Q1 2024 Crescent Capital BDC Inc Earnings Call
Operator: Please stand by. Your program is about to begin. If you need assistance during today's program, please press star zero. Good day, everyone, and welcome to today's Crescent Capital BDC, Inc. first quarter earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad. Please note this call is being recorded, and it is now my pleasure to turn today's call over to Dan McMahon, Head of Investor Relations. Please go ahead.
Please standby your program is about to begin.
Operator: If you need assistance during todays program. Please press star zero.
Daniel McMahon: Good day, everyone and welcome to today's Crescent Capital BDC, Inc. First quarter earnings call.
Operator: At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session.
Daniel McMahon: You May register to ask a question at any time by pressing star one on your telephone keypad. Please note. This call is being recorded and it is now my pleasure to turn today's call over to Dan Mcmahon head of Investor Relations. Please go ahead.
Daniel McMahon: Good morning and welcome to Crescent Capital Bdc INC's first quarter and March 31, 2024 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.
Daniel McMahon: Good morning, and welcome to Crescent capital BDC Inc's first quarter ended March 31, 2024 earnings conference call.
Daniel McMahon: Please note that Crescent capital BDC, Inc. May be referred to as Sika Crescent BC or the company throughout the call.
Daniel McMahon: Before we begin I will start with some important reminders comments made over 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.
Daniel McMahon: Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainty. 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 filing. The company assumes no obligation to update any such forward-looking statement. Please also note that past performance and market information are not a guarantee of future results. Yesterday, after the market closed, the company issued its earnings press release for the first quarter and did on March 31st, 2024, and posted a presentation to the IR section of its website at crescentbdc.com.
Daniel McMahon: Putting those listed.
Daniel McMahon: Filings.
Daniel McMahon: Company assumes no obligation to update any such forward looking statements.
Daniel McMahon: Please also note that past performance or market information is not a guarantee of future results.
Daniel McMahon: Yesterday after the market closed the company issued its earnings press release for the first quarter ended March 31, 2024, and posted a presentation to the IR section of its website.
Daniel McMahon: DC Dot com.
Daniel McMahon: 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 CCAP's Chief Executive Officer, Jason Breaux, President Henry Chung, and Chief Financial Officer, Gerhard Lombard. With that, I'd now like to turn it over to... Thank you, Dan.
Daniel McMahon: Presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday the SEC.
Daniel McMahon: As a reminder, this call is being recorded for replay purposes.
Daniel McMahon: Speaking on today's call will be <unk>, Chief Executive Officer, Rob <unk>.
Henry Chung: Henry <unk> and.
Daniel McMahon: And Chief Financial Officer Cara lumbar.
Daniel McMahon: With that I'd now like to turn it over to Jason.
Jason A. Breaux: Dan, hello everyone, and thank you all for joining us today. We're very pleased to report another record quarter of earnings with continued strong credit performance across the portfolio. Net Investment Income, or NII, was $0.63 per share, up $0.02 from last quarter. Our NII has increased in each of the past five quarters, resulting in record NII for the fifth consecutive quarter.
Jason A. Breaux: Thank you Dan Hello, everyone and thank you all for joining us today we're.
Jason A. Breaux: We're very pleased to report another record quarter of earnings with continued strong credit performance across the portfolio.
Jason A. Breaux: Net investment income or NII was <unk> 63 per share up <unk> <unk> from last quarter.
Jason A. Breaux: Our NII has increased in each of the past five quarters, resulting in record NII for the fifth consecutive quarter.
Jason A. Breaux: This quarter's earnings translated into an annualized NII return on equity of 12.6%. With our earnings well in excess of the regular dividend, our board has declared a supplemental dividend for the first quarter of 11 cents per share, which when coupled with our previously declared regular dividend of 41 cents per share equates to a 10.3% annualized dividend yield on March 31, 2024 now. We've demonstrated meaningful earnings in excess of our base dividend over the last several quarters.
Jason A. Breaux: This quarter's earnings translated into an annualized NII return on equity of 12, 6%.
Jason A. Breaux: With our earnings well in excess of the regular dividend. Our board has declared a supplemental dividend for the first quarter of <unk> 11 per share.
Jason A. Breaux: Which when coupled with our previously declared regular dividend of <unk> 41 per share equates to a 10, 3% annualized dividend yield on March 31, 2020 for NAV.
Jason A. Breaux: We've demonstrated meaningful earnings in excess of our base dividend over the last several quarters.
