Earnings call transcript Q2 2023

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Operator

Good morning and afternoon, ladies and gentlemen, and welcome to the Q2 2023 Crescent Capital BDC, Inc. Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Dan McMahon. Please go ahead.

Daniel McMahon

morning. Good Crescent Conference Second Call. to XX, ended BDC, Earnings XXXX Capital welcome Quarter Inc.'s June and company Please be CCAP, the referred that to the note Crescent as Crescent Capital BDC BDC may throughout call. or

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

NII During share. we call, by or Regulation because G, measures discuss investment regarding financial company as non-GAAP The it's NII information believes share SEC performance X certain income this conference method net adjusted provides adjusted useful per such to per investors as defined may that financial GAAP uses be in share and income call. this measure the share, investment slide to its directly income reconciliation condition net can company the A net results of per most the presentation for per financial of adjusted measure to comparable operations. investment accompanying found

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

the reviewed second with for its presentation presentation Yesterday, company's issued ended in be market to release of Relations earnings the yesterday XX, XX-Q quarter Investor filed the www.crescentbdc.com. website section the XXXX, after closed, conjunction The with Form company posted the SEC. the June should press at and a its

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

and Henry be Breaux; today's CCAP's Officer, Director, Gerhard Officer, Chief on Jason Speaking Chung. Lombard; and Managing will Executive call Financial Chief President

now I'd turn to that, Jason. over like it to With

Jason Breaux

on a brief the our for providing market our discussing overview and Gerhard review it for We current environment before our our interest continued to second over portfolio touch quarter Hello, I'll Henry activity investing in turning you, quarter. CCAP. review begin you then Dan. thank second before policy our performance and call earnings then results in financial will Thank joining dividend more call. the detail. the everyone, by your to appreciate performance. of I'll recent

Please begin. a you'll Let's results. of to Slide turn X, see where summary our

record For net quarter. $X.XX $X.XX reported investment share, of the per quarter, second up share income we in the per from prior

XX%. earnings unrealized investment share a to base of net the X% of in strength value our reflect income the core quarter resulted over our $XX.XX compared of earned quarter's dividend quarter. prior the in This This by continues the earned, basis, as power portfolio over net end, up per coupled asset as we net to on with in as portfolio appreciation

turn Please X.X% presentation. diversified with $X.X and to characteristics an approximately of average investments highlight certain size highly We of with XX a billion portfolio. of which the XX our the the investment portfolio. at quarter nearly of value Slides of companies across total fair XXX portfolio of ended

representing primarily unchanged consist the quarter. prior the loans, lien from quarter value of to continues senior portfolio unitranche first lien end, first XX% at investment Our collectively secured at fair and portfolio of

companies We creation. as for equity with to equity-backed debt long-term that to XX% with quarter portfolios. strengthen sponsor-backed to continue almost second lien greater provide This We can to subordinated positioned and compared XX speaks financial risk and private maintaining industries and their believe value end. continued lend exclusively generally defensively of and focused across our on operational portfolio diversified private of support our to remain a lower loss well focus portfolio sponsors companies, protection of companies and downside debt portfolio

software, of majority right-hand industry side and to has can is businesses, care, be always industries. that credit by of our investments in more This recession-resilient cash focused Crescent's with deem team design you on a be in terms the health private focus on see as professional flow-generative services. particular businesses Slide to we on composition, and what continue In commercial the underwriting of service-based XX free

A few to more levels. performance trends ratings and credit nonaccrual review,

the from quarter. improved average of companies last weighted our rated grade for from XX% receive, value, and Our portfolio quarter, the X portfolio the risk at of X fair percentage can XX% X.X and X.X last accounted of up ratings investments, portfolio highest

value, from investments quarter fair on status, of in investments quarter. and had our a cost we representing end, nonaccrual at debt prior X decrease the companies As portfolio of total respectively, and X.X% X.X%

