CCAP - Earnings call 3 2023 | Crescent Capital BDC, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Q3 2023 Crescent Capital Inc. Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 9, 2023. I would now like to turn the conference over to Dan McMahon. Please go ahead.

Daniel McMahon

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

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

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

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

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

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

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

Jason Breaux

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

has We remains years. private and Before growth we and the our revised CCAP's begin, format changed. which refresh, an presentation firm, tradable XX-plus investing over content of helpful consistency trust in Crescent's the overview you of past format the providing will reflects credit the note The is brand corporate in performance.

begin. Let's

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

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

earnings dividend income net quarter's This our by to core we investment as XX%. earned the over strength of the power our in regular reflect portfolio continues

and share of supplemental quarter. as resulted basis, quarter's X.X% a paid dividend September, net of combined quarter on on announced compared which call. value in the unrealized in the prior per asset with per as up also to net coupled was our first overearn in $X.XX CCAP's appreciation We end, of share portfolio dividend last payments, $XX.XX the

For supplemental $X.XX share, $X.XX supplemental quarter's dividend the to last December higher XX. per declare of quarter, a we payable than on pleased third dividend are

as investment calculated measurement of XX% reminder, supplemental net regular a subject in to of dividends are excess income per share these our $X.XX As a dividend, test.

January fourth of XX, payable consecutive represents CCAP a $X.XX. dividend per share on $X.XX of quarter the dividend quarter regular regular paying the of a declared also which Board XXXX, Our for XXth

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

loss speaks primarily on unitranche XX% consist of and to first prior our second protection quarter. end, portfolios. This secured senior continues collectively portfolio at at lien debt lower to a defensively representing portfolio unchanged risk the lien loans, downside focus and and of with lien subordinated continued positioned maintaining first focused the value greater fair to investment from Our quarter of portfolio compared

as debt diversified companies industries We and to continue well private and quarter of lend across equity-backed exclusively portfolio XX end. almost XX% to our remain of sponsor-backed with companies,

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

stable portfolio X.X quarter-over-quarter. average remains weighted of Our grade

see XX% And X ratings companies can portfolio highest risk XX% the on at the our portfolio accounted of receive will of value, up last the you that percentage investments Page XX, quarter. fair for from and rated X

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

issuance current second rate onset highest in the the third quarter, backdrop. the of its since XXXX. Activity new with to hitting QX half levels have picked hike mark market in in XXXX, the Moving up

new transactions. During the terms quarter, continue third pricing attractive and market be to for

we see above are to are highs. take historical the contributions levels Credit to which at spreads some on to from private a permanent equity leverage broadly syndicated believe, share continued is market, We've loans structural credit are and historical shift. averages, extent, lower new more

of in see Looking to activity. uptick we continued year this XXXX, and the ahead remainder to a M&A expect

of many by increasing companies that looking side, monetize is longer-held may exit with to an record On investments. at seeking for demand dry are supply be number the private equity the sponsors on backed potential and side, private powder levels opportunities

a does opportunities our further, these acceleration that do we sponsor-backed economy to slowing When investment to discuss environment. Henry? sponsor-to-sponsor deal on us deep of in should and While pick potential benefit. up and like space turn higher perceptions weigh it continued relationships the to position the dynamics recession to activity the longer on Henry activity. situation, and to company now environment lead transactions, focus believe Crescent's for around our current QX to an rate portfolio a I'd well over geopolitical

Henry Chung

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

of in was and lien As unitranche secured senior you XX% can the see investments. on the first side page, left-hand

companies. spread quarter, attractive a remaining closed new the $XX $XX During we coming million fees investments our were investments X from the totaling quarter third new existing loans average during silver on private portfolio XXX and with in million points. to basis floors, weighted of equity-backed with investments The the approximately companies incremental

able aggregate in compares the below the point average exits, Jason's current deployment gross Underscoring repayments. sales about value weighted loan $XX earlier The our market, we of new to the to million in historically million was to in quarter approximately value $XX achieve for relative XX%. the and were attractive investments

rotation lien highly a that strategic perspective selective by remain risk and a capital deployment on long-term risk-adjusted view credit of from maintaining insulated in We our continue credit is first to and return orientation leverage BDC and focused the noncyclical of of quarter. acquired First stable both maintaining remain and on during have on continued Eagle assets these industries. the the levels fronts third We progressed

