BlackRock TCP Capital Corp. Q1 2023 Earnings Call
Even with the broader market weakness during the year private credit assets generally held up well.
Further demonstrating the resiliency and stability of the asset class in different market environments.
During the early part of 2023, we saw notable recoveries across most asset classes from their respective 2022 performances.
Market stabilize as we entered the year by the latter part of Q1 struggles that emerged in the banking sector understandably shook investor confidence and drove volatility that continues today with now several bank failures crystallized.
Notwithstanding the broader social and economic implications weakness and even turmoil in the banking sector is hardly a new dynamic to establish private market participants.
Rather it is a dynamic we have benefited from for most of our nearly 23 years lending to middle market companies, who continue to look an ever greater numbers for alternatives to traditional forms of financing.
While it's too early to say when the current situation will be fully resolved. We believe the reaction to recent events in the banking sector will likely make it even less efficient and less economic for banks to lend to the middle market and therefore further support if not accelerate the opportunity for well positioned private credit lenders such as ourselves.
In addition, the Swift collapses several banks and ongoing concern with the sector has been a reminder to borrowers of the benefits of working with a direct lender like Blackrock.
Lenders can act quickly when needed and have locked up or permanent capital that facilitates stable long term financing solutions to borrowers that remain available during periods of market dislocation.
We have seen this firsthand many times, including during the early days of Covid and to get more recently this past quarter with a few portfolio companies. We have that had cash deposits with Silicon Valley Bank.
The news about the challenges that the banks started to spread and these companies had difficulty accessing their liquidity.
Our team was in position to provide short term liquidity.
That had been required.
Fortunately the fed stepped in to backstop, the deposits and ultimately our capital was not needed, but our ability to work directly with these borrowers and to act quickly. We're further reminders of the value that private credit managers can provide.
Now I'd like to turn to our first quarter highlights.
We delivered strong net investment income of 44 per share in the first quarter.
Given the floating rate nature of our portfolio. Our net investment income continues to benefit from higher base rates as well as wider spreads on new investments, resulting in a run rate NII that is among the highest in tcp's history as a public company.
In recognition of the higher ongoing earnings power of T. C. P. C primarily to provide the right environment. Our board of directors today announced an increase of <unk> <unk> per share quarterly dividend distribution.
The second quarter dividend of <unk> 34 per share will be payable on June 30 to shareholders of record on June 16th.
As a reminder, our board has always taken a disciplined approach with regard to the dividend given our emphasis on stability and strong coverage through our recurring net investment income.
Throughout T C. P. CS history, we have consistently covered our dividends with recurring net investment income. This commitment remains important to us and even accounting for the dividend increase declared for the second quarter, our first quarter dividend coverage ratio would have been.
Approximately 129%.
Phil will discuss our first quarter investment activity in more detail, but in summary, we are being disciplined in deploying your capital in this uncertain environment.
While also selectively taken advantage of the more lender friendly investment environment.
We've reviewed a substantial number of transactions during the quarter and deploy capital in a small percentage of those opportunities.
Given the slowdown in private equity deal volumes, we are reminded of the benefits of our channel agnostic approach approach to deal sourcing.
Our pipeline remains healthy and given our direct relationships with management teams and other industry participants we continue to find attractive opportunities.
Current environment.
Finally, the credit quality of our portfolio remains solid with loans to just two portfolio companies on non accrual as of the end of the first quarter totaling just <unk>, 3% of total investments at fair value.
The lowest non accrual levels and TCP cease history as a public company.
Auto alert, which was placed on nonaccrual in Q4 of last year was successfully restructured in Q1.
And our loans are now back on accrual status.
While still early it appears that some of the macro headwinds that had been facing the company since the onset of the pandemic appear to be abating, and we have been encouraged by auto alerts relative performance year to date year to date and post the completed restructuring.
Looking back at our historical performance as a public company. Since 2012, we have generated a 10, 3% annualized return on invested assets and the total annualized cash return of nine 3%.
We believe this performance remains at the high end of our peer group.
