Investcorp Credit Management BDC Inc (ICMB) 2025 Q1 法說會逐字稿

Good afternoon, and thank you for joining today's Investcorp Credit Management BDC Incorporated scheduled earnings release for the quarter ended September 30, 2024.

下午好，感謝您參加今天的 Investcorp Credit Management BDC Incorporated 截至 2024 年 9 月 30 日的季度收益發布會。

It is now my pleasure to turn the floor over to Walter Tsin, CFO.

現在我很高興將發言權交給財務長 Walter Tsin。

Thank you, operator. Welcome, everyone, to Investcorp Credit Management BDC quarter ended September 30, 2024, earnings call. I am joined by Suhail Shaikh, President and Chief Executive Officer of the company.

謝謝您，接線生。歡迎大家參加 Investcorp Credit Management BDC 截至 2024 年 9 月 30 日的季度財報電話會議。與我一同出席的還有該公司總裁兼執行長蘇海爾·謝赫 (Suhail Shaikh)。

I would like to remind everyone that today's call is being recorded and that this call is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of this call will be available by visiting our Investor Relations page on our website at icmbdc.com.

我想提醒大家，今天的通話正在錄音，而本次通話屬於 Investcorp Credit Management BDC 的財產。嚴禁以任何形式未經授權播放本次通話。您可以透過造訪我們網站 icmbdc.com 的投資者關係頁面來收聽本次電話會議的音訊重播。

I would also like to call your attention to the Safe Harbor disclosure in 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 our Investor Relations page on our website.

我還想提請大家注意我們新聞稿中有關前瞻性資訊的安全港披露，並提醒大家，今天的電話會議可能包括前瞻性陳述和預測。實際結果可能與這些預測有重大差異。除非法律要求，我們不會更新前瞻性陳述。要獲取我們最新的 SEC 文件的副本，請訪問我們網站上的投資者關係頁面。

The format for today's call is as follows: Suhail will provide an overall business and portfolio summary, and I will then provide an overview of our results, summarizing the financials followed by a Q&A.

今天電話會議的格式如下：Suhail 將提供整體業務和投資組合摘要，然後我將概述我們的業績，總結財務狀況，然後進行問答。

At this time, I would like to turn the call over to Suhail.

現在，我想將電話轉給蘇海爾。

Thanks, Walt, and thank you to everyone for joining us today. I'm pleased to announce that we delivered a strong quarter, reflecting our focus on maintaining a resilient portfolio and capitalizing on selective opportunities in a challenging market environment. Despite economic uncertainties, we are well positioned to navigate challenges and consistently deliver value to our shareholders. Our net asset value rose by $0.34 per share to $5.55, up from $5.21 as of the quarter ended June 30, 2024. The increase was primarily driven by higher net investment income, unrealized gain on investments from mark-to-market adjustments, and solid credit performance across our portfolio.

謝謝，華特，也謝謝大家今天的參加。我很高興地宣布，我們本季業績表現強勁，這反映了我們專注於維持穩健的投資組合，並在充滿挑戰的市場環境中抓住選擇性機會。儘管存在經濟不確定性，我們仍有能力應對挑戰並持續為股東創造價值。我們的淨資產價值從截至 2024 年 6 月 30 日的季度的 5.21 美元每股上漲 0.34 美元至 5.55 美元。

For the quarter, we generated net investment income of $2.3 million or approximately $0.16 per share, reflecting a $1 million increase over the prior quarter. Additionally, we were successful in deploying $13.1 million across six portfolio companies, marking an uptick in activity compared to recent quarters. These achievements reflect the durability of our strategy and our continued focus on credit selection and proactive portfolio management, which remains unwavering even as economic conditions shift.