portfolio aggregate First approximately million Balance Eagle the the had of in third we sheet Eagle is down realized of during and XX% the exits as leverage March. in quarter quarter-over-quarter since $XX First acquired names. XXX% were of last Friday, closing aforementioned

to XX. Turning Slide

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

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

we and companies our It monitor base interest coverage relevant that continue our weighted service continued calculate perform rising impact in That investment Overall, contrast weighted on held expense strong respective in portfolio that have respective portfolio evaluating an we to to at a of portfolio of reflects interest when of metric our rates revenue the their closely to interest using our a with to to calculation, trailing stable to is more investment ratio borrowing important XX-month X.Xx. obligations. average quarter-end interest latest interest note growth. ratio The companies. the this the Xx. annual have provides interest expense resulted companies We believe the portfolio continues ability coverage would being coverage EBITDA which well our at in said, average costs year-over-year of

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

fixed Our cash aggregate quarter. from have portfolio the we analysis address XX% end, the the companies in available during quarter, increasing our charges an increase aggregate to quarter demonstrates across portfolio, that of revolver with liquidity. not approximately positioned in are capacity At sheet operating flows balance available third was XX% revolver the aggregate prior and seen and well utilization

been have in operating see the have effectiveness that particularly been Our and results the actions this private we in taken. SG&A managing costs, that to equity are of active starting partners demonstrate environment,

year-over-year and our significant grown both of A revenue majority portfolio a have companies EBITDA on basis.

resulted some and from seen issues have economic pressures at improvement margin employee that COVID-related we pressures particularly portfolio elevated chain companies our turnover. Additionally, supply in

in actions teams rate challenging strength our While transactions. the the and whom substantial for partnered invested early taken are well-established portfolio large amount that management to environment encouraged equity our have have to of have results the present to the companies a applied and outlook relationships long-standing sponsors date. benefit our with in private and by Most to The current we firms equity it companies. of environment by continues with economic of navigate, we multiple is of from our

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

Gerhard Lombard

hello, everyone. and Henry, Thanks,

X%. $XX.X quarter. Total per for investment income compared $X.XX income million second $X.XX pick for $XX.X lowest and income, investment dividend portion up the strong an accounting quarter investment increase million $XX.X income the related given Logan prior $XX.X income of and of investment fees at income. total unused quarter's the in the quarter-over-quarter amortization million yield share one high this continues for of is interest prior net ultimately income, analysis, market-leading generation. Our on was our the of a from JV quarter the of compared second our XXXX to focus million on of free companies representing based revenue of of XX% for space levels X% X% quarter, margins with modest per the which, PIK represent income, to to investment for share and approximately from flow total comprised Recurring income of our cash to

$XX share Our quarter. by September XX, million was our for $X.X portfolio excess GAAP million from or of net unchanged total net resulting in per portfolio $XXX value billion was net 'XX second per as prior of September resulting of offset $X.XX, assets million, to stockholders' of $XX.XX approximately earnings the equity of in to million, investment share contributed per At or quarter-over-quarter. Net compared from as increase appreciation the value XX, $XX.XX $XXX quarter net operations asset share $XX quarter. down last

Now liquidity. and capitalization let's to shift our

on I'm Slide XX.

rate debt-to-equity was X.XX% our As as down of XX, prior was on X.XXx quarter. the in September ratio weighted X.XXx The of borrowings end. quarter interest average from our

the we've no the slide, right-hand highlighted XXXX. As maturities on side are there of until debt

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

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

as I'd cash supplemental be as per turn it a for to November of to which XXXX. share, record XXXX on of XX, remarks. stockholders of that, December will with to And Additionally, Jason XX, Board $X.XX discussed, Jason closing back like our declared paid dividend

Jason Breaux

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

an capitalize track current share view selectively dividends, condition Our highly in an in yield attractive translates environment. healthy, price, portfolio over annualized into current we CCAP's predominantly $X current is of we and per given on On diverse first investment to and basis, we're CCAP's NAV and are NAV on which delivering excellent stock our which XX% total and the yield financial lien record a on XX.X% as focus stability. currently

we As always, line quarter. that, next us today, we can look with open appreciate you forward operator, you to and for questions. all joining we the And speaking with

Operator

comes James. first Dodd from Your the of from question Robert Raymond Instructions] [Operator line

Robert Dodd

the on quarter. Congratulations

I questions. on talked Some realized about, assets XX% first, you of first from mean, obviously, the the you that.