Jason A. Breaux: In response, we implemented a supplemental dividend policy in the first quarter of 2023 to share additional earnings upside with our stockholders in the form of an increased distribution. This was in light of our view that earning the base dividend has always been a key part of the CCAP story. We've never cut it, and we've paid the current base dividend of 41 cents for 22 consecutive quarters.
Jason A. Breaux: In response, we implemented a supplemental dividend policy in the first quarter of 2023 to share additional earnings upside with our stockholders in the form of increased distributions.
Jason A. Breaux: This was in light of our view that earn the base dividend has always been a key part of the <unk> story.
Jason A. Breaux: We've never cut it and we've paid the current base dividend of <unk> 41 for 22 consecutive quarters.
Jason A. Breaux: Reflecting confidence in both the sustainability of CCAP's NII and the continued strong credit performance of our portfolio, we are pleased to announce that our board recently approved a one cent increase to our regular dividends, increasing the second quarter regular dividend to $0.42 per share. What underpins this increase in our base dividend is our conviction in CCAP's longer-term earnings power. I reviewed firsthand the impact of a higher rate environment on our portfolio and the origination opportunities in our private credit pipeline.
Jason A. Breaux: Reflecting confidence in both the sustainability of <unk> NII and the continued strong credit performance of our portfolio.
Jason A. Breaux: We are pleased to announce that our board recently approved a <unk> <unk> increase to our regular dividend increasing.
Jason A. Breaux: Increasing the second quarter regular dividend to <unk> 42 per share.
Jason A. Breaux: What underpins this increase in our base dividend is our conviction and <unk> longer term earnings power.
Jason A. Breaux: Having reviewed firsthand the impact of a higher rate environment on our portfolio and the origination opportunities and our private credit pipeline.
Jason A. Breaux: We are bullish on CCAP's longer-term ability to continue its track record of earning its regular dividends. We also note that we have benefited from managing and monitoring the loans that we acquired from First Eagle BDC for over a year now, and believe that the earnings from the current assets, as well as the loans that we expect to rotate into, will continue to be attractive for CCAP's longer-term earnings profile. The strength of our earnings and the positive valuation momentum in our portfolio also led to growth in our net asset value, which increased 1.2% in the quarter and 4.6% year over year to $20.28 per share, which is the highest it has been since June 2022. Net income per share was $0.76 in the first quarter, corresponding to an annualized ROE of 15.2%. Now, let's shift gears.
Jason A. Breaux: We are bullish on C caps longer term ability to continue its track record of earning its regular dividend.
Jason A. Breaux: We also note that we have benefited from managing and monitoring the loans that we acquired from first Eagle BDC for over a year now and believe that the earnings from the current assets as well as the loans that we expect to rotate into we will continue to be attractive for <unk> longer term earnings profile.
Jason A. Breaux: The strength of our earnings and the positive valuation momentum in our portfolio also led to growth in our net asset value.
Jason A. Breaux: Which increased one 2% in the quarter and four 6% year over year to $20 28 per share.
Jason A. Breaux: Which is the highest it has been since June 2022.
Jason A. Breaux: Net income per share was <unk> 76 in the first quarter.
Jason A. Breaux: Corresponding to an annualized ROE of 15, 2%.
Speaker Change: Let's shift gears.
Jason A. Breaux: Please turn to slides 13 and 14 of the presentation, which highlight certain characteristics of our portfolio. We ended the quarter with approximately $1.6 billion of investments at fair value across a highly diversified portfolio of 183 companies, with an average investment size of approximately 0.5% of the total portfolio. We've deliberately maintained an investment portfolio that consists primarily of Senior Secured First Lien and Unitronch First Lien Loans. Collectively representing 90% of the portfolio at fair value at quarter end, up modestly from the prior quarter, this speaks to our continued focus on maintaining a defensively positioned portfolio with greater downside protection and lower risk of loss compared to portfolios with greater second lien and subordinated debt exposure. We have focused our investing efforts on non-cyclical industries with high free cash flow characteristics and remain well diversified across 20 broad industry categories.
Jason A. Breaux: Please turn to slides 13, and 14 of the presentation, which highlights certain characteristics of our portfolio.
Jason A. Breaux: We ended the quarter with approximately $1 6 billion of investments at fair value across a highly diversified portfolio of 183 companies with an average investment size of approximately <unk>, 5% of the total portfolio.
Jason A. Breaux: We have deliberately maintained an investment portfolio that consists primarily of senior secured first lien and Unitranche first lien loans.
Jason A. Breaux: Collectively representing 90% of the portfolio at fair value at quarter end up modestly from the prior quarter.
Jason A. Breaux: This speaks to our continued focus on maintaining a defensively positioned portfolio.