Flex our ability to consistently identify attractive opportunities at.
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 positioning.
Thanks Raj.
I'll start with a few comments on our existing portfolio and then move on to highlight our investment activity during the first quarter.
We continue to emphasize strong portfolio management and credit monitoring procedures for our existing portfolio companies as.
As a reminder, our investment team members specialized across industry verticals and are responsible for sourcing investment opportunities underwriting and structuring those opportunities and then monitoring them until exit.
We view this as an advantage is it ensures that the relationships and the knowledge developed during the deal sourcing process and during the deep private equity like due diligence process can be leveraged throughout the life of the investment.
Our investment teams are continuously engaged in dialogue with owners and operators to assess both current and projected performance relative to our original underwriting assumptions.
In addition, you'll team members' review portfolio company performance with senior members of the investment Committee on a quarterly if not more frequent basis.
This process helps and proactively identify investments that may require more engagement with management to ensure our loans remain well protected.
Given the higher rate environment.
Higher input costs and general uncertainty in the economy, we are working with a few companies to help them navigate slower revenue growth and margin pressure.
However, we recently completed our quarterly review process.
Pleased to report that the portfolio generally remained in good shape.
In fact, despite the margin pressure facing many companies across the market. The majority of companies in T. C. P. CS portfolio with a cash flow underwriting continued to report positive EBITDA growth.
We believe our portfolio is well positioned given our emphasis on companies with established business models.
Have a reason to exist and are core to their underlying customers.
Making companies more resilient through difficult macro environment.
At quarter end, our portfolio had a fair market value of approximately $1 $7 billion.
88% of our investments were senior secured debt spread across a wide range of industries, providing portfolio diversity and minimizing concentration risks.
We also continue to emphasize companies less cyclical industries.
The portfolio at quarter end consisted of investments in 143 companies and all time high for T. C. T C and our average portfolio company investment was $11 $6 million.
As the chart on slide six of the presentation illustrates our recurring income is distributed broadly across our portfolio.
Not reliant on income from any one company in fact more than 90% of our portfolio companies each contribute less than 2% to our recurring income.
86% of our debt investments are first lien providing substantial downside protection.
And 94% of our debt investments are floating rate and important benefit of course in this higher rate environment.
Moving on towards vessel activity are dual sourced tend to listen Arctic approach provides us an important advantage, particularly at a time when we are seeing a slowdown in traditional sponsored backed activity.
Our industry focused deal teams continued to identify unique investment opportunities from a wide range of sources, including directly through industry context contacts and management teams.
This is in addition to our traditional sponsor relationships.
In reviewing these opportunities we emphasized transactions, where we are positioned as a lender of influence which enabled us to leverage our two decades of experience and negotiating deal terms and conditions that we believe provide meaningful downside protection.
These include substantial collateral and tailored covenant packages.
In addition, our industry specialization, which our borrowers truly value.
<unk>, our ability to assess and effectively mitigate risk in our underwriting and when negotiating terms in the credit documentation.
Despite the more modest pace of market activity T. C. P C invested $76 million in the first quarter.
Deployment in the quarter included loans to eight new and two existing companies primarily in senior secured loans.
Follow on investments in existing holdings continue to be an important source of opportunity for us accounting for 45% of total dollars deployed over the last 12 months.
D C P C as largest investment during the first quarter was a unit tranche investment to support the acquisition of World choice investments.
World Choice owns and operates a diverse portfolio of life dinner and family entertainment attractions across the southern U S.
The company is strategically located in stable regional tourism destinations, including patients for Tennessee.
Which it operates the Dolly Parton Stampede.
This market benefits from tourists visiting dollywood, but also the great smoking Nashville, the script the great Smoky Mountains National Park, which is the most visited National Park in the country.
We view this as an attractive investment opportunity given the company has demonstrated and stable growth over the past 15 years, including steady performance during the great financial crisis due in part to its low fixed cost base and strong free cash flow generation.
Overworld choices 30, plus year history have consistently delivered high attendance and revenue growth, which is establish them as a leading entertainment options with minimal direct competition in each of its core markets.