Moving QX. second the what quarter, we continue to the banking in space approximately volatility first than and year, made syndicated the as witnessed the of the with direct market prior depth A busier for We've attractive markets lighter in was in LBO to in given issuance increasingly current market XX% seen from in the the in quarter regional challenges issue lending the albeit execution the by CLO share to backdrop. of compared during lenders financing U.S. space. Transaction direct lending certainty gain the direct have of issuers. lack completed capital and new of BSL activity

M&A by at increasing for much powder overall supply thus equity decline may be monetize demand the record the between of a of to opportunities That investments. longer-held expectations buyers sellers backed in side, dry on many remained Valuation far, are and XXXX seeking have exit volumes. an potential said, private for is side, apart number private companies sponsors and on that with looking levels driving

acclimate buyers we early has picked year LBO environment, uncertainties volume that the the exist. signs Looking see up, economic and ahead overall despite continue that market to as to sellers remainder new beyond, to the and of

acquisition March. Henry, our of beginning following to like On which variable May, I'd supplemental to full policy. dividend intent over implement BDC on Eagle touch the call it First first quarter. our in combined program turn I dividend announced we Before our to of this in is our quarter results a

supplemental For dividend the an payable on second to $X.XX share, per XX. declare September quarter, of we're inaugural pleased

on comfortably outpacing per to in of $X.XX CCAP's seen which share portfolio X reference dividend XX% in is income earnings measurement share detailed quarters for subject test. our resulted Slide As floating presentation, accelerate regular higher been we rates investment in as NII our recent dividend, net calculated of have it of the some per excess given underlying our have has yields, as higher portfolio. base time, rate XX% a

the right come the curve, ultimately program stockholders sector's by looking current framework XX% over earnings formulaic will we at preserving do our the rates profile. impact to the our of our supplemental expect outlooks. XX of $X.XX balance base stability entire second And Total rate offered forward our believe which for based time, of down across NAV time, will share the over yield We quarter on shape of however, distributions while annualized a June strikes the per NAV. increasing represent the different total BDC dividends

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

Henry Chung

deployment side first investments. XX, of our on million, all was you Jason. activity. where second turn of Gross senior lien highlight which we the in Please $XX quarter the the secured and Thanks, Slide in see unitranche recent left-hand page, was to as can

incremental $XX million During closed portfolio existing new investments from companies. investments the with in million we coming the quarter, X our totaling $XX remaining on

is $XX gross of with investments floors, SOFR in sales compares by equity-backed in capital aggregate credit and approximately our an on million new quarter credit a repayments. We were highly view points. perspective remain $XX insulated exits, spread to strategic The basis risk-adjusted from the attractive that deployment maintain and The long-term loans average fees to return XXX million approximately second during to companies deployment selective and lien orientation private first and a risk.

acquired assets Friday, stable leverage And on the and remain leverage down both acquired levels in In had near on during First those sheet second the First XX% BDC Eagle and quarter. focused have maintaining we portfolio as of last of Eagle since March. realized is rotation quarter-over-quarter. of approximately of we fronts the term, closing Balance the continued the progressed

Slide to XX. Turning

up at driven average XXX in the income-producing the XX.X% You base can of to that is year-over-year, points yield basis increased the quarter-over-quarter our by see XX.X% from weighted securities rates. and respective cost increase

debt of weighted with rate floating As floating our debt investments structure, which with X% to compares of on at rate XX% XX, liability fair floor points, based a XX% of basis drawn our floors. June average XX value were

average This Overall, said, margin. situates continues year-over-year above portfolio as us well was perform continued well we our have case and growth. average to portfolio floors strong interest borrowing of the closely in the our being growth rising this That rates quarter with to benefit from in impact increases net base continued our companies. monitor revenue to our costs in EBITDA weighted investment with

is at in interest to trailing using note important expense the expense which coverage companies the calculate in average resulted would that stable weighted The we coverage respective at X.Xx. interest contrast an It our quarter-end interest coverage portfolio held interest rates base calculation, ratio XX-month X.Xx. that interest have latest our investment in annualized ratio of reflects a of to