本季度，我們的淨投資收益為 230 萬美元，約合每股 0.16 美元，較上一季增加 100 萬美元。此外，我們成功地向六家投資組合公司投入了 1,310 萬美元，與最近幾季相比，投資活動有所增加。這些成就反映了我們策略的持久性以及我們對信貸選擇和主動投資組合管理的持續關注，即使在經濟狀況發生變化時，我們的策略仍然堅定不移。

Turning to the broader market environment. New deal flow, particularly in M&A and LBO activity remain subdued. However, we achieved higher origination volumes this quarter, driven mainly by refinancing deposits. We also made two secondary investments at attractive prices, allowing us to further diversify our portfolio with favorable terms. Although competition remains intense and high-quality opportunities are scarce, we continue to deploy capital strategically, maintaining our optimal portfolio leverage between 1.25 times and 1.5 times. Our investment pipeline remains robust, and we are optimistic about the opportunities ahead. We prioritize building relationships with high-quality sponsors and investing in companies within defensible industries that demonstrate strong cash flows.

轉向更廣泛的市場環境。新交易流，特別是併購和槓桿收購活動仍然低迷。然而，本季我們的貸款發放量有所增加，主要得益於再融資存款。我們還以有吸引力的價格進行了兩次二級投資，使我們能夠以優惠的條件進一步實現投資組合的多樣化。儘管競爭依然激烈，優質機會稀缺，我們仍繼續策略性地部署資本，將最佳投資組合槓桿率維持在 1.25 倍至 1.5 倍之間。我們的投資管道依然強勁，我們對未來的機會充滿樂觀。我們優先與高品質的贊助商建立關係，並投資於具有強勁現金流的可防禦行業內的公司。

We continue to rotate the portfolio towards larger, more stable credits and focus on senior secured investments within the core middle market. Our portfolio companies are performing well with only a small number of challenged positions. The median EBITDA of our portfolio rose from approximately $55 million last quarter to $61 million this quarter, while the weighted average net leverage declined from 5.1 times to 4.7 times over the same period. Non-accruals as a percentage of total fair market value improved to 4.8% this quarter from 5% last quarter. These outcomes reinforce the durability of our strategy, our focus on credit quality, and our proactive portfolio management as we look forward to a strong remainder of the year.

我們將持續調整投資組合，使其朝向更大、更穩定的信貸方向發展，並專注於核心中端市場的優先擔保投資。我們的投資組合公司表現良好，只有少數公司面臨挑戰。我們投資組合的 EBITDA 中位數從上個季度的約 5,500 萬美元上升至本季的 6,100 萬美元，而同期加權平均淨槓桿率從 5.1 倍下降至 4.7 倍。非應計費用佔總公平市價的百分比從上一季的 5% 改善至本季的 4.8%。這些成果增強了我們策略的持久性、對信貸品質的關注以及積極主動的投資組合管理，我們期待今年剩餘時間的業績表現強勁。

I will now turn to details of our portfolio activity during the quarter. During the quarter ended September 30, we invested in three new portfolio companies and three existing portfolio companies. Fundings for new investments totaled approximately $13.1 million at cost, as I mentioned, of which $0.5 million represents the reinstatement of previously recorded paydowns for interest received from Klein Hersh LLC, while it was on nonaccrual status. The weighted average yield of debt investments made in the quarter was approximately 10.7%. In the same period, we fully realized two portfolio company investments totaling $13.4 million in proceeds with an IRR of approximately 11.8%. We invested in the first lien term loan of Argano to support the refinancing of the company's capital structure.

現在我將介紹本季我們的投資組合活動的詳細資訊。在截至 9 月 30 日的季度內，我們投資了三家新的投資組合公司和三家現有的投資組合公司。正如我所提到的，新投資的資金總計約為 1,310 萬美元，其中 50 萬美元代表恢復先前記錄的從 Klein Hersh LLC 收到的利息支付，當時該利息處於非應計狀態。本季債務投資的加權平均收益率約為10.7%。在同一時期，我們完全實現了兩家投資組合公司投資，總收益為 1,340 萬美元，內部收益率約為 11.8%。我們投資了Argano的第一筆留置權定期貸款，以支持該公司資本結構的再融資。

Argano is a leading provider of mission-critical digital transformation services to corporations. Argano is a Trinity Hunt Partners portfolio company. Our yielded cost is approximately 11.5%. We also made an investment in the first lien term loan and delayed draw term loan of Likewize Corporation to support the refinancing and Genstar Capital's purchase of the company from Brightstar Capital. Likewize provides technology, device protection and support. Our yielded cost is approximately 11.5%. Finally, we made an investment in the first lien term loan and delayed draw term loan of Integrity Marketing acquisition. Integrity is an insurance broker that distributes and markets life and health insurance products and wealth management solutions.