Our second largest investment in the quarter was the first lien loan to support the acquisition of Binder.
Founded in 2013, finders, and leading digital asset management vendor.
We view this investment as an opportunity to lend to a premium product and it's well positioned to benefit from strong tailwind for products that enables sales marketing in Congress.
We also view our loan as well covered given strong visibility on cash flows and binders significant and diverse customer base.
New investments in the first quarter were offset by total dispositions of $19 million.
The overall effective yield on our debt portfolio increased to 13, 1% compared with nine 1% one year ago, reflecting.
Reflecting the benefit of higher base rates and wider spreads on new investments.
Investments in new portfolio companies during the quarter at a weighted average effective yield of 13, 3% exceeding the 13, 1% weighted yield on exited positions.
Given further pullback in banks' ability to lend in this environment exacerbated by the regional bank turmoil in the first quarter.
Continuing to benefit from a more lender friendly investment environment with improvements in both pricing and terms relative to just 12 months ago.
Post quarter end, we've seen a modest pickup in activity and have been investing selectively maintaining our underwriting discipline, while being mindful of the inflationary environment.
We emphasize companies that have significant pricing power to pass on higher input costs.
Including increases in their cost of capital.
It's also important to note that we did not underwrite to perfection, we seek to build in sufficient buffers to ensure companies can withstand changes in the microenvironment, including higher costs without impairing their ability to service on them.
Our pipeline remains healthy and the yields on investments in our pipeline are generally in line with our current portfolio.
To date, we've had limited prepayment income in the second quarter.
Let me now turn it over to Eric to walk through our financial results as well as our capital and liquidity positioning.
Thank you Phil.
As Ryan noted our net investment income in the first quarter benefited from the increase in base rates since March of last year.
Net investment income of 44 10.
What what's up 29% versus the first quarter of 2022.
And exceeded the first quarter dividend of <unk> 32 cents per share by 34%.
Today, we declared a second quarter dividend of 34 cents per share.
An increase of two cents per share over the first quarter dividend.
This is our second dividend increase in the last three quarters.
We remain committed to paying a sustainable dividend that is fully covered by net investment income as we have done consistently over the last 11 years.
Investment income for the first quarter was 87 per share.
This included recurring cash interest of 76.
Recurring discount and fee amortization of <unk> and.
And pik income of less than three <unk>.
Notably Pik income was only 3% of total investment income.
Investment income also included two cents of dividend income.
Other income and I'm penny from prepayment premiums and accelerated OID and exit fee.
As a reminder, we amortize upfront economics over the life of an investment rather than recognizing all of it at the time the investment is made.
Operating expenses for the first quarter or 34 cents per share.
And included interest and other debt expenses of <unk> 20 per share.
Incentive fees in the quarter and totaled $5 $4 million or <unk> 90 per share.
Net realized losses for the quarter were $36 million or 53 cents per share.
Resulting primarily from the reorganization of our investment in auto alert.
However, given the stronger performance by auto alert over the last few months.
And they improved capital structure activity restructuring our investment in auto alert had a net appreciation during the quarter and is now back on accrual status.
Net unrealized gains in the first quarter totaled $28 million or 48 per share.
Primarily reflecting a $36 2 million reversal of previously recognized unrealized losses from the auto other reorganization.
Partially offset by a $3 2 million unrealized loss.
Investment and Astra acquisition.
And a $2 9 million unrealized loss in our Vantiv.
The net increase in that asset for the quarter was $22 $7 million or 39 cents per share.
We have a robust validation process, Kansas substantially all of our investments are valued every quarter using prices provided by independent third party sources.
These include quotation service at an independent valuation services.
And this process is also subject to rigorous oversight.
Including back testing every disposition against our valuation.
The credit quality of our overall portfolio remains strong.
A total of only two portfolio companies were on nonaccrual at the end of the first quarter.
Representing 0.3% of the portfolio at fair value and 0.5% of cost.
Now turning to our liquidity.