the provides service respective our portfolio evaluating We believe when continue more ability their relevant to of metric obligations. to this companies a interest

environment. closely managing We continue in our to also monitor are operating how fixed charges companies this portfolio

aggregate analysis in balance cash operating sheet companies portfolio with to well and demonstrates the fixed our flows are charges that liquidity. positioned available Our address

strength revolver not to end, multiple revolver utilization available have we with with in equity and continues in it's the whom across increase the benefit private of the by amount have quarter. equity of of capacity seen applied The portfolio, aggregate was of well-established invested our in long-standing relationships approximately portfolio have As XX% firms Most companies. of substantial aggregate and from our second during quarter transactions. partnered an we

time and value average Crescent's brings approximately experience at that provides challenges managing environment perspective. of the market of it. us from is the current which loan-to-value significant relevant safety to the successfully an navigate record margin through in with multiple a weighted and economic the enterprise cycles underwrite us portfolio with The provides track XX%, coverage of

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

Gerhard Lombard

Thanks, Henry, everyone. and hello,

Logan fees to First for the the total from of approximately share Eagle prior JV XX% compares for quarter's the acquisition, investment quarter. prior to and Total rates the of Our net XX%. income. yield quarter Driven comprised income, investment XX% $XX.X dividend share of million increase quarter, representing $X.XX income, accounting an income income income rising was of PIK for XXXX quarter-over-quarter quarter income for impact the million $X.XX $XX.X ultimately per interest the base $XX.X million unused up investment of second related for million, compares recurring of the from amortization of and for and $XX.X investment second by this to adjusting per

represent total revenue income PIK of our portion at income. a continues investment X.X% of to modest

benefit paired of a high-quality income recurring provides modest is combination for noncash basis income stockholders. investment of with the a CCAP PIK-based enures portfolio stream that Our majority income a of to substantial the

last positive or for total Our million GAAP of second The share June per $X.X net from quarter, the share quarter the of up assets with compares million prior a in to $XXX to net of quarter. second fair billion XX, as quarter-over-quarter. per for At $XXX $XX resulting asset portfolio XXXX million unrealized investments, equity operations the resulting at approximately XX, on in led $XX.XX earnings of deployment net which ultimately per $XX.XX net coupled and from net investment our June portfolio value per to $XX modest quarter. growth our was depreciation compared value share stockholders' $X.XX of as $X.XX, increase share million, in was

XX. Slide to Turning

largely categories. with X were Our of quarter quarters, of rated ratings prior our portfolio second with highest X, the internal portfolio rating consistent at XX% or end the the

go just XX. and let's on I'm liquidity. Slide to capitalization Now our

effective side XX, are of until and there July debt senior became on quarter. May, notes of the of million total was of completed on weighted X.XX% repayment as as prior due unsecured maturities aggregate the the slide, we've XXXX X.XXx Adjusted this June our on debt-to-equity a X.XXx, stated offering maturity notes upon As for private the from the end. at $XX of X.XX% borrowings amount of was quarter rate In XX, The notes interest XXXX. XXXX. their July average right-hand ratio activity, principal no XX. down in our highlighted we These

position well cash opportunities borrowing while million base and support of our selectively portfolio other company strong powder positions to Our quarter cash as this remains to liquidity and with undrawn of of capacity end. dry restrictions new us $XXX existing We continuing with subject $XX.X to invest in equivalents leverage, of level believe commitments. million

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

will which a declared supplemental discussed, per paid XXXX, be to as $X.XX Board of of XX, of Additionally, cash August our as dividend XXXX. stockholders on Jason share, XX, September record

