Investcorp Credit Management BDC, Inc.

Good morning, ladies and gentlemen, and welcome to today's InvestCorp Credit Management BDC's quarter-ended March 31st, 2025 earnings call. It is now my pleasure to turn the floor over to Walter Chin, CFO.

Thank you, Operator. Welcome, everyone, to InvestCorp Credit Management BDC's quarter-ended March 31st, 2025 earnings call. I am joined by Suhail Shaikh, President of Chief Executive Officer of the company in Andrew Muntz, Chief Operating Officer of the company. I would like to remind everyone that today's call is being recorded and that this call is the property of Investor Credit Management, BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by visiting our investor relations page on our website at itmbdc.com. I would also like to call your attention to the State Harbor disclosure and our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. Actual results may differ materially from these projections. We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit the company's registration statement on the SEC's editor platform or our investor relations page on our website. The format for today's call is as follows. Suhail will provide an overall business and portfolio summary, and I'll then provide an overview of our results, summarizing the financials, followed by a quick Q&A. At this time, I would like to turn the call over to Suhail.

Thank you, Lawrence, and thank you to everyone for joining us today. We have reached three shares in the first quarter of 2025, last year in its continued progress and masterability for ITMD. Our strategic priorities in the past several quarters have centered around resolving legacy credit issues and resubmissioning the portfolio for steady performance. For the quarter ending March 10, 2025, we've reported net investment income of $4.7 million or $0.05 per share, compared to $0.06 per share in the prior quarter. On that asset value, the share increased 2 cents per share to $5.42, compared to $5.39 as of September 31, 2024. The increase in that was primarily driven by an increase in unrealized gains, offset by a decline in head investment income per share, which was largely due to reduced investment activity during the quarter, and the configuration of repayments. We believe this trend is reflective of the broader market environment that has heightened on 70 and fused 70 and financing activity has sloped new deals, though. We are encouraged, however, that market fundamentals remain in cash and expect activity to pick up as macro on 70 or limited status improves. Despite this, our portfolio remains stable and we continue to prioritize credit quality and long-term valuation for usher in orders. We have significantly reduced the number of non-recruits and now have just two investments in non-recruit standards, representing approximately 1.7% of the total portfolio at fair value, down from five investments at 3.6% at fair value in the previous quarter. This month, the annual shift and underscores of success of our participants' investing approach, as well as putting the most challenged names behind us, and as a result, we expect more stable earnings profiles for the remainder of 2025, notwithstanding any massive shock. Turning to the broader market, you continue to see a noticeable slowdown in review activity. Stacks and sums in broader geopolitical uncertainty have contributed to a decline in M&E, volume and sponsorless financing. While this has impacted our deployment space, we remain highly selective regarding the way for opportunities that lead our risk-adjusted return thresholds. We believe patience and discipline in this environment will ultimately be rewarded. While cautiously optimistic that deal activity will be balanced, the appeal of reduction in massive volatility is a necessary condition for that to occur. In addition, We continue to believe our portfolio is well-versed in the world of the shifting economic environment. As an upgrade to the prior quarter and as we continue to have more clarity on direct tariff exposure based on conversations with management and sponsors, we estimate that less than 20% of our portfolio may experience moderate direct effects from tariffs, and that was as of the beginning of the tariffs announcement. Importantly, The companies potentially affected are actively implementing mitigation strategies, including outcomes through price increases, switching to the best-buying suppliers, and improving supply chain efficiency. We believe these proactive measures, coupled with the operational strengths of our portfolio companies, provide a solid foundation for navigating these efforts. Overall, our correct exposure to tasks remain plentiful, and we will continue engaging with portfolio companies to monitor and manage these risks going forward. I will now turn the call over to Andrew to discuss the details of portfolio activities during the quarter.

