfolio the as is safety of The underwriting of the amount risk enterprise as at approximately both of an was margin from beneath average the invested investments.

demonstrated multiple the experience weighted track provides navigating stable and a low XXXX grade what the market with managing health economic successfully record us of cycles, environment be beyond. challenging The also and and portfolio by in and portfolio nonaccrual through is relevant Crescent’s average is rates. could significant

With now that, to will over I Gerhard. turn it

Gerhard Lombard

everyone. morning, good and Henry, Thanks,

figure for per share XX%. fourth of net adjusted XXXX $XX investment the $XX.X of the prior for $X.XX share share the million increase quarter income $X.XX Our reported Total the quarter investment quarter, per of for inception fourth fourth income million for of the $X.XX compares representing for XXXX. since and we’ve approximately prior an to quarter of compares quarter, the to highest quarterly per

fees consider quarter-over-quarter amortization we rising was base XX% interest income related what and unused of income, rates. fixed recurring Importantly, comprised income, by up investment driven yield

approximately of dividends significant XXXX. income form from the ultimately of recurring portfolio value over amortization remaining. That of of QX accelerated nonrecurring the total income basis having XXX% realized has Alcentra assets. OID this We’ve million the recurring in been investment yield revenue XX% generated by close and related XX% Crescent’s of fees, originated cost income, to our with $XX accounted This replaced two years from of for from now in quarter’s income unrealized up investment last

and unitranche a focused revenue at approximately first income. we lien X% primarily note continues top largely income portfolio, names revenue, interest of legacy out largely income. represent venture, our consisting Alcentra portion a and quality high having expect rotated our loan in total to scheduled of also of a invested we’re broadly-syndicated to recurring Because bank generate of I’d line of joint modest PIK investment that

this to Turning quarter’s earnings. back

per for for share per of the net assets operations $X.XX, earnings GAAP share or the was quarter. negative increase prior resulting from XXXX fourth $X.XX to quarter which Our net in compares

on depreciation investments Net Our net $X.XX investment share, per $X.XX by income share. than per outpaced our was share. of less dividend unrealized were per $X.XX by regular losses offset which realized net

$XX At equity as mark-to-market XXXX, December unrealized XX, our share quarter of our in last in our fourth XXXX. losses net total compared portfolio, XX, per with at led per $XX.XX $XX.XX $X.X $XXX million stockholders’ holding ultimately million as million, roughly fair realizations or coupled resulting to $XX.XX asset $XX share to of was at quarter, per Net XX, $XXX on value investment million or December million of December down approximate approximately quarter-over-quarter. the and billion investments share of value steady $XXX

widening largely advance at To We to the credit in a highlight the reiterate ratings bulk of the Eagle believe this internal volatile QX rated in This our during delevering with to with prior is consistent of dynamic prioritize we fourth X, distinction First attributed close quarter, the evidenced the is for market We spreads. rating the portfolio highest Henry’s NAV quarter’s acquisition. environment. of an portfolio quarters by or the comments, our shareholders decline of categories. XX% end X important of

I’m to on let’s liquidity. Now shift and capitalization XX. Slide

we XX, our our X.XXx September stated December to total as interest year-end. of average ratio weighted rate debt-to-equity from XX. down borrowings X.XXx managed As X.XX% on of at The was

by with we the are that, $XXX term see million notes to right-hand XXXX. Facility After debt slide, to level maturity the upsized that can remaining of have related few there low million worth also X.XX% unsecured the of our years $XX over we our next no until on XXXX. Revolving million. you maturities It’s SMBC a side highlighting in $XXX July As January, in maturities Corporate

million in million From subject perspective, and restrictions leverage, cash $XXX to equivalents. borrowing we of had of year-end, other undrawn $XX and a liquidity base capacity, and as cash

March Finally, our declared share on for XX, of the $X.XX per which a XX, XXXX. will cash as XXXX, first of Board quarterly quarter of record be dividend, to XXXX, stockholders April paid

to back like with for I’d to it And that, Jason closing turn remarks.

Jason Breaux

Thanks, Gerhard.

We continue navigate CCAP to ahead. well remains and positioned that uncertainty economic to believe the market

We’d First cycle about current potential do portfolio, we for our market all volatility understand take further to remain that support scale be BDC thank answers ongoing position. good in the and and your be continued time as for of to the very the your transaction the and happy First feel and like you We’d progresses, we may please we today. spread enhance widening and transaction. further we to excited Eagle we limited due anticipate Eagle While our about questions, as some

with that, open And for the operator, line please questions.

Operator

Robert [Operator Please The go Dodd Instructions] you. James. from of ahead. Thank Raymond question first comes

Robert Dodd

to Hi of guys. sort I'm ask you going credit [ph]. relates a to question that

expect the expect lower to your forward to target was result on is a is ahead you've changing be obviously, combined running case Or historically? than going you about, running to that leverage be just forward? basis a as range talked You lowered leverage timing? proposed Do that a Do of acquisition? present leverage acquisition. of I.e., you

Jason Breaux

Hey that if for the the than We – historical question. that a grid driver back [ph] merger. balance look sheet, Robert, Excuse it's And a you had me. is anticipation of higher they've big intentionally left in bit Jason. bit the in at us. leverage delever did of QX historically the here Thanks a

to on target in pro we're leverage end of basis, stated think going X.X of forma as publicly that sort kind we And right a of so X.X. the range I to combined middle our up

Robert Dodd

it. Got Thank you.

on. deployments in your on quarter, will obviously follow Another, the

of effect any the think cases, was you – that? liquidity? color in the capital of more normal adequate the been a was of like some to something Or add-ons portfolio out growth or to Can any or the of us around follow-on have whatever? companies course addressed companies give something and – liquidity, the you pad portfolio said that. I any to it's or Were it follow-on business

Jason Breaux

Yes.

all unfunded As getting that far portfolio the as we deployment normal on course it our to in had commitments was existing drawn QX, companies. and

Robert Dodd

one mean, are Got I gave in this mean I how based – more, EBITDA like actually how – trends or two, if what's how – stable. would But it. XX% were revenue then And you the the the pretty one obvious, now? doing? I year-end The operating rates. you interest coverage companies or or I can. on mean, so portfolio quarter raising the it can right performing on any color us anything how give appears actually that? on things trending the are how are

Jason Breaux

about Sure. I and the would companies health The overall say grow broadly on line to speaking, bottom we continue to of top continue feel line. the good portfolio. the the

We largely with would seen growth, higher wages, would we and portfolio. the and pleased inflationary or cash say are which the flow overall, EBITDA outpace performance revenue tightness attribute But like. market pressures growth to the of we underlying have I labor

Robert Dodd

you. Thank

Jason Breaux

Thanks Robert.

Operator

I closing will Thank you. Breaux [Operator at further Jason call back to Instructions] for this There time. questions turn remarks. are no the

Jason Breaux

everyone again, of We to speaking CCAP. your with soon. look forward Thank you you, interest operator. Thank you again Great. for support Okay. and

Operator

does conference We disconnect you call you today. our thank this please participation conclude that your for and gentlemen, and ask lines. your for Ladies

Crescent Capital BDC (CCAP) 23 Feb 232022 Q4 Earnings call transcript