Jason A. Breaux: With greater downside protection and lower risk of loss compared to portfolios with greater second lien and subordinated debt exposure.
Jason A. Breaux: We have focused our investing efforts on non cyclical industries with high free cash flow characteristics and remained well diversified across 20 broad industry categorizations.
Henry Chung: Our investments are almost entirely supported by well-capitalized private equity sponsors, with 98% of our debt portfolio in sponsor-backed companies as of quarter end. We've been pleased with the fundamental performance of our portfolio, as indicated by our performance ratings and non-accrual levels. Our weighted average portfolio grade of 2.1 remained stable quarter over quarter. And on slide 17, you will see that the percentage of risk-rated 1 and 2 investments, the highest ratings our portfolio companies can receive, accounted for 89% of the portfolio at fair value, an improvement from 87% at year end.
Jason A. Breaux: Our investments are almost entirely supported by well capitalized private equity sponsors with 98% of our debt portfolio and sponsor backed companies as of quarter end.
Henry Chung: We've been pleased with the fundamental performance of our portfolio as indicated by our performance ratings and non accrual levels.
Henry Chung: Our weighted average portfolio grade of two one remained stable quarter over quarter.
Henry Chung: And on Slide 17, you will see that the percentage of risk rated one and two investments the highest ratings our portfolio companies can receive.
Henry Chung: Accounted for 89% of the portfolio at fair value and improvement from 87% at year end.
Henry Chung: At quarter end, we had investments in seven portfolio companies on non-accrual status, representing 1.6% and 0.9% of our total debt investments at cost and fair value, respectively. This compares to nine portfolio companies on non-accrual status, representing 2.0% of total debt investments that cost as of year end, as our position in Matilda Jane, our first eagle name, was realized above our acquired cost base, and Integro was removed from non As previously noted, we are pleased to declare a supplemental dividend of $0.11 per share for the first quarter, payable on June 17.
Henry Chung: As of quarter end, we had investments in seven portfolio companies on nonaccrual status, representing one 6% and 0.9% of our total debt investments at cost and fair value respectively.
Henry Chung: This compares to nine portfolio companies on nonaccrual status, representing 2.0% of total debt investments at cost as of year end as our position in Matilda Jane Ah first Eagle name was realized above our acquired cost basis.
Henry Chung: An integral was removed from non accrual status.
Henry Chung: As previously noted we are pleased to declare a supplemental dividend of <unk> 11 per share for the first quarter payable on June 17.
Henry Chung: Our board has also declared a regular dividend of $0.42 per share for the second quarter, payable on July 15, 2024. I'd now like to turn it over to Henry to discuss the market, our Q1 investment activity, and the portfolio.
Henry Chung: Our board has also declared a regular dividend of <unk> 42 per share for the second quarter payable on July 15 2024.
Henry Chung: I'd now like to turn it over to Henry to discuss the market, our Q1 investment activity and the portfolio Henry.
Henry Chung: Jason, in terms of the market, first quarter direct lending volume was down nearly 30% from the fourth quarter, driven primarily by lower LBO and M&A activity. The majority of activity came from refinancings, which represented 36% of overall activity in the first quarter, much of which was in the upper-middle market for Brawley Syndicated Loan Arrangers and other upper-middle market focused direct lenders competing for transactions. March LBO volumes, however, were at their highest level since November and almost double February's total.
Henry Chung: Thanks, Jason in terms of the market first quarter direct lending volume was down nearly 30% from the fourth quarter, driven primarily by lower LBO and M&A activity.
Henry Chung: The majority of activity came from refinancings, which represented 36% of overall activity in the first quarter much of which was in the upper middle market or broadly syndicated loan arrangers and upper mid market focused direct lenders competed for transactions.
Henry Chung: March LBO volumes, however were at their highest level since November and almost double February total.
Henry Chung: As a result of this momentum, a stable economy, a strong private credit market, and a significant backlog of transactions that sponsors are holding, we are optimistic that we will see a pickup in LBO volume through the remainder of the year. And while the syndicated markets are open, we believe the direct lending market remains a market of choice for sponsors in the lower and core middle market, given the benefits of the direct lending expertise offered by managers like Crescent, including speed and certainty of execution and flexibility around the ability to craft bespoke capital structures.
Henry Chung: As a result of this momentum a stable economy, a strong private credit market and a significant backlog of transactions that sponsors are holding we are optimistic that we will see a pickup in LBO volume through the remainder of the year.