Thank you, Kiril. During the quarter ending March 31st, we invested in one new portfolio company and two existing portfolio companies. Fundings for new investments totaled $5.1 million at cost. The weighted average yield of debt investments made in the quarter was approximately 10.2%. In the same period, we fully realized three portfolio company investments, totaling $7.3 million in proceeds with an IRR of approximately 9.6%. First, we participated in the LDO transaction of Excelevation by Olympus Partners. Excelevation is a vertically integrated provider of manufactured products and design installation services to the data center market. We invested in the Revolver, the First Lean Term Loan, and the LayDraw Term Loan. Our yield at cost is approximately 9.9%. With regards to existing portfolio companies, we made an incremental investment in the First Lean Term Loan of WorkGenius, a leading AI-powered talent platform that connects businesses with highly skilled freelancers. Our yield at cost is approximately 11.3%. As part of our participation in this financing, we also received Class A1 equity loans. Lastly, we also received warrants in CareerBuilder. Turning to our realizations, we realized our first main term loan positions in Victor Holdings and Flatworld Solutions, both of which were refinanced during the quarter. Our realized IRRs on Victra and Flatworld were 10.5% and 13.5% respectively. Finally, we realized our revolver position on American Teleconferencing, also known as PGI. Our realized IRR was negative 36.2%. As of March 31st, our five largest industry concentrations by fair market value were Professional services at 15.5%. Containers and packaging at 9.2%. Trading companies and distributors at 8.6%. Commercial services and suppliers at 8.0%. And IT services at 7.9%. Overall, our portfolio companies at quarter end were in 19 VIX industries, including our equity and warrant positions. I would now like to turn the call back over to Walt to discuss our financial results.

Thanks, Andrew. With the quarter ending March 31, 2025, the fair value of our portfolio was $192.4 million compared to $191.6 on December 31. Our net assets were $78.1 million, an increase of $0.5 million from the prior quarter. Our portfolio's net increase in net assets from operations this quarter was approximately $2.2 million. The weighted average of our debt portfolio was 10.8%, an increase from 10.4% in the previous quarter ended December 31st. As of March 31st, our portfolio consisted of 43 borrowers. Approximately 77% of our investments were in first lien debt, and the remaining 23% were invested in equity, equity warrants, and the other positions. 98.2% of our debt portfolio was invested in floating rate instruments, and 1.8% in fixed rate instruments. The weighted average spread on our debt investments was 4.7, a slight increase from 4.3 in the prior quarter. Our average portfolio company issuer on a fair market value basis was approximately 4.5 million, and our largest portfolio company investments on a fair value basis is Biocam at 13.6. We have recently announced that on April 15, 2025, the Board of Directors declares a distribution for the quarter ended June 30, 2025. of $0.12 per share payable in cash on June 14, 2025 to all stockholders of record as of May 24, 2025. Gross leverage was 1.53x and net leverage was 1.37x as of March 31, compared to 1.57x gross and 1.42x net respectively for the previous quarter. With respect to our liquidity, as of March 31st, we had approximately $13 million in cash, of which approximately $10.7 million was restricted cash, with $44 million of capacity under our revolving credit facility with Capital One. Additional information regarding the composition of our portfolio is included in our Form 10Q. With that, I would like to turn the call over back to Hale.

Thanks, Lord. As we head into the rest of 2025, We remain focused on maintaining mass stability, sustainable net investment income, while selectively deploying capital and high-quality opportunities. We believe the second half of the year will provide some interesting investment opportunities given as add volatility in the market base. We are proud of the work we have done to position the company to be in a strong position today as a Thank you for your continued support, and we look forward to taking your questions.

Ladies and gentlemen, at this time we will conduct the question and answer session. If you would like to state a question, please press 7 pound on your phone now. Again, that's 7 pound, and you will be placed in the queue with the order received. You may also press 7 again to remove yourself from the queue. Please listen for your name to be announced and be prepared to ask your question when prompted. We are now ready to begin. Our first question comes from Mr. Paul Johnson with TBW. Go ahead, sir.