Argano 是一家為企業提供關鍵任務數位轉型服務的領先供應商。 Argano 是 Trinity Hunt Partners 的投資組合公司。我們的收益率成本約為11.5%。我們還對 Likewize Corporation 的第一留置權定期貸款和延期提款定期貸款進行了投資，以支持再融資以及 Genstar Capital 從 Brightstar Capital 收購該公司。 Likewize 提供技術、設備保護和支援。我們的收益率成本約為11.5%。最後，我們對Integrity Marketing收購的首筆留置權定期貸款和延期提款定期貸款進行了投資。 Integrity 是一家保險經紀公司，分銷和銷售人壽和健康保險產品以及財富管理解決方案。

We purchased Integrity in the secondary market. Yield at cost is approximately 10%. We also made a follow-on investment in the first lien term loan of Victra, also known as LSF9 Atlantis Holdings, LLC. We purchased Victra in the secondary market for a yield at cost of approximately 9.8%. And finally, we made another investment in Crafty Apes. Crafty Apes is a full-service visual effects studio and studio that works with studios across the globe. Our yield at cost is approximately 14.9%. We continue to work with the company's management to provide them with financial flexibility. Lastly, we realized our first lien term loan positions in Retail Services WIS Corporation and South Coast Terminals, both of which were refinanced during the quarter.

我們在二級市場購買了Integrity。成本收益率約為10%。我們也對 Victra（也稱為 LSF9 Atlantis Holdings, LLC）的第一筆留置權定期貸款進行了後續投資。我們在二級市場購買了 Victra，成本收益率約為 9.8%。最後，我們對 Crafty Apes 進行了另一項投資。 Crafty Apes 是一家提供全方位服務的視覺效果工作室和工作室，與全球各地的工作室合作。我們的成本收益率約為14.9%。我們繼續與公司管理層合作，為他們提供財務靈活性。最後，我們實現了零售服務 WIS 公司和南海岸碼頭的首筆留置權定期貸款，這兩筆貸款均在本季度進行了再融資。

We've been invested in both of these companies since May and December of 2021, respectively. Our realized IRR on WIS was approximately 12.9% and our realized IRR on South Coast was approximately 10.7%. As of September 30, our largest industry concentrations by fair market value were professional services at 14.6%, containers and packaging at 11.7%, commercial services and supplies at 10.3%, trading companies and distributors at 8.8%, followed by insurance at 7.6% and specialty retail at 7.2%. Our portfolio companies are in 20 GICS industries as of the quarter end, including our equity and warrant positions, which is a decrease of three industries from the previous quarter.

我們分別自 2021 年 5 月和 12 月起對這兩家公司進行了投資。我們對 WIS 實現的 IRR 約為 12.9%，我們對 South Coast 實現的 IRR 約為 10.7%。截至 9 月 30 日，以公平市場價值計算，我們最大的行業集中度為專業服務（14.6%）、容器和包裝（11.7%）、商業服務和供應（10.3%）、貿易公司和分銷商（8.8%），其次是保險（7.6%）和專業零售（7.2%）。截至季末，我們的投資組合公司涵蓋 20 個 GICS 產業，包括我們的股票和認股權證頭寸，比上一季減少了 3 個產業。

I would now like to turn the call over to Walt to discuss our financial results.

現在我想將電話轉給沃特來討論我們的財務表現。

Thanks, Suhail. For the quarter ended September 30, 2024, the fair value of our portfolio was $190.1 million compared to $184.6 million on June 30. Our net assets were $79.7 million, an increase of $4.9 million from prior quarter. Our portfolio's net increase in net assets from operations this quarter was approximately $6.6 million. The weighted average of our debt portfolio was 10.5%, a decrease from 12.3% in the previous quarter ended June 30, largely driven by declining SOFR and tighter spreads on new investments. As of September 30, our portfolio consisted of 45 borrowers. Approximately 82.5% of our investments were in first lien debt and the remaining 17.5% were invested in equity, warrants and other positions.