Henry Chung: And while the syndicated markets are open we believe the direct lending market remains in a market of choice for sponsors in the lower in core middle market given the benefits of the direct lending expertise offered by managers at crescent, including speed and certainty of execution.
Henry Chung: Flexibility around the ability to craft bespoke capital structures.
Henry Chung: Please turn to slide 15, where we highlight our recent activities. As you can see on the left-hand side of the page, gross deployment in the first quarter totaled $74 million, 95% of which was in senior secured first lien and unit tranche investments. During the quarter, we closed seven new platform investments, totaling $43 million, with the remaining $31 million coming from incremental investments in our existing portfolio company. Incremental investment as a percentage of overall activity was elevated in Q1 compared to recent quarters as we've seen higher levels of opportunistic refinancing and add-on opportunities within our existing borrower universe.
Henry Chung: Please turn to slide 15, where we highlight our recent activity.
Henry Chung: As you can see on the left hand side of the page gross deployment in the first quarter totaled $74 million, 95% of which was in senior secured first lien and Unitranche investments.
Henry Chung: During the quarter, we closed seven new platform investments totaling $43 million with the remaining $31 million coming from incremental investments in our existing portfolio of companies incremental.
Henry Chung: Incremental investments as a percentage of overall activity was elevated in Q1 compared to recent quarters as we've seen higher levels of opportunistic refinancing and add on opportunities within our existing borrower universe.
Henry Chung: This provides an ongoing opportunity for us to make incremental investments in existing, well-performing companies seeking to grow via the pursuit of accretive M&A. $74 million in gross deployment compares to approximately $98 million in aggregate exits, sales, and repayments.
Henry Chung: This provided ongoing opportunity set for us to make incremental investments in existing well performing companies seeking to grow via the pursuit of accretive M&A.
Henry Chung: $74 million in gross deployment compares to approximately $98 million in aggregate exits sales and repayments.
Henry Chung: The new investments during the first quarter were loans to private equity-backed companies with silver floors, attractive fees, and a weighted average spread of approximately 600 basis points. We continue to back well-capitalized borrowers with significant equity cushions, and the weighted average loan to value of our new investments for the quarter was 40%. Turning back to the broader portfolio, please flip to slide 16. You can see that the weighted average yield of our income-producing securities at cost remained flat quarter over quarter at 12.3% and is up 50 basis points year over year. It is worth noting that for the first time, this metric, represented by the dark blue line at the top of the chart, includes the impact of income-producing equity investment.
Henry Chung: The new investments during the first quarter were loans to private equity backed companies with silver floors attractive fees and a weighted average spread of approximately 600 basis points.
Henry Chung: We continue to back well capitalized borrowers with significant equity cushions and the weighted average loan to value of our new investments for the quarter was 40%.
Henry Chung: Turning back to the broader portfolio. Please flip to slide 16.
Henry Chung: You can see that the weighted average yield of our income producing securities at cost remained flat quarter over quarter at 12, 3% and is up 50 basis points year over year. It.
Henry Chung: It is worth noting that for the first time. This metric represented by the dark Blue line at the top of the chart includes the impact of income producing equity investments.
Henry Chung: This includes dividends from the Logan Joint Venture as well as our partnership interest in GACP2 and WhiteHawk. Prior period yield figures have been retroactively updated for consistency. We believe that this update provides a more comprehensive view of expected near-term investment income from CCAP's portfolio. As of December 31st, 98% of our debt investments at fair value were floating rate with a weighted average floor of 80 basins, compared to our 65% floating rate liability structure based on debt drawn with 0% floors.
Henry Chung: This includes dividends from the Logan joint venture as well as our partnership interest in <unk> and White Hawk.
Henry Chung: Prior period yield figures had been retroactively updated for consistency.
Henry Chung: We believe that this update provides a more comprehensive view of expected near term investment income from <unk> portfolio.
Henry Chung: As of December 31, 98% of our debt investments at fair value were floating rate with a weighted average floor of 80 basis points, which compares to our 65% floating rate liability structure based on debt drawn with zero percent floors.
Henry Chung: Overall, our investment portfolio continues to perform well, with strong year-over-year weighted average revenue and EBITDA growth. That being said, we have continued to closely monitor the impact of rising borrowing costs on our portfolio companies. The weighted average interest coverage of the companies in our investment portfolio at quarter end improved from 1.7 times at year end to 1.8 times at quarter end. As a reminder, this calculation is based on the latest annualized base rates as of each respective quarter.
Henry Chung: Overall, our investment portfolio continues to perform well with strong year over year weighted average revenue and EBITDA growth.
Henry Chung: That being said we are continuing to closely monitor the impact of rising borrowing cost on our portfolio companies.