Yeah, good morning. Thanks for taking my question. Yeah, one, you know, question I have is just I'm wondering kind of, you know, how can the advisors scale or any sort of benefits that can kind of be provided to the BDC here? Because as I'm looking at it, you know, the allocation of expenses from the advisor, about $1.4 million per year, so that's almost $0.10 a year the shareholders have to eat through just on the expense allocation alone. you know, there's a few items on here, insurance, I mean, that's a penny per quarter, and this quarter, if you strip out big income, it doesn't really appear that your cash flow is positive. So, I'm just wondering, you know, what sort of things could you talk about, maybe, you know, you're waiving a little bit of fees here, but, you know, is there room from the advisor to waive additional fees? Is that something that they would do if MII falls below zero. There goes negative. Anything there, even just telling the cost of status that can be improved, that would be helpful.

Yeah, that's a great question. Here, I'll try to answer it in two sort of parts. One, the simple answer on waving fees, that's always something that we and consider something that's within our control. The second is the production of cost. I think that, and we've mentioned this before as well, we continue to work on scaling the private credit platform at Investor. And that is a real-time effort that's going on and has been going on, and it's going to continue to As that happens, there will be a natural reduction of overhead and expenses that, you know, the advisor is going to bear, which results in EDC. And also, from now on, a allocation of resources, plus as well as, frankly, mutual employment as well. All of that's going to benefit CDC. And it has in the last, say, two quarters. If you notice how the book is reshaped, that's all, you know, Bart and Barthelot, the strategy of doing it. So that was step one. Step two is obviously expanding the platform, which we are continuously doing, raising new capital, working on raising new capital, et cetera. And hopefully that gives you some sense of where we are. um you know we've done stability we've we've stabilized both terms both over and now we're very focused on as as regularly pointed out expenses and increasing an ai every which way possible thanks for that i mean do you have any kind of idea maybe it's the runway for that whether it's you know

on launches or just kind of the pace of scaffold racing that's going on on the platform that might, you know, you might, Cheryl might start to see some benefit from that. Do you think that's a 2025 sort of event or it's just going to be a longer process?

Yeah, no, it's a 2025 event. We are currently in the process of racing So that's live and, you know, that's underway. So it is a second half 2025 event. Okay.

Thank you very much for talking to me.

Thank you. And, again, if you have any questions, please press 7-pound. Our next question comes from Mr. Christopher Nolan with Lattenberg Tallman. Go ahead.

Yeah, hi. Just following up on the questions. When you say you're raising capital, are you talking about equity or debt?

Not for this vehicle. We're raising capital for other vehicles, which will help them sort of expand the platform and have some overhead options. So that's equity capital that we're raising for.

And, you know, I applaud your efforts to clean up the balance sheet and so forth. Why don't you just do share purchases at this point, given the dividend yield and everything else?

You know, that's something we talk about. We won't take it off the table. So no plans in place yet, but it's obviously a tool that we have and something we consider all the time.

But no plans... I mean, your stock's trading at half a buck. Your dividend feels above what your loans are. You have been disgusted. Really?

We... We have talked about it. We have not discussed it as something that we would launch right now.

Got it. Not a cool exit. Congratulations on that. Should we see a bump up in NII in the second quarter?

You should. I mean, look, I think the big picture, the macro picture is that so far God is coming down. And we are seeing some spread widening, especially in the new opportunities that we're looking at. We're seeing about 25, 50 base points spread widening. You might see a little bit of an increase in NII, holding everything else constant, just from deployment. But, you know, as the cost comes down, it's being made up so huge. On asset deals, they're going to be relatively flat, at least for the pending. You know, as we go into the second half of the year, your guess is as to this line, as to what happens from a macro perspective in the economy, that's really going to drive where we see spread. But from where we sit right now, we're starting to see about, you know, 25-50 basis points of widening on new opportunities.

Okay. Thank you.

Thank you very much. I currently don't see any other questions.

Great. Well, thank you, everyone, and thank you again for the good questions, and we look forward to speaking to you again after the June quarter.

Thank you, everyone, and this concludes today's conference call. Thank you, everyone, for attending.