PSBD - Earnings call transcript Q4 2024 | Palmer Square Capital BDC Inc.

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Operator

Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-End 2024 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded.

At this time, I'd like to turn the call over to Jeremy Goff, Managing Director, you may begin.

Jeremy Goff

Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-End 2024 Earnings Call.

Joining me this afternoon are Chris Long, Chairman and Chief Executive Officer; Angie Long, Chief Investment Officer; Matt Bloomfield, President; and Jeff Fox, Chief Financial Officer and Director.

Relations fourth released fiscal be earlier on Square's BDC's financial ended also Capital Palmer were palmersquarebdc.com. results today Investor Square quarter year and XXXX accessed Palmer at website and can

have be on months. can arranged event next for accessed a of our replay We today's also that the website X for

purely and rates, in statements. actual results the call, changing this make remind other factors economic this based forward-looking current uncertainties on to that by are of in not limitation, statements call to expressed the including could a statements, on forward-looking caused those without conditions that are filings future and and from factors During SEC. you want historical other are are identified with statements the forward-looking market performance not expectations. These subject I we we forward-looking are that interest differ our surrounding The guarantee cause conditions statements to materially uncertainty and

the that and as these of statements prove incorrect. inaccurate, be believe are can forward-looking to assumptions those result, assumptions we the any those on based assumptions based a forward-looking reasonable, Although be are can statements which on on

of undue statements made unless reliance and required by made forward-looking not related forward-looking should palmersquarebdc.com. To forward-looking Capital please these SEC BDC copies statements filings, website Square Palmer at You place of the The to obligation during the update statements. are call visit hereof, this on as date assumes our obtain no law.

that, Chris over Long. to will the turn call With I now

Christopher Long

market BDC's then call Fourth and portfolio the Conference and an results. Year-end for full joining begin overview the quarter us of afternoon, financial outlook, to to for Call. year by you Square will XXXX today Good and discuss team the highlights, everyone. Capital providing Palmer the turn Quarter fourth Today, I Thank

quarter, PSBD high-quality our and continued portfolio. income exhibited the performance stability by in generation solid underpinned fourth strong across

total and and net $XXX.X $XX.X our $XX.X the million and million respectively. investment team million, quarter, of of deployed fourth income generated capital During

paid net dividend, $X.XX a plans investment included delivered and total shareholders throughout previously share as per fiscal our supplemental out per to prior share $X.XX to supplemental of a nearly pay from $X.XX We distribution. all year. have This communicated we distribution fourth the income quarter of earnings spillover quarters earnings $X.XX including

Square XXXX was for only market a debt the credit brought built We both IPO-ed public syndicated BDC private has transformative spans and that year in BDC. Palmer January and successfully Capital portfolio large publicly-traded that broadly investments. a to

an discloses we our disclose level into our public on are In This Our determined for BDC real-time based actionable and in disclosure large only unique to portfolio. $XX.XX. allows of XX share transparency, announced and part sector-leading health portfolio real of with the transparency, prices enhanced January that to us monthly NAV. we our assets, recently commitment value per line NAV our the providing visibility of is

underpinned our Before us I philosophy our turn reiterate space a others publicly-traded and of from as company. performance over to to year want investment in market many in I have outlook, Angie proprietary our discuss call qualities that our the the the differentiate first to

to just in Our returns of ability one, in, and corporate established an I manager is expertise, risk-adjusted to our deep experience credit. mentioned, our differentiated with deliver to structured our opportunistically attractive shareholders as Two, as opportunity addressable loans rooted years diversification investing believe debt BDC large superior platform peers. spans and private credit offers and that our meaningful flow. we expanding bank enables liquid market which flexibility and level Three, broader relative to composition deal that portfolio our both loans approach

secured attractive pursue primarily and coupled diversified private as with shareholder loans Five, transparency. fees And protection approach value our sixth, downside industry-leading rate stable on agility the portfolio to rigorous underwriting focus most alignment comprised the large our markets. high-quality demonstrated our senior by and our liquid Four, and on relative quality, to process to borrowers. across focused of credit floating