Our balance sheet positioning remains very strong and we ended the quarter with total liquidity of $307 million relative to our total investments of $1 $7 billion.
This included available leverage of $208 million in cash of $99 million.
Unfunded loan commitments to portfolio companies at quarter end equal 7% of total investments were approximately $109 million.
Of which only $34 million wherever revolver commitment.
Our diverse and flexible leverage program includes two low cost credit facilities two unsecured note issuances.
And an SBA program.
Last month Fitch reaffirmed P. C. P C. Its investment grade rating with a stable outlook.
Our unsecured debt continues to be investment grade rated by both Fitch and Moody's.
Given the modest size of each of our debt issuances, we are not overly reliant on any single source of financing.
And our maturity remained well ladders.
Additionally, we're comfortable with our current mix of secured and unsecured financing and do not have any immediate financing needs.
Combined the weighted average interest rate on our outstanding borrowings increased modestly to $4 one 9%.
This compares with $3 two 6% at the end of 2021.
That is an increase of only 93 basis points over the last 15 months.
Base rates increased approximately 480 points during that period.
This is the result of having over 70% of our borrowings from fixed rate sources.
Now I'll turn the call back over to Raj.
Thanks, Eric as a reminder, our annual shareholder meeting will be held virtually on May 24, and all of our shareholders are invited to attend.
Consistent with prior years and in line with many of our BDC peers. We have included in our proxy a proposal for shareholder approval to issue up to 25% of our common shares on any given date over the next 12 months at a price below net asset value.
The purpose of the below NAV issuance proposal and our proxy is to provide flexibility to be clear at this point, we do not intend to issue equity below NAV and certainly not unless it is accretive to our shareholders.
This is the equivalent of an insurance policy, which our shareholders have approved every year since we've been public.
Even though the economic outlook grows increasingly uncertain end market volatility persist we are confident in our proven strategy and approach to investing that has delivered strong risk adjusted returns for our shareholders throughout different economic environments.
We believe we have demonstrated a consistent ability to execute throughout the credit cycles, enabling T. C. P C to deliver for our shareholders.
So if economic growth and contraction.
It also makes us a reliable partner for our borrowers and further helps us to attract appealing investment opportunities.
And with that operator, please open the call for discussions.
Questions constantly.
If you would like to ask a question. Please press star followed by one of your telephone keypad.
So maybe a question press star followed by team.
And as a reminder, if you are using you.
Speakers.
Please remember to pick up your handset before asking your question.
Our first question comes from Robert Dodd with Raymond James. Please proceed.
Hi, guys.
One if I can go.
Toward obviously the company's function.
Yeah.
Well it was bumped up in the quarter. So do you.
Do you think how can.
Kind of what's the restructuring to come back.
Since you restructured it modal converted into equity and then effectively.
Hum.
So can you give us any thoughts on how at least to reposition and was restructured.
Yeah.
Thanks for that question.
[laughter] yeah.
Here, you're saying I'll try to add a little color I think the short answer is the restructuring we hope and from early indications may prove to be good timing.
This was a good business that had an.
An impact coming out of Covid that was tied to supply chain issues.
A fairly robust demand side for <unk>.
<unk> in new and used cars in particular.
And that you know essentially resulted in it being.
Able to mitigate it its value proposition, where you know they help dealers not create demand and differentiate themselves.
When that's that's more valuable as we came through so it was a good business, but really a challenged balance sheet.
Factors coming into this environment.
The business.
And as we think about restructuring.
You kind of went in different directions, a business environment improved for it Ironically in this environment, where you know what there is.
Inventory on our dealerships and the supply chain issues abated.
That helps them become more relevant again.
And the the trends are showing that the box and similarly, the balance sheet that was you know a challenge with something that we were able to do.
Part of the solution to fix so I don't know that it was too aggressive I think time will tell when unless when you say aggressive you mean in our favour I.
I do think that it was well timed and it was something that we.
To avoid doing by finding and working in conjunction with the company and its owners to a solution I think the nature of the restructuring being relatively quick and efficient.
