BlackRock TCP Capital Corp.

Ladies and gentlemen, good afternoon. Welcome everyone to BlackRock TCP Capital Corp's fourth quarter 2022 earnings conference call. Today's conference call is being recorded for replay purposes. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, please press the star key followed by the digit one. I will repeat these instructions before we begin the QA session. And now, I would like to turn the call over to Katie McLean, Director of BlackRock TCP Capital Corp Investment Relations Team. Katie, please proceed.

Thank you, Tia. Before we begin, I'll note that this conference call may contain forward-looking statements based on the estimates and assumptions of management at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. Any forward-looking statements made on this call are made as of today and are subject to change without notice. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the fourth quarter and full year ended December 31, 2022. We also posted a supplemental earnings presentation to our website at www.pcpcapitals.com. To view the slide presentation, which we will refer to on today's call, please click on the investor relations link and select events and presentations. These documents should be reviewed in conjunction with the company's form 10-K, which was filed with the SEC earlier today. I will now turn the call over to our chairman and CEO, Raj Vaig.

Thanks, Katie. And thank you all for joining us for TCPC's fourth quarter and year-end 2022 earnings call. I will begin today's call with a few comments on the market environment and provide an overview of our fourth quarter and full year results. I will then turn the call over to our president and chief operating officer, Phil Tseng, who will provide an update on our portfolio and investment activities. Our CFO, Eric Cuellar, will review our financial results as well as our capital and liquidity positioning in greater detail. I will then conclude with a few closing remarks before we take your questions. 2022 was a year in which the equity and fixed income markets experienced significant volatility, particularly in the latter half of the year. This was driven by a combination of geopolitical uncertainty and the Federal Reserve's ongoing actions to aggressively raise interest rates in order to curb inflation, an effort that appears will continue for the foreseeable future. This volatility persisted in the fourth quarter and adversely impacted spreads across fixed income markets, including middle market loan spreads. No sector or asset class was immune to the market volatility, and in the fourth quarter, we experienced a decline in NAD due in part to the market volatility, but mostly due to lower valuations on three specific portfolio companies and company-specific items. I will touch on these in more detail later, excluding the impact of these three names our NAV decline would be closer to 3%. In this environment, our team's more than two decades of experience lending through multiple market cycles and our ability to work with our portfolio companies to manage through challenging operating environments is particularly valuable. We are also reminded of the benefits of direct lending that historically delivered premium yields to the liquid markets and, importantly, better downside protection in periods of market turbulence. One aspect of our investment strategy that has led to strong downside protection and very low loss rates throughout our history has been our strong portfolio management and monitoring procedures. In addition to the ongoing monitoring our deal teams perform over investments and their individual portfolios, on a quarterly basis, TCPC's Investment Committee also performs a thorough review of every company in the portfolios. As part of this process, the same deal team members that originated and underwrote these investments review the company's most recent financial performance and engage in dialogue with the business owners and operators to assess both current and projected performance relative to our original underwriting assumptions. All of this is conducted within the context of our deep industry expertise. We evaluate each borrower's ability to manage in times of stress using both a forward-looking and historical lens. Additionally, our industry expertise has always enabled us to underwrite loans with strong lender protections in the form of covenants specifically tailored to contemplate both company and industry specific dynamics. As you can imagine, these existing protections are more important today given the market environment as they allow us to take any actions required to protect our capital. Before providing highlights from our fourth quarter and full year financial results, I'd like to provide some more context to the sequential decrease in our NAV. In addition to the more normative valuation adjustments across the portfolio due to wider market spreads in the quarter, two-thirds of the total unrealized losses recorded in the fourth quarter was attributable to three portfolio companies, Admentum, Razor, and AutoAlert. Each of these write-downs was driven by a unique set of circumstances impacting the company and or the industry in which they operate. It is important to emphasize that the issues driving these valuation impacts are isolated, and in the case of Inventum and Razor, driven by exposure to well-performing equity investments, which tend to have more mark-to-market volatility. Importantly, the credit quality of our portfolio remains in excellent shape. In the case of Inventum, as many are aware, the company has delivered very strong performance over the last several years, driven in part by the ongoing shift to online learning. which led to significant write-ups and significant realized gains on our investment. While Edmonton's performance continues to be strong, the pace of growth and demand for online learning tools coming out of COVID has slowed but continues. Given the normalization of growth in the sector, combined with a more moderate outlook and general public market valuation declines, the value of our investment was marked down in the fourth quarter. However, the overall performance of our investment has been very positive, and we remain confident in the long-term performance of Inventum. Razor Group is a consolidator of small to medium-sized brands that sell through Amazon's third-party platform. While we continue to view our loan to Razor as well-covered, the company's enterprise value has been pressured by the challenges facing the broader Amazon ecosystem, which resulted in a reduction of the value of our warrants, as well as a modest decline on the value of our first lien loan. Finally, Auto Alert is a company that provides marketing software to auto dealerships. Auto Alert was severely impacted at the start of the pandemic when auto dealerships were closed, and it has subsequently been impacted by the supply chain issues that have resulted in limited new car inventory. We are working with management and the sponsor on next steps. We are encouraged by the fact that some of the macro issues seem to be abating, and recent results reflect improving performance. Now, turning to our fourth quarter and full year 2022 highlights. We delivered strong net investment income of 40 cents per share in the fourth quarter and $1.53 for the full year. Given the floating rate nature of our portfolio, our net investment income benefited from the increase in base rates in 2022, as well as wider spreads on new investments made throughout the year. As an acknowledgement of the higher ongoing earnings power of our portfolio, primarily driven by higher base rates, we announced a $0.02 per share increase in our dividend, beginning with the fourth quarter dividend that was paid on December 31st. And our board of directors today announced a $0.32 per share dividend distribution for the first quarter, payable on March 31st to shareholders of record on March 16th. This is in addition to the $0.05 per share special dividend that was announced in December and paid last month to shareholders of record as of December 31st. As a reminder, we have always emphasized the stability of the dividend and the coverage through our recurring net investment income. Throughout TCPC's history, we have consistently covered our dividends, our recurring net investment income, a commitment that remains important to us even with the recent dividend increase. Phil will discuss our fourth quarter and full year investment activity in more detail, but in summary, we are being disciplined in deploying new capital in this uncertain environment while also taking advantage of the more lender-friendly investment environment. We reviewed a substantial number of transactions during the year and selectively deployed capital in a small percentage of those opportunities. Looking back at our historical performance as a public company, since 2012, we have generated a 10.3% annualized return on invested assets and a total annualized cash return of 9.3%. We believe our performance remains at the high end of our peer group, demonstrating our ability to consistently identify attractive opportunities at premium yields and deliver exceptional returns to our shareholders across market cycles. Now I will turn it over to Phil to discuss our investment activity and portfolio position.