As opportunistic will we to credit maintain we for continue a be believe to differentiator PSBD. and strong nimble performance portfolio, our be ability across our

managers upside arise. rate board loans higher-quality their predominantly portfolio the large which and Further, credit grapple pay efficiently In when of select is today's are of with across environment of market, enables lower and attractive act evolving appreciation quickly assets. opportunities structured PSBD total private investments return and and secured over comprised we an illiquid more loans, many portfolios, to our through senior NAV credit cash time. believe in positioned

been heard us of future We have to be managers front on that higher forward. lessons will credit. public we private a set up even a and will have moving we've learned have ahead, to Square the encouraged of as mover fixed first this propel income the other be Palmer rhetoric we the and by Looking said heights combination

that confident differentiated our pursuing even private debt of One and combining they may structure. we're that also our is remain the portfolio be this as approach peers demonstrates future Further, fee that advantage from larger public construction. vehicles point

value, Palmer leverage. philosophy only further assets. for you, with highlights equity firm in that taking rooted for management that As rewarded our our not This before, a is said shareholders. belief capital fellow charges Square should attracting we alignment This we've net on grows net our fee be on asset

outlook. call the our discuss hand over to now market Angie to will I

Angie Long

both In equity results you, investors strategies markets. markets. on diversification act as yields and to our which Thank and credit rate to spread they floating the arise dislocations private credit across driven credit believe the and by indices tightening from Chris. and PSBD bias, meaningful against benefit delivered included quarter, liquid in attractive exposure, evolving an traditional duration enable lower We most higher-quality backdrop, ability fourth financial rotational total from macroeconomic strong

the a floating the in for reasons. attractive In credit environment our view, senior of most area rate is current secured few credit

assets advantage similarly First, over rate current floating a credit. rate fixed offer income rated

higher these base well. and one rates believe many result attractive remains today. quarters, healthy credit in overall opportunities are the the spread return SOFR an had the with by markets risk-adjusted below coupled it we investment-grade forecast macro offered continues perform economy is loans, in recent the than most While strong has When backdrop premium as of somewhat to declined

another value role plays in about environment. the we how investment navigating think important current Relative

capital tighten, to juncture in reposition staying structure. when and portions higher we better arise. structure senior this the you are risk also capital at entry to spreads secured in important Patience additional we are the on our our believe as with for junior of or the as want compensated investors As loans ability opportunities sense points the liquidity portfolio credit not makes being most take

around interest rates. of is ongoing uncertainty the there trajectory Additionally,

are we will think rate hikes we prognosticators, around not rate year. rate interest cuts the or While volatility expectations do continue throughout evolve as

was to for market rate now pricing or X wider total XXXX, For in pricing opportunities example, for in even it's cuts volatility just X return on or could in potential and this the in the believe lead X. September, spreads We portfolio loans.

and Due to the our of strategy. our team, investment structured corporate credit advantages deep differentiated and

in the market in the face ] debt have which are assets. as private many the [ being illiquid of both paramount distinct locked segment environment full We nearly their tights. into of tighter spread play our more in all credit a believe ability to X that through XX-year is public upside the We the of of to is and presenting shareholders portfolio a or partake opposed allows across market to the this even markets. capability the sides classes, This of

to the strategically has stand We administration's to Palmer positioned confident we're effectively We few impact Square's of scenarios new any prepared pockets rate still opportunity new inflationary is to that are operate higher in the tariffs believe in the contemplated. fully platform volatility of believe the impact of regardless of our policy and the the environment borrowers not have take the and and adjusted broadly policies economy. known. of market But currently years the the past over well advantage

disciplined we lowest standards, nonaccruals. portfolio environment, any investors of the income of a PIK levels industry's the providing In with economic security secured loan XX% underwriting some of our senior and with uphold

by XX, competitive remains As XXXX, BDC historical of to provided yield, which the yields quite and current XX.X% measures sector. an December with in highly investors attractive we

tightening aggressively markets. BDCs than environments we reiterate, liquid, in primary risk-adjusted through up tighter across credit the cycles, managed better we strategies more patient To measured our spread respond open investors. structured ultimately We multiple most believe and secondary our long-term spread opportunities flexibility and and have when approach to private drives our for have and returns

momentum mitigating risk strong as attractive philosophy current enter have spread the our tightening in We XXXX is while believe environment. to and positioned investment yields we drive into

Matt that, the investment like hand call who will our With to over and I'd portfolio activity. to discuss