After a number of other types of processes were in place does highlight the benefit of doing this when you're one of few lenders one of one you can do so much more efficiently.
So restructuring, but I think that you know.
Hopefully that where we're able to do is give them. It's just a running room in the capital structure and liquidity to achieve its highest value, especially as those demand factors and economic factors are moving back in its favor.
Got it got it got it thank you.
Additional color.
The other one.
Back on accrual now was at one <unk>.
I'll start with the full quarter and the partial quarter or just.
Yes.
And it was right at quarter end. So that there was no income recognized during Q1 for motto alert.
Got it. Thank you and then the other one on credit quality.
Uh huh.
Based on filled prepared remark.
The majority of companies kind of positive EBITDA, so presumably some of them obviously.
Okay.
Revenue business in Q1, but you mentioned that were underwritten on our cash flow.
Can you give us any color to that.
Is that EBITDA decline for whatever proportion of businesses is that new is that was that expected as a result of macro or idiosyncratic issues anything we should be watching out for in the rest of the portfolio.
Yeah.
Yeah. Thanks, Robert So I would say that you're right. It was the majority in and it's a meaningful majority of our cash flow thesis loans have seen EBITDA growth.
There are of course, some businesses our portfolio, which have been impacted by what the fed is doing and you know the fed's been very explicit about trying to slow growth.
And the inflationary environment has been quite good.
A meaningful and so not all companies are seeing EBITDA growth just the vast majority.
No.
Are we are we concerned at this point.
Feel like we have sufficient margins there in in these cash flow loans and.
You know just because they are they're seeing some either flat year over year or sequential EBITDA or in some cases down.
Most of these situations are areas where we're.
Terribly concerned where it hit our watch list.
Yeah.
Got it. Thank you that's it for me.
Thank you Robert Thank you for your question.
Yes.
Our next question comes from Christopher Nolan with Ladenburg Thalmann. Please begin.
Hey, guys.
Have you guys entered into any discussions with your banks providing.
Your facilities in terms of change of pets, we're treating terms.
Uh huh.
We we haven't needed to.
And neither have they approached us regarding that.
Yeah, and just for some context.
You know our business to even before the <unk>.
Teach pizza was public has been doing leverage loans and facilities for over two decades, So I think.
We try to think about.
The right type of structures flexibility et cetera.
So you know we're not on the wrong side of the banking discussions, but there have been no discussions to date.
Hey, consideration in terms of adding additional credit lines.
I think we are comfortable where we are in terms of the capital structure. Today I think we're always we're always in conversation with various providers.
For flexibility and additional sort of thinking about diversifying to.
On the capital structure.
So there'll always be consideration of way back when and if that makes sense.
But I would just emphasize the point that we feel very well.
Cover today, and I'm very appreciative of that.
Eventually work with being a good financing partners.
And we do have an accordion in some parts of it.
<unk> one thing we do.
Always look at it.
Continuing to add perhaps other banks to the to the lineup within their facilities.
And so that's a regular thing we do.
One of the things like Clinton less banking crisis was basically cut off the lines of credit.
And I'm, not saying that that's happening.
What's going to happen, but you know just sort of as a insurance policy.
With Blackrock apparent be able to backstop, if the we're seeing the worst and the banks are cutting off credit loan.
Yeah.
I think that's a question I will not answer for Blackrock.
I like my job here.
But I would say that you know when you go back through the prior crises.
The one thing I would say as a private credit assets have just held up very well I mean in bdcs.
Even though march to NAV.
Havent had.
Not dropped historically as much as other.
Credit you know or you know liquid asset classes I think there's a benefit to the lockup structure permanent capital nature.
There's a benefit to the way, we underwrite that allows us to keep a healthy portfolio and take protective actions I think our lenders do that historically.
<unk> seen our ability to protect their their capital.
So while I won't answer the question on the Blackrock.
Side of it I will say that historically, even in the worst crises. It hasnt. It wouldn't have been needed her husband wasn't needed and we take encouragement that that.
Kind of conductor business, the same way and hope for the same same type of Protection's going forward.