So a on that big of you et historic to Obviously, Can names Can get how give and OEMs kind you the performance that there, mix. X still go. refinance the struggles the us more us usually to went portfolio quarters that that troubled the tend any color ones headache. I later. still a gone, PC are then rotation quarter left the a in to is us mean of aren't any cetera, give names that easiest some update going? portfolio their load of on problem the give could basis

Jason Breaux

it's for Jason. Robert, the Thanks question.

noncore the place. in that the of when portfolio is bucket we I we would say still right. acquired You're identified book the

think underwrote further to time need feel And positions about might those comfortable was marks to we've we and some monetize. to rush it we where that take exit. positions ultimately positions. and not generally are Those I expectation develop those our that those

your So observation accurate. think I is

but say out they within core of are fully all XX%, they that have the wouldn't just realized We XX realizations. I fall bucket. natural all names that

our those there think some has of to of some try part to been proactive on I movement rotate sort names.

Robert Dodd

Got expect is can mean the Is XX%, writing checks the so I -- appreciate up. that us Or bigger firms loans, market we I you And better LTV if or then businesses? you example, underwrite -- -- that [indiscernible] them in equity obviously, quarter about to for XX%. current type leverage anyway. it. down, the in remarks, that. coverage mix I on I if And be think otherwise. [ the your was mentioned low mean, get the on are give opening interest of would just ] it the ARR the interest it checks to -- is imply at to order lower P for

Henry Chung

I'll Yes. This take one. Thanks for Henry. that question. the is

that loans. your -- of not we just none typical of that the historically cash to these on ARR we nor are term. That's on the focus question, here On focus your intend X first no, part flow-based loans. near an area in all They're renewal

the on I think the on you hit nail the point. second head

ago. of saw current are We environment And we moderate in. that a base that's than on seeing, capitalizing withstand environment very what this the rates in they are going where environment, a especially years to focused businesses X rate today, especially way the just in rate rate we're not oftentimes, more sponsors couple much are with that be in a levers

think I a of sponsors. -- it I part think to approach capitalization thoughtful the from So is certainly

will with price one that's of to its ability that what for to for its side on look disciplined trying and going if is pass service. flow other other are to and respect end. that that business whether our sponsors we cash just And generates not certainly And versus risk. of for credit that I debt very something also our kind the and it looking structures. There it fit out full to work that or our of still terms really fits the the us, just capital on there box. are in is of cover profile not would doesn't stretch binary we're are quite the think that or portfolio I say, That's pursue on amount to

Jason Breaux

is in thing said try line, about other The that really a something minimize. which that, to top our as is portfolio past, Henry of and I'd as add our agree percentage talked you we everything with we've PIK Robert, and hard know, interest to the of

buyers, find buyers environment, are. cash that oftentimes aggressive you'll are in Henry structures, overall full And basis, we in or as base those firms this very cap when income top -- in PIK on equity structures them. to mentioned, a see obviously we'll selective think more at to I PIK so where component given are private We the our a participate modest types evaluate put our other are of we those there's keep a very in deals them. but rates And looking line. trying place level

Robert Dodd

look I to your I are assets to is little right? it. that later monetize time appreciate to like still color. Got pretty sponsors more can the in to currently, a more going be in to you point, XXXX, looks If ask bit XXXX. high going line It stretch

expect different you what the to structures So if to do does of does to evolution here see I go third we more rates be kind reminiscent think XXXX like of year, Same monetization be question. in going XXXX, that you increase, you're kind high. doing apply quarter the as remain of next but in some is we do guess, or QX for there's -- through funds