Matthew Bloomfield

you, Thank Angie.

for portfolio to fourth the activity and our quarter. Turning investment

compares quality, credit of value XX, across Our demonstrate total third quarter billion diverse XXXX, billion offerings of strong small service the investment that of and a fair of and fair reflecting X.X%. and at core as This a had mix portfolio of a XX markets. approximately December XXXX of $X.XX company-specific value to and tailwinds of the industries approximately increase a industry end end $X.XX

an $XXX.X $X.X XX of million. included of capital value quarter, million In fourth commitments we investment which invested average the new at approximately

we period, same repayments through and sales. the During approximately realized $XXX.X million

credit spreads markets. in tightened ability for and these identify our our risk-adjusted BSL that As confident both appropriate markets to private meet to portfolio determine continue our mentioned, we We the and across examined to remain Angie opportunities observe spreads thresholds. of

this on credit market reach for not quality what is to for we spread want compromising However, prudent is or we our incremental in reiterate believe to our investors. portfolio that

better deal capital the landscape there and current in on believe investment future we deployment. environment, months Based the opportunities for will be

can are of the anticipating we focused As year. the take back opportunities such, maintaining of ample are we so liquidity the advantage that on we half for

our quarter to have Board addresses in $X.XX it the team cuts we in saw of we our and net recalibrated beginning of lowering and the This XXXX. out rate base support paying end, this policy our continue quarter seek first To management of the directly will fourth believe income via dividend, as of decision supplemental base nearly all distributions. the to stability XXXX, investment our NAV existing we and

that consistency for yield broader management competitive quality attractive with we will Board a credit is risk the know fellow remain team go-forward key consideration to sector dividend Our offer our and while BDC shareholders, and that continuing believe mitigation. our and

speak In to to our of key first statistics our performance, in full our I entering market and and reflecting XXXX. highlight company that publicly-traded some XXXX quarter want a as positioning year on achievements year our fourth

average value As XX.XX% to securities of of and loans. total of to at was our predominantly end at yield floating PSBD and liquid on income debt on and an quarter, was maturity At of income-producing maturity weighted X.XX%. yield fourth XX, lien, annualized producing yield debt our December average of cost fair a shares portfolio securities XX.X% the first focused total rate XXXX, dividend the amortized offered weighted

driver for from professional our our who the In value portfolio's key X.X% highly services XXXX, care health quantify Our a investors also investments account exposure XX diverse industry this expertise. software, To is by portfolio largest providers team's overall portfolio. of and largest diversification, distinct the benefit included industries for services. only and

million. average coverage $X.X portfolio basis, value secured a Our size XX% borrowers On senior secured average with first of approximately $XXX a interest hold lien senior have fair is million, weighted and EBITDA of of X.Xx. an our leverage of X.Xx weighted

fourth During any did to nonaccrual. add quarter, the we loans not

rate. XX% value, average Our over a new BDC existing loans were XXX just represent and at investments weighted nonaccrual reference quarter, comprised credit on points overall market new spread X.XX% basis the averages. private the of well X In below fair of funded reported loans of

Our PIK on We low basis at maintain loan income for investment approximately a rating average an relative overall X.XX%. fair internal very income percentage the all X.X as to a value-weighted industry investments. of total of remains

relative scoring unique Our rating a is value-based on system. based

turn like the XXXX fourth to who review results. call to will I'd Now financial our over Jeff, quarter

Jeffrey Fox

Matt. you, Thank

quarter are and fourth interest fourth investments. XXXX for as from period. million increase well was for from the pleased XXXX, growth as year our investment in We can $XX.X our performance. million up full Total portfolio of This continued year XX.X% $XX.X income our be attributed prior with income quarter financial the to

per year $XX.X quarter million of quarter Total $XX.X for the per the fourth the compared period fourth million million XXXX $XX.X share million prior the with period. $X.XX in to share comparable for for Net net last $XX.X was investment or income $X.XX year. or were compared expenses

quarter total During losses of the unrealized and had million in fourth company $X.X fourth net compared of $X.X of XXXX, realized to total gains the the a million and of unrealized realized quarter XXXX. the

portfolio For to consisted the exited depreciation of and December net ended XX, of to existing months related million million unrealized $X.X depreciation X XXXX, of $X.X investments. portfolio related net this investments unrealized

was share third the At the of quarter, NAV of the XXXX. per of fourth compared $XX.XX the end to end $XX.XX at quarter