Henry Chung: Weighted average interest coverage of the companies in our investment portfolio at quarter end improved from one seven times at year end to one eight times as of quarter end.
Henry Chung: As a reminder, this calculation is based on the latest annualized base rates as of each respective quarter.
Gerhard Lombard: We also continue to closely monitor how our portfolio companies are managing fixed charges. Our analysis demonstrates that our portfolio companies, in the aggregate, are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity. As expected, we saw a modest increase in aggregate revolver utilization during the first quarter, with approximately 56% of aggregate revolver capacity available across the portfolio at quarter end, which is more than ample in our view.
Henry Chung: We also continue to closely monitor how our portfolio companies are managing fixed charges.
Gerhard Lombard: Our analysis demonstrates that our portfolio companies in the aggregate are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity.
Gerhard Lombard: As expected we saw a modest increase in aggregate revolver utilization during the first quarter with approximately 56% of aggregate revolver capacity available across the portfolio as of quarter end, which is more than ample in our view.
Gerhard Lombard: The strength of our portfolio continues to benefit from the substantial amount of equity invested in our company. Most of it is applied by large and well-established private equity firms with whom we have long-standing relationships and have partnered in multiple transactions. And we note that the weighted average loan to value in the portfolio at time of underwriting is approximately 41%. With that, I will now turn it over to Gerhard.
Gerhard Lombard: The strength of our portfolio continues to benefit from the substantial amount of equity invested in our company's most of its applied by large and well established private equity firms with whom we have long standing relationships and our partner within multiple transactions and we note that the weighted average loan to value of the portfolio at a time to underwrite is approximately 41%.
Gerhard Lombard: With that I will now turn it over to Gerard.
Gerhard Lombard: Thanks, Henry, and hello everyone. Our net investment income per share of $0.63 for the first quarter of 2024 compares to $0.61 per share for the prior quarter and $0.54 per share for the first quarter of 2024. Total investment income of $50.4 million for the first quarter, the highest quarterly figure we've reported since inception, compares to $50.0 million for the prior quarter. Recurring yield related income was flat quarter over quarter at $47.8 million and accounted for approximately 95% of this quarter's total investment income. Thick income continues to represent a modest portion of our revenue, 3% of total investment income, which compares favorably to the BDC peer group. However, we remain highly sensitive to PIC income, particularly in a higher-for-longer rate environment.
Gerhard Lombard: Thanks, Henry and Hello, everyone.
Gerhard Lombard: Net investment income per share of <unk> 63 for the first quarter of 2024 compares to <unk> 61 per share for the prior quarter and 54 per share for the first quarter of 2023.
Gerhard Lombard: Total investment income of $50 4 million for the first quarter, the highest quarterly figure we've reported since inception.
Gerhard Lombard: Compared to the 50.0 million for the prior quarter.
Gerhard Lombard: Recurring yield related income was flat quarter over quarter at $47 8 million.
Gerhard Lombard: And accounted for approximately 95% of this quarters total investment income.
Gerhard Lombard: Pik income continues to represent a modest portion of our revenue 3% of total investment income, which compares favorably to the BDC peer group.
Gerhard Lombard: We remain highly sensitive to pick income, particularly in a higher for longer rate environment.
Gerhard Lombard: What we consider non-recurring investment income, which consists primarily of accelerated amortization, fee income, and common stock dividends, increased approximately half a million dollars, quarter over quarter, from 2.1 to 2.6 million, driven primarily by two large realizations and an increase in structuring fees. While we expect some level of non-recurring or transactional investment income each quarter, the non-recurring investment income over the last two quarters was unusually high, exceeding $2 million in each of those two quarters.
Gerhard Lombard: What we consider nonrecurring investment income, which consists primarily of accelerated amortization fee income and common stock dividends.
Gerhard Lombard: Increased approximately half a million dollars quarter over quarter from $2, one to $2 6 million.
Gerhard Lombard: Driven primarily by two large realizations and an increase in structuring fees, while we expect some level of nonrecurring or transactional investment income each quarter on nonrecurring investment income over the last two quarters was unusually high exceeding $2 million in each of those two quarters.
Gerhard Lombard: Our gap earnings per share, or net income, for the first quarter of 2024 was $0.76. This was primarily the result of net investment income outpacing the regular and supplemental dividends, coupled with 13 cents per share of net unrealized depreciation.
Gerhard Lombard: Our GAAP earnings per share or net income for the first quarter of 2024 was <unk> 76.