謝謝，蘇海爾。截至 2024 年 9 月 30 日的季度，我們投資組合的公允價值為 1.901 億美元，而 6 月 30 日為 1.846 億美元。本季我們投資組合的營運淨資產淨增加額約為 660 萬美元。我們的債務組合的加權平均值為 10.5%，低於 6 月 30 日止季度的 12.3%，主要原因是 SOFR 下降和新投資利差收窄。截至 9 月 30 日，我們的投資組合由 45 位借款人組成。我們的投資中約有 82.5% 是第一留置權債務，剩餘的 17.5% 投資於股票、認股權證和其他部位。

90% of our debt portfolio was invested in floating rate instruments and 3% in fixed rate instruments. The weighted average spread on our debt investments was 4.3% and the weighted average floor was 0.9%, a slight decline compared to the previous quarter, which had a weighted average spread of 5% and a weighted average floor of 1%. Our average portfolio company position on a fair market basis was approximately $4.2 million, and our largest position -- portfolio company investments on a fair market basis is BioPlan at $17.4 million.

我們的債務組合中有 90% 投資於浮動利率工具，3% 投資於固定利率工具。我們的債務投資的加權平均利差為 4.3%，加權平均下限為 0.9%，與上一季的加權平均利差 5% 和加權平均下限 1% 相比略有下降。我們在公平市場基礎上的平均投資組合公司頭寸約為 420 萬美元，我們在公平市場基礎上的最大頭寸——投資組合公司投資是 BioPlan，價值 1,740 萬美元。

We are pleased to announce that on November 4, 2024, the Board of Directors declared a distribution for the quarter ended December 1, 2024, of $0.12 per share, payable in cash on January 8, 2025, to stockholders on record as of December 20, 2025. Gross leverage was 1.39 times and net leverage was 1.2 times as of September 30 compared to 1.42 times gross, 1.35 times net, respectively, for the previous quarter.

我們很高興地宣布，董事會於 2024 年 11 月 4 日宣布對截至 2024 年 12 月 1 日的季度進行分配，每股 0.12 美元，將於 2025 年 1 月 8 日以現金形式支付給截至 2025 年 12 月 20 日登記在 199 月，總槓桿為 3025 年 12 月 20 日登記在 1.99 月，總槓桿為 31.000 倍總槓桿率為 1.42 倍和淨槓桿率為 1.35 倍。

With respect to our liquidity, as of September 30, we had approximately $10.1 million in cash, of which approximately $8.3 million was restricted cash with $52.5 million of capacity under our revolving credit facility with Capital One. Additional information regarding the composition of portfolio is included in our Form 10-Q, which was filed earlier this week.

關於我們的流動性，截至 9 月 30 日，我們擁有約 1,010 萬美元現金，其中約 830 萬美元為受限現金，我們與 Capital One 的循環信貸安排下的容量為 5,250 萬美元。有關投資組合構成的更多資訊包含在我們本週稍早提交的 10-Q 表中。

With that, I would like to turn the call back over to Suhail.

說到這裡，我想把電話轉回蘇海爾。

Thank you, Walt. In closing, we are encouraged by our performance this quarter and are confident in our ability to navigate the complexities of the current environment. Our disciplined approach, strong sponsor relationships and focus on resilient portfolio companies provide a solid foundation for continued success.

謝謝你，沃特。最後，我們對本季的表現感到鼓舞，並對我們應對當前複雜環境的能力充滿信心。我們嚴謹的方法、強大的贊助商關係以及對有韌性的投資組合公司的關注為持續的成功奠定了堅實的基礎。

Thank you all for your support, and we look forward to taking your questions. That concludes our prepared remarks. Luke, please open the line up for Q&A.

感謝大家的支持，我們期待回答您的問題。我們的準備好的演講到此結束。路克，請開始問答環節。

(Operator Instructions) Christopher Nolan, Ladenburg Thalmann.

（操作員指令）克里斯多福諾蘭、拉登堡塔爾曼。

Hi. Congratulations on a good quarter. Can you clarify -- I didn't hear it as I had overlapping calls. What was the driver of the PIK income for the quarter, please?