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

Jason Breaux

strong for closing, CCAP going remains results the with Gerhard. quarter to forward. strong financial deliver our pleased we're well believe In Thanks, and results positioned

and Our yet portfolio excellent on to attractive is diverse environment. we're selectively financial investment and healthy, capitalize this condition in volatile

always, us next you As we look today, all quarter. and we forward appreciate speaking joining with you to

with we can line And questions. open that, for operator, the

Operator

[Operator Lynch KBW. question at Instructions]. be And first from your Ryan will

Ryan Lynch

quarter. guys that fully has performance portfolio at specifically? the investments? of performing to to how What's initially? And bought you with a obviously, that even Nice at I guys some do that least outlook now with on hear And there of Or just My question first in potential upside those has of you would portfolio? your is portfolio. integrated discount. it FCRD any sort is just for in initial of how love just acquisition turnover your those assets been any the are

Jason Breaux

Thanks have for or it's Henry so, that that But under that additional I did months start comments. through the X would process or Jason. the X -- has portfolio on question. maybe can we're checked on so I we guess, now Ryan, the largely and diligence the out. for that that say hood, officially the months some I will

had job before team the looking company. the we to think a direct in credits I nice did access the at

the Now we access have the direct sponsors. companies to and

surprises no the book. But the I would say relative underwriting to real of major

realizations I prepared think around a made the date. comment Henry in remarks to

portfolio XX% as running week. last think FCRD I XX%, on realized the of around we're

Henry Chung

and Yes. cost part to of the through of The of able that rotate question that quarter on better. we've around to second part to comment And for outlook rotation July, names did and with your upside the just the realize here. respect been we the beginning out second

progress good front initially making well. as that So on

portfolio. from cost we I expected onboarded. a to -- diligence assets it's in our here of has say terms basis think our initially early we remaining terms we of are the we what see But think if upside names Jason's I that point, the too to little that the meaningful in out proven have in in

Ryan Lynch

in sometimes at And unrealized movements of have I to and Okay. the unrealized realized combination the That's then loss positive. know -- because you the loss helpful. if a both when portfolio flip that look realized I can

-- gains Or investment? drove was guys overall that $X Or net number this Was speaking of by or gains of quarter? this driven small a had of that kind investments? you quarter. that the So broadly one million was that that upside in

Gerhard Lombard

Ryan, out. it's really Nothing Gerhard. stood

of kind kind saw across the we you and to think portfolio, called out. I contributed movement of that's number that

So...

Ryan Lynch

significant with from last Obviously, dividend -- Okay. they'll a increased nicely still of come there's And above and earnings supplemental dividend, sort because pretty total down. have rates But well. seems back maybe dividends. to earnings in guys the for Is just this of supplemental the kind me, well one and that policy. working put be program regarding you one dividend out dividend

coverage increasing wanted XX% even where to Or ever of be consider payout dividend or the want to thoughts the you Just core this on dividend would sort excess? from that. ratio to a either standpoint? hear besides something you that Is your changing

Jason Breaux

well. from stockholders certainly preserving We of generated done stable Thanks, every We policy the spent dividend provide lot dividend, dividend, quarter. really as believe earning our it stockholders we've several excess our regular Yes. as with time consistently our which again. will Ryan. of framework will us that NAV thinking know, a Jason the quarters. earnings you ensures a we've last prioritized benefit dividend And supplemental our for about over also but in

ago, long-term That dividend. earned you X.X% around and be to in least relative are increase initial we at up we the certainly, from over as is an points X-plus what it, earnings years see which that sector curve, continue And try a the could half this, if a to for say rates we to year really the said, our to we at to we take SOFR With including in of meaningfully, decline we've in hovering the being for CCAP. suggesting is XXX a basis X%, about position, want first the now where market think 'XX. can approach look

a each stockholders also been able the have stable upside over delivered every that lot along in We've participate $X.XX our quarter the the the significant and way share and of quarters. a to during earned

So to approach. take on now, trying we're comfortable with we're I long-term really this. think the a view And right

Operator

Oppenheimer. be at will Penn question Next from Mitchel

Mitchel Penn

questions on average A Good couple of weighted loan-to-value. quarter, your guys.

You it's at the guys said What's it for XX% origination. today portfolio?