Sounds good thanks for taking my questions.
Thank you. Our next question comes from Ryan Lynch with <unk>. Please proceed.
Okay.
Hey, good morning, Thanks for taking my questions.
First one I had I know the deal opportunity environment. It is really strong today.
Just with the available capital being a little bit.
Limited out there.
Yeah, I think so.
Really high quality loans this quarter I would guess, but is there any point, where you guys looked at the balance sheet leverage and look to manage the level of deployment based on their your leverage range and are we getting to that point yet.
So let me answer it this way we have definitely we haven't given formal targets on our leverage range I think we've historically given some guidelines of where we're comfortable.
We absolutely look to maintain buffer.
And.
And the leverage facilities when we don't we don't use leverage as part of our investment decision, it's really a portfolio optimization tool.
I would say that the other thing we are very conscious of is maintaining the investment grade rating.
Have a frequent I think healthy dialogue with the rating agencies and so.
In the current environment, but you know a couple of things one is <unk>.
Given where we are underwriting I think you can see that from the current portfolio and the new deals.
Even the leverage we have is is.
It's a great environment on an unlevered basis, and the leverage I think is helpful.
But we are not going to push that in any way that compromises the balance sheet.
The ability to protect our portfolio or our investment grade rating.
And without giving formal guidance on a target range I'll leave it at that for.
Where we are levered today, and how we're thinking about operating in the current environment.
Okay, that's fair enough.
And then kind of.
Flipping back to put some of your prepared comments you kind of talked about with the current kind of many banking crisis, we have going on I think you said it will further reduce.
Willingness to lend to middle market companies I would love to just hear you.
I'll provide some more thoughts on two areas in regards to this one.
How much today or in the past.
Two years to actually competing with banks.
Neal so the extent that banks pull back that would obviously be a beneficiary to appear there are no meaningful competitors in Europe .
Based on what the here.
How if at all banks are really in the space that you're competing with for deals that youre actually couldnt portfolio number one.
And then secondly on the flip side.
If things do potentially pullback from Wendy.
Thank Mike Lee.
How do you think that impacts your portfolio companies or borrowers that may have additional lines of credit outside of your debt with thanks.
Yeah.
Thanks, Ryan So so I'll address the first part of the question.
We do compete on occasion.
Directly with with banks those are more the I'd say regional banks.
Who are.
Committing an underwriting, let's say loans of anywhere between two to three 400, maybe in terms of tranche size.
And so you know those.
Together their own solution and trying to syndicate that deal out.
So that's one part of the market and that is part of the market given that we compete with given our focus on the core middle market.
Then there's another part of the market, where the banks participate and that's on the larger cap direct lending side.
Clearly the 123 $4 billion a unit tranche deals that you're seeing now that some of the large cap direct lenders are or aren't focused on that is competing head on with what you know the large cap banks, what would otherwise be doing.
So I would say that.
For us the competition is more on the regional side.
You know the likes of SBB and first Republic, and so on you know those aren't banks that that typically.
In middle market.
Lending, but there is certainly others that do on the regional side.
<unk>.
And the fact that they are.
We expect them to be more constrained either for their own risk management or from a regulatory standpoint that we think will benefit us.
And even if those regional banks do come into market.
But we think it'll be perhaps they'll pull back on risks maybe be less aggressive on on on quantum or terms.
Or maybe it will want to do it on a best efforts basis, which obviously.
It's less reliable for a borrower in terms of execution and Thats, where our direct lending comes into play where we can provide certainty of execution.
And.
And we've done that for the better part of two decades now.
I'll try is the second part of the question I think you were asking about if they pulled back on.
Revolvers and liquidity and things of that sort.
How does that impact companies I think that.
If you think about what's happening with the banks over the last two decades. They there was an effort you know.
My former employer I was part of it as a learning experience to do what we do directly and we just.
Not built for that long term.
Type solution, but they did they did they were effective and we've partnered with a lot of regional banks and others on the short term AR revolvers and facilities and I think that's been a good place for them.
These are asset backed are very very well protected and.