$X.XX a reflects of NAV per our quarterly base we the of year-end, of distribution Subsequent As and $X.XX January share. of a supplemental a disclosed dividend the dividend $X.XX a comprised December to of payment reminder, NAV $XX.XX. also

balance at At the Moving were and X.Xx, $XXX assets capacity $X.X billion approximately debt-to-equity to Available assets XXXX. undrawn facilities X.XXx the end on credit December QX, consisting was and to total were compared our our million end to this quarter. QX. million, XX, was of at the million ratio third as $XXX.X Total of sheet. approximately end $XXX of the net of cash liquidity, of compares our

extended before As acquire approved giving of repurchase commenced in January XX a up stock program repurchase On January Directors mentioned the of December of PSBD our on $XX Directors XXXX. Board of or January XX on of on calls, stock of on December XXXX. to XX million of XXXX, earnings This previous our which Board our to plan, ability expires XXXX, plan, XXXX. us stock XX

fourth shares at of for purchased we a the $XXX,XXX. cost $XX.XX During an quarter, price purchase XX,XXX average total of

the declared $X.XX of distribution On share. February quarter XXXX per Board regular of a XX, first Directors

yield to As opportunities Matt mentioned, in competitive the this allows us allows to to disciplined believe future. BDC peers better maintain and dividend for be in we a capital deploying PSBD

distribution. we net the the settle. the quarterly March, the The which dividend paid of quarterly above announce portfolio, regular repayments of Given be out distribution in will nature allows excess to of income plan supplemental liquid undistributed the PSBD's investment for to supplemental

to And like call with open I'd up the for questions. that,

Operator

Kenneth [Operator And your the with question RBC Lee Capital first comes of Instructions] line Markets. from

Kenneth Lee

as the year out the sustainable the there. opportunity impact dividends confidence like on one gives well there? of driven that the for level be of What to for new outlook partly Just going there, sounds is cuts by you set the rest rate as

Matthew Bloomfield

the scenarios looked team a of for about management that along obviously was Thanks, spread like felt we lot Ken. We This Board the duration. different is felt environments, at good different with the environments, Matt. portfolio, different across rate level the and pretty

remarks, environment mind with Obviously, And standpoint. our that, we'll to right top feel to we it not But the a in seeing a beat great is we prepared in supplemental just mentioned from ton as be be now, like that. risk-reward with wanted deal on as of our conservative. of able opportunities the

for in appropriate to And that ourselves felt going so give it a of but other to we extent on see future. yields, set BDC that wanted flexibility plenty more also where forward was it the interesting things comparison the basis to we do are

Kenneth Lee

helpful Got it's the the to sales in there. fairly prepayments near portfolio I could you. just of And terms I it one follow-up, potential recognize Very if difficult term within there. or predict investment over outlook the be may. either -- What's there?

Matthew Bloomfield

the we think of lot I saw activity quarter. refinancing mean, I Yes. obviously a in repayment

relative You pretty see elevated prepayments to investments third in the was sold or quarter.

spread pretty environment. of think to I tightening part Angie's was earlier, comments that just rapidly

refinanced to make to cases, came repriced or borrowers of maturities their to back some lot just BDC and the loans the out refinanced our didn't a So where those. for or hold it pushed in market, sense either

repayments And those. so took we in

start quite that's these on say I'd for And of can to pure M&A a volume markets, refinancing XXXX, more or than the lot continued some in persist side LBO new things look, volume. time. that so

conversations of near half new years, the now. of activity our it case like muted for a that's going from lot and we term. saying the maybe feels think deal remain sponsors, past for couple But sit of it's year think the people been with I where back I pretty the have So for to from and

Operator

question comes from Harter Doug Your of line the with next UBS.

