Crescent Capital BDC, Inc.

Good day, and thank you for standing by. Welcome to the Q1 Crescent Capital BDC earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to turn the call over to your host, Daniel McMahon. You may begin.

Thanks, Kevin. Good morning, and welcome to Crescent Capital BDC, Inc.' 's first quarter ended March 31st. 2021 Earnings Conference Call. Please note that Crescent Capital BDC Inc. may be referred to as CCAP, Crescent BDC, or the company throughout the call. Before we begin, I'll start with some important reminders. Comments made during the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, we may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income, or NII, per share. The company believes that adjusted NII per share provides useful information to investors regarding financial performance because it's one method the company uses to measure its financial condition and results of operations. A reconciliation of adjusted net investment income per share to net investment income per share, the most directly comparable GAAP financial measure, can be found in the accompanying slide presentation for this call. In addition, a reconciliation of this measure may also be found in our earnings release. Yesterday, after the market closed, the company issued its earnings press release for the first quarter ended March 31, 2021, and posted a presentation to the investor relations section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be Jason Breaux, Chief Executive Officer of CCAP, and Gerhard Lombard, Chief Financial Officer of CCAP. And with that, I'd now like to turn it over to Jason.

Thank you, Dan. Hello, everyone, and thank you for joining us. We appreciate your continued interest in CCAP. For our call today, I'll provide a few highlights from this quarter's results, review our investing activity, provide some thoughts on our current positioning, and then turn it over to Gerhard to review our financial results in more detail before we open the call to Q&A. So let's begin. Please turn to slide six, where you'll see a summary of our results. We reported strong first quarter financial results with adjusted net investment income of 46 cents per share. This quarter, we accrued a capital gains-based incentive fee expense related to changes in net realized and unrealized gains and losses. This non-cash expense, which was not paid and is not payable, was approximately 5 cents per share for the quarter. Our Q1 net investment income per share, inclusive of the accrued capital gains incentive fee expense, was 41 cents. Pausing on the impact of this adjustment for a moment, which is only payable at the end of each fiscal year based on our investment advisory agreement. If we were to hypothetically end the year as of this March 31st, the five cents per share of cumulative accrued capital gain incentive fee expenses that we had at quarter end would not be paid or payable since the gains must be realized in order for us to be eligible to receive the fee. Turning back to our results, our net asset value per share increased for the fourth consecutive quarter, up approximately 1.8% in Q1 to 2024, one of the highest levels since CCAP's inception. Gerhard will walk through the key drivers in more detail, but the increase was primarily driven by a net change in unrealized depreciation specific to certain individual portfolio companies and net unrealized mark-to-market gains related to the tightening of credit spreads relative to the end of the fourth quarter. Please turn to slide four, which highlights our historical NAV trajectory and cumulative dividends since inception. Focusing on the right-hand side of the page, our business has performed well through the pandemic. From a total economic return perspective, which is change in NAV plus dividends paid, we've generated over 14% since the year ended 2019, just prior to the onset of COVID-19. This was driven by growth in our net asset value per share, up 3.8% in that timeframe, and the payment of our quarterly-based dividends, which cumulatively represent another 10.5%. Overall, we're pleased with this outcome, and with our total investment portfolio carried at 103% of cost as of quarter end versus 102% as of year end, we remain comforted by the quality of our portfolio and its performance. particularly given the volatility we've all experienced since March of last year. Let's now shift gears and turn to slides 13 and 14 of the presentation, which provide a snapshot of the current portfolio. We ended the quarter with just under 1.1 billion of investments at fair value across 131 portfolio companies, with an average investment size of less than 1% of the total portfolio. Our investment portfolio continues to consist primarily of senior secured first lien and Unitranche first lien loans. We are well diversified across 20 industries and lend primarily to private equity-backed companies. 99% of our debt portfolio was in sponsor-backed companies as of year end, consistent with prior quarters, and 80% of the portfolio at fair value was first lien, up from 78% as of year end, driven by our Q1 deployment, which I'll touch on shortly. For the first quarter, our portfolio companies continued to perform well. 118 out of our 120 debt investment portfolio companies, representing 99% of total and debt investments at fair value, made full scheduled principal and interest payments, and PIC interest represented approximately 4% of total investment income in Q1. 91% of our debt investment portfolio today is marked above 95 cents on the dollar, and the average mark of the entire debt portfolio is 97.6. Two more positive credit trends are outlined on slide 17, continued strong performance ratings and non-accrual levels. Our weighted average portfolio grade of 2.1 was unchanged as compared to year-end, and the percentage of risk-rated one and two investments, the highest ratings our portfolio companies can receive, increased modestly to 87.6% of the portfolio fair value as compared to 87.5% as of year end. As of quarter end, we had investments in two portfolio companies on non-accrual status, representing 1.7% and 1.3% of our total debt investments at cost and fair value, respectively, unchanged from year end. Moving to our investment activity, please turn to slide 15. In terms of the broader market backdrop, Spreads tightened across the board in Q1, as strong demand in the leveraged loan markets led to pricing and terms in favor of borrowers. All-in yields for new issuers were generally lower than the last few quarters, and a larger percentage of new deals were covenant light. Despite this competitive backdrop with record levels of dry powder in the direct lending market, we continue to benefit from Crescent's long-standing reputation as a reliable partner and ability to offer surety of capital and scaled financing solutions to the sponsor community. This was evidenced by over $1 billion of total deployment across Crescent's private credit platform in Q1. Sponsors and portfolio company management teams alike are, in our view, exhibiting a strong preference for flexibility of capital and a long-term partnership approach with firms like ours. CCAP's gross deployment in the first quarter totaled $88.2 million, approximately 90% of which was in Unitron's first lien investments. All told, we closed on six new investments and 11 follow-ons, totaling $63 million and $13 million, respectively, with the remaining $12 million coming from revolver and delayed draw term loan activity during the quarter. All six of the new investments were private equity-backed loans at 600 to 675 basis point spreads, each with a LIBOR floor, and OIDs between 1.5% and 2.75%. In addition, loan-to-value levels remain attractive, averaging approximately 45% for these transactions. The $88 million in gross deployment compares to $77 million in aggregate exits, sales, and repayments in the quarter. It's also worth highlighting that the $63 million CCAP invested in the six aforementioned new deals represented only 12% of the over half billion dollar total check size committed across Crescent, highlighting the breadth of our platform. For the month of April, we closed on three new investments for $31 million and four add-ons for $6 million. The new investments are each private equity-backed, first lien or unit tranche loans, with spreads, LIBOR floors, and other characteristics fairly comparable to the aforementioned Q1 investments. Two more updates before I turn it over to Gerhard. First, as we have previously disclosed, Sun Life has advised us that it intends to purchase up to 10 million of CCAP stock in the secondary market over time, pursuant to a 10b51 plan, demonstrating its alignment with CCAP stockholders. We expect that this Sun Life purchase plan will be adopted in this upcoming open trading window, commence purchasing CCAP stock this calendar quarter, if such purchases meet the terms of the plan, and be in effect for approximately 12 months unless extended or until the aggregate approved purchase amount has been expended. This is in addition to a currently active $1.2 million affiliate purchase program funded by certain officers of CCAP and employees and affiliates of Crescent. The third such plan implemented since our listing following the cumulative purchase of approximately $4.9 million of CCAP stock pursuant to the first two plans. And finally, Our board has declared a 41 cent per share quarterly cash dividend for the second quarter of 2021 payable on July 15th to stockholders of record as of the close of business on June 30. With that, I'll now turn it over to Gerhard to cover additional details on the quarter.