Essentially swing lines, if you will.
And to the extent, we they pulled back from that business, which I think is really more of their core competency and a big part of their relationship Becker where companies.
I think they will like.
Many many cases in the past with financing markets.
Necessity will drive a creative solution and that may be something that we do as part of it maybe part of the other types of parties.
Right you know from where we sit right now the cost of capital for those solutions is below our targets it wouldn't be appropriate for this business unless that changes, but that doesn't mean there aren't.
Private market solutions, or some hybrid or something that comes up to the extent demand is there and there's a good place to obtain a risk.
Our reward type type financing opportunities and that's happened time and time again, I would imagine there'll be something like that that emerges. It's just too early to tell its also unclear where the banking sector ends up.
But I think that exiting that type of business would be a more wholesale change in and they are in their business model, which we don't see or anticipate or even hear about in the current environment.
Yeah, and I'll just add one of the one of the things we've seen them.
Due to some of the pullback, especially from the larger banks is that as our portfolio companies continue to grow.
Obviously, they're making tuck in acquisitions or.
They're growing their cashless tremendously and they at some point may be ripe for a refinancing by violent larger banks.
But given what's going on and we expect them to stay in our portfolio longer and and we can continue to finance them. You know given that we know that business really well and as you've seen as we've talked about quarter of.
In recent quarters.
Origination that we get out of our existing portfolio continues to be pretty high I think it was 45% over the last 12 months and that's partly due to to us the existing lenders providing that solution for the borrowers instead of them going out and getting cheaper cost of capital.
From from the banks and what would have been the case, one or two years ago.
Okay.
Understood I appreciate the time for that.
Thank you thanks Ryan.
Yes.
Your next question comes from Kevin folks JMP Securities. Please proceed.
Hi, Good morning, and thank you for taking my question. Just one question for me relating to Edmonton and you've obviously seen the headlines around the adverse impact that AI is having on the online education space. Some publicly traded education platforms are down more than 60% year to date.
If you could share your high level thoughts on the impact that AI is having on in medicine that <unk> business model. They are experiencing the same degree of disruption that other online education platforms are facing I am just trying to get a better understanding around the movement in fair value marks for the company and what the Atkins as well thanks.
Yeah, I can give you some perspective, because we've talked about it and then.
Time will tell but I think if you think about what had mentioned has successfully done in moving our business forward.
Sheathing overtime.
Over time, it's made a big push from going from analog to digital.
See that's where the market is going for Ed Tech.
They've done a very good job I think proactively going from broader based assessment and targeted content to much more personalized assessment and targeted content to move students forward from.
From a baseline from where they are to a baseline or ahead of it.
A big part of that.
Value proposition going forward is the ability to do that very proactively.
Target manner and not surprisingly some AI.
Type of technology is actually additive to that you know it gets it makes it a more robust function. So the product set will certainly incorporate that and it meant to them as a company I should let you know the CEO , who is exceptional and as field speak to a directly but has even before AI became kind of a topic of the day.
But if we're exploring incorporating that into their product set because that is where the market. Ultimately will go and we will benefit from but I think that makes it a better product not a less relevant products and that's one that I think will only enhance what they're doing it on a personalized basis with students.
How that ultimately rolls forward I think time will tell but from our point of view of the thinking at the company level.
They've been thinking about AI and incorporating it.
For for quite some time now.
And I haven't tracked the other online education performance I don't think that necessarily comparative businesses.
But at least from my perspective, it's something.
That would be additive to what they do and they certainly see that that way as well.
Okay I appreciate the insight Ross and congratulations on a nice quarter.
Thank you.
Yeah.
Thank you for your question.
The final question is medicine. So as a reminder, it is star one to ask question.
Yeah.
Okay. We appreciate your participation on today's call I would like to thank our team for all the continued hard work and dedication.
Just like to thank our shareholders and capital partners for their confidence and their continued support.
Thanks for joining us this concludes today's call.
Yeah.
That concludes today's conference call. Thank you all for your participation you may now disconnect your lines.
That concludes.