Gerhard Lombard: This was primarily the result of net investment income outpacing the regular in supplemental dividends, coupled with <unk> 13 per share of net unrealized depreciation.
Gerhard Lombard: As of March 31st, our stockholders equity was $752 million, resulting in a net asset value per share of $20.28 as compared to $743,020.04 per share last quarter. Now, let's shift to our capitalization and liquidity. I'm on slide 19.
Gerhard Lombard: As of March 31, our stockholders' equity was $752 million.
Gerhard Lombard: Resulting in net asset value per share of $20 28 at.
Gerhard Lombard: As compared to $743 million or $20 <unk> per share last quarter.
Gerhard Lombard: Now, let's shift to our capitalization and liquidity I'm on slide 19.
Gerhard Lombard: We continue to maintain a conservative mindset toward both balance sheet liquidity and BDC leverage, maintaining the company with a full economic cycle mentality. While this starts with our underwriting of new investment opportunities, it also applies to how we manage CCAP's capitalization and liquidity. As of March 31, our debt to equity ratio was 1.11 times, down from 1.15 times in the prior quarter. Our liquidity position remains strong with $344 million of undrawn capacity subject to leverage, the borrowing base, and other restrictions. $32 million in cash and cash equivalents at quarter end. The weighted average stated interest rate on our total borrowings was 6.97% as of quarter end.
Gerhard Lombard: We continue to maintain a conservative mindset to both balance sheet liquidity and BDC leverage maintaining the company with a full economic cycle mentality.
Gerhard Lombard: While this starts with our underwriting of new investment opportunities. It also applies to how we manage C caps capitalization and liquidity.
Gerhard Lombard: As of March 31, our debt to equity ratio was 111 times down from 1.15 times in the prior quarter.
Gerhard Lombard: Our liquidity position remains strong with $344 million of Undrawn capacity subject to leverage borrowing base and other restrictions and $32 million in cash and cash equivalents as of quarter end.
Gerhard Lombard: The weighted average stated interest rate on our total borrowings was 697% as of quarter end.
Gerhard Lombard: And as we've highlighted on the right-hand side of the slide, there are no death maturities until 2026. As Jason noted, for the second quarter of 2024, our board increased our regular dividend to $0.42 per share, which we are well positioned to cover over the longer term. As a point of clarification, we will continue to declare and pay quarterly supplemental dividends subject to approval by the Board to enhance stockholder distribution. With that, I'd like to turn it back to Jason for closing remarks.
Gerhard Lombard: And as we've highlighted on the right hand side of the slide there are no debt maturities until 2026.
Gerhard Lombard: As Jason noted for the second quarter of 2024, our board increased our regular dividend to <unk> 42 per share, which we are well positioned to cover over the longer term.
Gerhard Lombard: As a point of clarification, we will continue to declare and pay quarterly supplemental dividend subject to approval by the board to enhance stockholder distributions.
Gerhard Lombard: With that I'd like to turn it back to Jason for closing remarks.
Jason: Thanks, Gary Hart.
Jason A. Breaux: In closing, we are pleased with this quarter's strong financial results and the performance of our investment portfolio. We've continued to maintain a defensively positioned portfolio that delivers a stable NAV profile with consistent dividend coverage. The announced increase in our base dividend highlights our conviction in CCAP's long-term earnings power. As we look forward over the remainder of 2024, We remain confident in the continued strong performance of CCAP's portfolio and believe we are on track to deliver attractive risk-adjusted returns to our stockholders.
Jason: In closing we are pleased with this quarter's strong financial results and the performance of our investment portfolio.
Jason A. Breaux: We've continued to maintain a defensively positioned portfolio that delivers a stable NAV profile with consistent dividend coverage and the announced increase in our base dividend highlights our conviction in <unk> long term earnings power.
Jason A. Breaux: As we look forward over the remainder of 2024.
Jason A. Breaux: We remain confident in the continued strong performance of <unk> portfolio and believe we are on track to deliver attractive risk adjusted returns to our stockholders.
Jason A. Breaux: Finally, in just over a month, on June 11th, we will be hosting our inaugural Analyst and Investor Day. We look forward to speaking with many of you then. And with that operator, we can open the line for questions. Thank you.
Jason A. Breaux: Finally in just over a month on June 11th we will be hosting our inaugural analyst and Investor day.
Jason A. Breaux: We look forward to speaking with many of you then and with that operator, we can open the line for questions.
Operator: Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad now. You may remove yourself from the queue at any time by pressing star 2 and once again that is star and 1 if you'd like to ask a question. We'll pause for just a moment to allow questions to queue. And just a reminder, that was Star and one for any questions and or comments. And our first question comes from Paul Johnson with KBW.