你好。恭喜您本季業績良好。你能澄清一下嗎——由於我的通話重疊，我沒有聽清楚。請問本季 PIK 營收的驅動因素是什麼？

Yes. Chris, thank you. So a big driver was the reversal of nonaccrual to accrual of Klein Hersh. The company continues to perform well. And so that was, as you recall, previous quarter, the last at least three quarters, we've had it on nonaccrual. So that was put back on accrual, and the big portion of that coupon is PIK.

是的。克里斯，謝謝你。因此，一個重要的驅動因素是 Klein Hersh 從不提列轉變為提列。該公司業績持續表現良好。所以，正如您所記得的，上一季度，即過去至少三個季度，我們一直處於非應計狀態。因此，這筆錢被重新計入應計項目，而這筆優惠券的很大一部分就是 PIK。

Was there anything else?

還有什麼事嗎？

That was the biggest driver, Chris.

這是最大的驅動力，克里斯。

Okay. And then I was curious whether or not there are timing issues at play in the quarter here. Last quarter's results tend to be a little -- if I recall, a little bit on the lower side. And just didn't know whether or not any deals, which were normally would have closed last quarter actually spilled over to this quarter?

好的。然後我很好奇本季是否有時間問題。如果我沒記錯的話，上個季度的業績略有下降。只是不知道通常上個季度應該完成的交易是否實際上延續到了本季？

Yes. Look, you're absolutely right. There were a couple of the deals that did spill over into this quarter. We've been working on them for a while. And as you know, this is a lumpy business. So we'll have that trend every now and then because it's hard to sort of plan when some of those transactions are going to close. What we're trying to do in the interim is, as you've noted in the portfolio, we've tried to smooth out some of that activity by purchasing some loans in the secondary market, whether it's to add on to existing positions or something that we find attractive that we know well, leveraging our expertise on some of those names.

是的。瞧，你完全正確。有幾筆交易確實延續到了本季。我們已經研究它們有一段時間了。如你所知，這是一項不穩定的業務。所以我們時不時就會出現這種趨勢，因為很難規劃某些交易何時會結束。就像您在投資組合中所提到的，我們在此期間試圖做的是，我們試圖透過在二級市場購買一些貸款來平滑其中的一些活動，無論是為了增加現有頭寸還是購買我們認為有吸引力的、我們熟悉的東西，利用我們在其中一些名稱上的專業知識。

Great. I'll get back to you. Thank you.

偉大的。我會回覆你。謝謝。

(Operator Instructions) Nolan.

（操作員指令）諾蘭。

Hi. I'm back. Also, I mean, could you give a little detail in terms of the realized loss and the unrealized gain? I presume some of the unrealized gain was just a true-up, but a little detail would be helpful.

你好。我回來了。另外，您能否詳細說明已實現損失和未實現收益？我推測部分未實現收益只是真實情況，但提供一點細節會很有幫助。

Sure. So the realized loss was a function of a couple of names. And unrealized was really -- was a function of Klein Hersh markup and BioPlan markup, so that was the easy. I mean, so both of those have performed well. So we marked both of those names up. And the realized was Crafty Apes, which happens to be on nonaccrual, and we've had to take a realized loss on that piece. There's more to come on that name in the subsequent period. So we will have some more to talk about. And then we did clean up the portfolio with some smaller trades, but those are the big movers in the portfolio.

當然。因此，實際損失與幾個名字有關。未實現的實際上是——是 Klein Hersh 標記和 BioPlan 標記的功能，所以這很簡單。我的意思是，這兩者都表現良好。因此我們標記了這兩個名字。而已實現的是 Crafty Apes，它恰好是未提列的，我們必須承擔這部分的已實現損失。在隨後的時期內，還會有更多有關這個名字的內容。因此我們還有很多事情要談。然後，我們確實透過一些較小的交易清理了投資組合，但這些是投資組合中的大動作。

And I guess my final question, Suhail, given that you are new into the CEO spot, could you articulate a little bit of your vision in terms of what -- where in the market you want ICMB to source deals and if there's a particular strategy and/or competitive advantage you might have?