Henry Chung

this is actually Mitch. -- We Henry,

aggregate the actually XX% that seen up in across in heavily. low We're haven't the metric We range tick portfolio. still

Mitchel Penn

of the And percent greater what XX%? than is portfolio

Jason Breaux

loan-to-value? XX%

Mitchel Penn

Yes.

Jason Breaux

know now, got that don't Mitch. we've right if fingertips at I our

us Let we work of on can you. that do bit a to circle and little back

Mitchel Penn

sure, you coverage Okay. the wasn't I average -- Great. said the might of ratio And interest have what's portfolio?

Jason Breaux

I Yes. In that's annualized figure expense an that remarks rates. for the interest it's -- think current the X.Xx, Henry base on in and said

Mitchel Penn

what Got are percent it. X? below And

Jason Breaux

that back as talked on think well. you circle about us Let that on I don't to calls. prior we've

Operator

[Operator question at Adams Sean-Paul Instructions]. Raymond next your James. will from be And

Sean-Paul Adams

credit additional that when on I if facilities, didn't unsecured know a need was XXXX, but that. if additional well could for debt? I provide note you end. guys any I clarification in looking revolving facilities added adding you're details on the just either of of maturing hoping you period bit in some those XXXX, as I as your guys both at little any for but Q, an just more know Regarding you facilities the see mention disclosed

Gerhard Lombard

Gerhard. the structure Yes. the We is our good pretty first. part I This feel maybe for take second question. today. Thanks capital about

the $XXX facilities million capacity in the credit of kind combination over on just structure. of about We have cap available of

market is we're I an -- unsecured the we not times, on not debt adding in considering at eye term. mean, all doing while the near we're additional what keep So

kind market. back think we periods X then debt the the have lenders expect, revolving generally with speaking, I that of to today's years. combination might question, of circling relative in And have, cost there. part of in is And your also factor kind on part you of of of the constant X We're, in of facilities revolving the high first X as

all the the extension And of an biannual of a the way facilities, it's or reinvestment those wall. so against way get kind we really to think so approach I of manage annual -- kind don't or period, those through maturity of end of we

as think the SPV at should CCAP, structure, period or for think that I credit as capital about to for revolving the SMBC the the we'll either continue you that, those and approach So least facilities the you we reinvestment end of expect as extend line. amend

Operator

at it Ryan we time, And have Lynch. this -- appears follow-up from a that

Ryan Lynch

to One more your What guys you JV? not necessarily I is for operate in want guys' Eagle's seems had. First it the What from acquisition. question that these long-term with outlook this I JVs. the term? you we long know should Logan past, inherited this Obviously, did expect

Jason Breaux

management. Yes. fair the -- And process. on assets a a would relatively say and a Jason the CLO, ago, the joint change in about majority structure vehicle under did the Eagle's Ryan, year a that diligence while amount vast I during year ago, we a that here. venture the that is was it's of structure of new contained within are First which done

sorry, So quite it attractively. quite was priced actually --

years to attractive it the standpoint, the from think yield reinvestment on with about pretty It's well-diversified left also off income very throws a I on period X an that. CLO a equity. And

for I thinking of being, as think it state. So steady the we're time

out over going perform see We to to and quarters. least the continue several expect it next we're it at to

Ryan Lynch

appreciate makes sense. the follow-up. I It Okay.

Jason Breaux

you. Thank

Operator

other at no remarks. registered. Please it And questions time, closing with gentlemen, we have proceed this any appears

Jason Breaux

for Okay. forward you and We sooner. in continued Thank call again you interest CCAP. look all the not we if appreciate And today. joining with to speaking quarter, operator. you, support all Thank your next

Operator

conference time, you you, disconnect Once Ladies you At we call Thank and that your indeed your for again, please gentlemen, today. this ask sir. this conclude does thank attending. lines. for

Crescent Capital BDC (CCAP) 10 Aug 232023 Q2 Earnings call transcript