Speaker Change: Thank you at this time I would like to ask a question. Please press the star and one on your telephone keypad now.
Paul Conrad Johnson: You may remove yourself from the queue at any time by pressing star two and once again that is star one if you'd like to ask a question.
Operator: We'll pause for just a moment to allow questions to queue.
Operator: And just a reminder, that was star and one for any questions or comments and our first question comes from Paul Johnson with <unk>.
Paul Conrad Johnson: Good afternoon, guys. Thanks for taking the questions.
Paul Conrad Johnson: Hey, good afternoon, guys. Thanks for taking my questions.
Paul Conrad Johnson: Congratulations on a good quarter. When you had average yield, this quarter was obviously pretty stable, as was the spread. I was just kind of wondering if you could speak to that in the market, you know, in your portfolio and kind of what you're seeing in the market.
Paul Conrad Johnson: Good quarter.
Paul Conrad Johnson: Weighted average yield this quarter was obviously quite stable as was the spread.
Paul Conrad Johnson: Wondering if you can kind of speak to that in the market.
Paul Conrad Johnson: In your portfolio and kind of what Youre seeing.
Paul Conrad Johnson: In the market.
Jason A. Breaux: Hey, Paul. It's Jason.
Speaker Change: Hey, Paul.
Jason: Jason Thanks for thanks.
Jason: Thanks for the question.
Jason A. Breaux: Thanks for the question. You know, I think we're pretty pleased with where we've been able to price new opportunities in this environment. Henry talked a little bit about the competition that we're seeing here in 24, uh... for deals we've certainly you know at lower volumes, which is driving uh... driven pricing tighter as well as the presence of the BSL market again, which has certainly been active here in 24.
Jason: I think we're pretty pleased with where we've been able to price new opportunities in this environment and we talked a little bit about.
Jason A. Breaux: The competition that we're seeing.
Jason A. Breaux: Here in 'twenty four.
Jason A. Breaux: For deals, we've certainly had lower volumes, which has driven driven pricing tighter as well as the.
Jason A. Breaux: The presence of the BSL market again, which has certainly been active here in 'twenty four.
Jason A. Breaux: That's largely, that's largely been focused on the upper mid market, where they're competing with some of the larger private credit arrangers in deals that, generally, we would characterize as in excess of a billion dollars in deal size. I think if I were to sort of think about pricing over the last couple of quarters, uh... the upper mid-market, I would say that on the uni side, pricing has come down generally 25 to 50 basis points, probably from a 525 type spread to 500 and even in some cases 475.
Jason A. Breaux: That's largely that's largely been focused on.
Jason A. Breaux: The upper mid market.
Jason A. Breaux: Where they're competing with some of the larger private credit Arrangers and deals that generally we would characterize as an excess of $1 billion.
Jason A. Breaux: Deal size.
Jason A. Breaux: I think if I were to sort of think about pricing over the last couple of quarters.
Jason A. Breaux: In the upper mid market I would say that on the union side pricing has come down.
Jason A. Breaux: Generally 25 to 50 basis points.
Jason A. Breaux: Probably from a $5 25 type spread to 500 and even in some cases $4 75.
Jason A. Breaux: And then in the core and lower middle market, which is where we at Crescent generally focus, I'd say, pricing over the same period of time. It's probably come in about 25-bits from a $5.75 to a $5.50 deal or from a $5.50 deal to a $5.25 deal.
Jason A. Breaux: Then in the core and lower middle market, which is where.
Jason A. Breaux: We at Crescent generally focus I'd say pricing over the same period of time, it's probably come in about 25 bps.
Jason A. Breaux: From $5 75 to $5 50 deal or from a $5 50 deal to a to a 525 deal.
Paul Conrad Johnson: Thanks for that; that's really good color. And then, kind of just on the marks for the quarter, Matt, that's up nicely. Was that just kind of general portfolio kind of marks probably across your book, or is there anything specific driving that?
Speaker Change: Thanks, Thats really good color.
Paul Conrad Johnson: And then.
Paul Conrad Johnson: Just on the marks for the quarter.
Paul Conrad Johnson: No.
Paul Conrad Johnson: <unk> nicely.
Paul Conrad Johnson: Was that just kind of general portfolio marks broadly across your book or is that.
Paul Conrad Johnson: Anything specific driving that.
Paul Conrad Johnson: Nonaccrual resolutions or anything like that.
Matt: Yeah, Hey, good morning. This is this is getting hard I can take that.
Gerhard Lombard: Hey, good morning. This is Gerhard. I can take that. There's nothing individually material.