我的最後一個問題是，蘇海爾，鑑於您剛剛擔任首席執行官，您能否闡述一下您的願景，即您希望 ICMB 在哪個市場尋找交易，以及您是否有特定的戰略和/或競爭優勢？

Yes, it's a great question, Christopher. So what we are trying to do is build a business around what we describe as core middle market. And that's really companies with sort of $15 million to $20 million of EBITDA on the low end to $50 million to $75 million on the upper end. A large portion of those deals are that we look at and what we actually end up investing in are club deals. So these are, I'd say, more than 50% of our transactions are coming in directly sourced from sponsors, which is why the portfolio tends to be heavily weighted towards sponsor-backed deals.

是的，這是一個很好的問題，克里斯多福。因此，我們正在嘗試圍繞我們所描述的核心中端市場建立業務。這些公司的 EBITDA 最低為 1,500 萬至 2,000 萬美元，最高為 5,000 萬至 7,500 萬美元。我們所關注的交易中很大一部分並且最終真正投資的是俱樂部交易。因此，我想說，我們超過 50% 的交易都直接來自贊助商，這就是為什麼投資組合往往嚴重偏向贊助商支持的交易。

And then the rest are opportunistic investments, could be sponsor-backed names in the secondary market and leveraging at times our liquid credit team's analysis on various names, which are less liquid for them, but sort of fit our yield bogeys. That's what we're trying to do. Given we have three other vehicles that we manage besides ICMB, we can actually write decent-sized checks for -- and meaningful checks for sponsors to actually have us be relevant to their solutions. That number of check size will continue to grow as we continue to raise money, which ultimately benefits ICMB.

其餘的則是機會性投資，可能是二級市場上由贊助商支持的公司，有時可以利用我們的流動信貸團隊對各種公司的分析，這些公司的流動性較差，但卻符合我們的收益率目標。這正是我們正在努力做的事情。鑑於除了 ICMB 之外我們還管理另外三種工具，我們實際上可以為贊助商開出數額相當大的支票——以及有意義的支票，以真正讓我們與他們的解決方案相關。隨著我們不斷籌集資金，支票金額將不斷增加，最終使 ICMB 受益。

And as you can tell, over the last 12 to 18 months, we've been steadily increasing the average EBITDA of the portfolio, decreasing the leverage, increasing the ability to do more deals were directly sourced from sponsors. So that's really our strategy. We expect to have ICMB benefit from a wider portfolio of opportunities that we seek in the marketplace in that core middle market.

正如您所看到的，在過去的 12 到 18 個月裡，我們一直在穩步提高投資組合的平均 EBITDA，降低槓桿率，提高從贊助商直接獲得更多交易的能力。這確實是我們的策略。我們希望 ICMB 能夠從我們在核心中端市場中尋求的更廣泛的機會組合中受益。

Final question. Your expenses tend to be a little bit heavy in terms of as a percentage of revenues. Any plan in terms of improving operating efficiencies? That's it for me.

最後一個問題。從收入的百分比來看，您的支出往往有點高。在提高營運效率方面有什麼計畫嗎？對我來說就是這樣了。

Great question. We are taking a very deep dive into just across our portfolios and across our business and specifically for ICMB, ways that we can efficiently manage our expenses. That number is going to come down over time as the rest of the portfolio and our business grows. I mean ICMB is obviously one portion of our strategy. So that number should come down organically, but also on an inorganic manner, we are looking at ways to use technology more efficiently to lower our expense base.

好問題。我們正在深入研究我們的投資組合和業務，特別是 ICMB，以尋找有效管理費用的方法。隨著投資組合的其他部分和我們業務的成長，這個數字將會下降。我的意思是 ICMB 顯然是我們策略的一部分。因此，這個數字不僅應該有機地下降，而且還應該以無機的方式下降，我們正在尋找更有效地利用技術來降低我們的費用基礎的方法。

Thank you very much. And there are no further questions.

非常感謝。再也沒有其他問題了。

Great. Thank you, everyone, and we look forward to talking again in a few months. Thank you.

偉大的。謝謝大家，我們期待幾個月後再次交談。謝謝。

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

今天的電話會議到此結束。謝謝大家的參加。