Douglas Harter

little decline being the mean of patient leverage on opportunity a deal to kind to repayments? near be term more those cautious of about to the commentary your could near-term in kind wait take we some that Should and of redeploy

Angie Long

This is Angie.

are and finding to buy, fair. in to that's for leverage to opportunity makes don't attractive and situation be sense we to more us But buy an think spreads. see things accretive more going patient things active yields I aren't you're I at that think wait the if of reducement. it incredibly

Douglas Harter

portfolio as liquid And of it. mix you think private kind versus investments kind more optimal Appreciate do you between loans? of an have Great. about construction, credit

Angie Long

between strategy the so of the our look to between to prescribed attractive what's that about we that's for rather think in world a going a best to don't the live X, have is because we're where the I at mix have are but move ability given time X. opportunities the we

Operator

Wedel from of comes line with the Melissa JPMorgan. question next Your

Melissa Wedel

total for in accounted total when supplemental or the expect same might the back a remain change base low the going the up? creep forward? to the right the Regarding the the earnings double-digit of we some portfolio into that power it now. as of has low that to you percentage maybe that trying historically, dividend, dividend. in Would teen dividend, look percentage Or -- seems I'm

Matthew Bloomfield

want question, Yes, to we fair think the good resetting I in I the This consistent a I we on continuing from we thinking from standpoint. near that about be we're basis cognizant way a to pretty Obviously, Melissa. the seeing be market we $X.XX as base a of term, hence, opportunity range. perspective. about is want in as think at a what and feel that's go-forward possible Matt. it were the mean But

be realistic not and importantly, investors the from excess for really most stretching spread. Our obviously goal markets about be and environment, are the but of of on to environment, trying outperform, types is standpoint, kind our extending always risk think to we the we're portfolio to spread obviously, these and deal

But the where again, so prudent. standpoint good. And we then term, feel pretty set we on to forward. a base obviously, comfortable the near wanted opportunities And felt But set where to be see from in want still we goes we'll that.

Melissa Wedel

Angie's -- heard uncertainty -- of look portfolio, from about points your your where to or points can potential about tariffs. I also When you talk policies the extent or you the about impact the across any more private tariffs which to of your credit the exposure generally? then portfolio, exposure impact market do broadly potentially in beyond there see versus you tariff is potentially? you think And that syndicated Okay.

Matthew Bloomfield

That's as we're lot to exposure. companies, of level. team, how about a at We all a our industry specifically feel the individual of mean great a time obviously, we've -- through relates I it question. good diving as we've and really positioned had tariff spent

exposure, minimis be over supplier manufacturing de auto more lot which, will years and the to has a -- impacted. auto very have of We directly exposure moved Mexico obviously,

So across it's probably a low single-digit portfolio. percentage the

to teams management of of talking of From lot think off opportunity a But we standpoint those lot from of we as a prices is price a moving target where information pass to lie. ultimately those through. they find -- it's a one-on-one, there's kind everybody operating I and out those think increase real-time

The it that higher syndicated to As relatively probably I credit does pertains auto, in that exposed syndicated versus would market think the there's that balanced. in transportation broadly from we any pertains don't necessarily have at we portfolio, the I private massive be But but exposure market, have Mexico. markets they're as some see our think we don't navigate X certainly potentially to what differential, least it in.

Operator

[Operator Instructions]

Angie Long

Melissa, Angie. this is

too. as that further patient Just portfolio. In clarification concern for an on names being around was than in the particular meant my rather a a explanation more comments, saying

of various in medium-term reasons worrisome. too we Just there attractive saying market near- much look But in pricing to at could that there right than be you way is that to now now. are believe at really the as points anything backdrop, future the market in the isn't as the entry more macro look the

Operator

management our hand the remarks. will That Q&A I call session. now to over for the closing concludes back

Christopher Long

today. you support much the Long. for entire Chris of of team, all appreciate Capital Palmer your so and is your Square behalf time joining of This we BDC. us Thank On management you

credit on and to from private decisions ahead. Our durability year both believe conviction PSBD differentiated to benefit our continue of loans the will and liquid investments forward. strategies pack in the our the the guide moving constructing PSBD portfolio our Further, credit separate will our focus portfolio we continue from to in

risk mitigation strong preserving in large quality our tool with in fundamentals and on ahead. focus the key as borrowers serve solid be will a Our quarters key credit

you We time. you in financial look updating May. with forward much thank to your first so Again, results our for quarter XXXX

Operator

concludes That you for today's joining. Thank call. all

now may disconnect. You

Palmer Square Capital BDC (PSBD) 27 Feb 252024 Q4 Earnings call transcript