Gerhard Lombard: We'd really link that increase in marks to what Jason said a minute ago, which is a tightening of the spreads.
Gerhard Lombard: Nothing.
Gerhard Lombard: Individually material.
Gerhard Lombard: Really link that increase in marks to what Jason said, a minute ago, which is tightening of spreads.
Gerhard Lombard: Got it thanks.
Paul Conrad Johnson: And then last one for me, just, you know, on your comment on the monetary income being a little bit higher in the last two quarters, by about 2 million or so. I guess just kind of how should we think about that going forward? Would you expect that to? Basically, not to really, basically not get, you know, another 2 million or so, you know, kind of going forward. And is that, you know, is that kind of non-recurring income, is that factored into your kind of weighted average?
Speaker Change: And then last one for me just on your comment on the on the nonrecurring as having a little bit higher in the last two quarters.
Paul Conrad Johnson: By about $2 million or so.
Paul Conrad Johnson: I guess, just kind of how should we think about that going forward would you expect that.
Paul Conrad Johnson: Basically not separately basically not yet another $2 million or so kind of going forward.
Paul Conrad Johnson: And is that is that kind of nonrecurring income is that factored into your kind of weighted average yield calculation or the for the quarter.
Gerhard Lombard: Yeah, yeah, thanks. Maybe we could take those in reverse.
Speaker Change: Yes, I think maybe take take those in reverse the second part we generally do not include the non incur nonrecurring income in our yield calculation. So so.
Speaker Change: So that would be the <unk>.
Speaker Change: Yield the yield calculus recurring income only.
Gerhard Lombard: Including OID.
Gerhard Lombard: The second part, we generally do not include the non-recurring income, or non-recurring income, in our yield calculation. So, that would be, you know, the yield calculation is recurring income only, including OID. Regarding the first part of your question, it is obviously difficult to project non-recurring income because the two highest drivers are accelerated OID and transactional fee income. And there is just an inherent level of uncertainty or volatility in those numbers quarter over quarter.
Gerhard Lombard: Regarding the first part of your question. It is obviously difficult to project nonrecurring income because the two highest drivers are accelerated OID and transactional fee income and there's just an inherent level of uncertainty or volatility in those numbers quarter over quarter I will say.
Gerhard Lombard: I will say that 95 plus percent of our total revenue is recurring, um... Our historical range of non-recurring has been between about $500,000 and over $2 million, which you heard in the prepared remarks, so while we don't provide forward-looking guidance on NII, as we look at Q2 today, while we expect some level of non-recurring income, we don't believe it will be quite as high as in Q1 of 2024 and Q4 of last year.
Gerhard Lombard: That 95% of our total revenue is recurring.
Gerhard Lombard: Our historical range of nonrecurring has been between about 500000 and over $2 million, which you had noted in the prepared remarks.
Gerhard Lombard: While we don't provide forward looking guidance on NII as we look at Q2 today.
Gerhard Lombard: We expect some level of nonrecurring income we don't believe it will be quite as high as in Q1 of 24 and in Q4 of last year.
Speaker Change: Got it.
Paul Conrad Johnson: I appreciate that. That's helpful. Talk to me. Thanks again. Thanks a lot, Paul.
Speaker Change: That's helpful. That's all for me Thanks again.
Speaker Change: Thanks, a lot Paul.
Operator: And just a reminder, if you'd like to ask a question, that was star and one on your telephone keypad now. And what's more, that was star and one for any questions or comments. At this time, I'm currently showing no questions in the queue. I'll now turn it back over to management for any closing remarks. Thanks, sir.
Paul Conrad Johnson: And just a reminder, if you'd like to ask a question that was star and one on your telephone keypad now.
Operator: And was one that was starting one for any questions Andrew or comments.
Speaker Change: At this time I'm currently showing no questions in the queue I'll now turn it back over to management for any closing remarks.
Jason A. Breaux: Thanks very much, everyone. We appreciate your time and attention and support of CCAP. We look forward to speaking with you next quarter and also at the Analyst and Investor Day in the interim.
Operator: This does conclude today's program. Thank you for your participation. You may now disconnect.
Speaker Change: Thanks, very much everyone. We appreciate your time and attention and.
Operator: In support of C cap, we look forward to speaking with you next quarter and also at the analyst and Investor day in the interim.
Speaker Change: Thank you.
Operator: This does conclude today's program. Thank you for your participation you may now disconnect.
Operator: Austin Investor Day and the Interrupt.
Operator: Hosted an investor day in the interim.
Speaker Change: Thank you.