Jason Breaux

rate and that multiple to a wasn't grow those market the I I lenders It's a to see secured which think depending we're the buyers low and of profile evolve about. we lot a of surprising. for environment, necessarily attached in cash bit at the would segments say, risk to debt going continue I years, saw And of that's on, great several the experienced thinking buyers we're something a a very flow think question. you

reality in rates we're and at. with where a different they're base where Now

toggle aggressive for traditional outlined, first portion PIK have a paper manage or QX that's of in maybe oriented structures, cash what think levels, it activity fixed see loan to acquisitions. or more pay Henry start their pick lien these you'll I and junior more with more of owners a burden potentially but are leverage of more option conservative these to a help might that piece as as charge

we're time. in I So in some something than to think seen it's going more start that 'XX of we've to do see

Operator

of from Your next KBW. Lynch Ryan question line comes the from

Ryan Lynch

guys kind purposely First the seems investments, on it level spread the your to weighted of that's value willingness of X.X% question in versus on are I with these your below loan average what's with, the Is new of to you you investments of combination on assume like the to look investments derisking quarter. had, feels want XX% X.X% kind of following the coming new new on quarter. this XX% on market? line value It question terms on that and on structures sort loan in these investments are to prior happening? Or representative to of what's market that like at up the made are previous I on new which was if overall the guys or kind investments. safety the Or fair just that coming today? of

Jason Breaux

for Ryan, question. it's Jason. Thanks the

I think little it's bit both. a of

certainly think the on a to of mention, in trying leverage be this underwriting fund level Not our at are overall selective I at. environment. in to sort we're we're we comfortable that

And are. looking so where not from we're we up lever meaningfully to

from point say pricing that has forced certainly tighten deal that's a to environment, bit. volume second in we private slower credit albeit with tick flow The are significant capital combined been up is because a I would that raised targeting slower QX a

XX or X.XX quarter say where in I range XX ago we're probably say, now liens, And would the are inside to X.XX, not so to today. a uni's points range. first we where in X.XX I the, were basis are So would stretch X.XX generally of

little addition our you've which got rational in more to a but become just even 'XX. bit bias, and imbalance, to I that, out we in hope think of So a supply-demand conservative

Ryan Lynch

sense. makes That That's Okay. helpful.

the speed result maybe of really sounds FCRD purchased active And exiting for? normal was, into got of this FCRD or to at exited exits. the more value like over The sort actually kind I you course I some those what proactive investments correlation pick you're or correlation the sounds you like just M&A in some doesn't -- those from have exiting and that think in of it and on other point. be said think which going your If has portfolio of a seems some I'm do XXXX, versus of exited, investments? at think what you guys the had those next a those up do and were of curious, been aggregate that would that, M&A you faster point, you portfolio you level XX% then to -- question able do to of know guys investments in of a them separately, realized ability a correlation it clip environment being with a environment higher does high -- you an

Henry Chung

is Ryan. question, Henry. Thanks I'll for take This that the one.

that value The you basis. fair relative value on onboard realized first to cost the the had or question

were we Jason either all So that, respect earlier out basis that the the question, where exited at. or realized cost to above at applies to XX cost investments investments that shook respective we've referenced that in -- the those with an

it's On onset think we interesting similar with We before point, a because the I dynamic did closed X the Alcentra. second see right COVID-XX. of Alcentra an

that the in activity. early picked XXXX part obviously, quite portfolio environment we recall, over up all is M&A and closed dramatically. there no activity we deal as in of And acquisition into where then that an XXXX, So

fast to First anemic First activity very, can so. frame the we to a able the Valley are shy backed. that that Eagle, was not acceleration taken to albeit potentially quite certainly see in expectation little see my portfolio again And we thereafter. FDIC. that all over we are happening we portfolio up, to see And these we Eagle And pick Bank if seeing think businesses all there's they're that know sponsors deal Silicon the think It's doing shortly closed And with have an the I right before where just got be time by rotation I monetize starting I what would as certainly of in saw for we're and I'd be well. pick during analogous we that say, here. almost a as about going be volumes that up, that of modestly given assets, sponsor M&A to environment attractive opportunity

Operator

Instructions] time. no this There Please questions at [Operator are continue. further

Jason Breaux

Well, the we like today and to call operator. look and you appreciate to you, all joining questions, Thank forward speaking I'd thank for earnings once you again, again soon. our with

Crescent Capital BDC (CCAP) 9 Nov 232023 Q3 Earnings call transcript