![Earnings call: Investcorp Credit Management BDC reports Q2 fiscal 2024 results](https://i-invdn-com.investing.com/news/LYNXNPEB6U08A_L.jpg)
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Investcorp Credit Management BDC (the “Company”) has reported its monetary outcomes for the second quarter of the fiscal 12 months 2024. The Company introduced a internet funding revenue of $1.6 million, marking a 3% lower from the earlier quarter.
Additionally, the Company’s internet asset worth per share fell by 6% to $5.48. Despite the decline, the Company declared a quarterly distribution of $0.12 per share. The resignation of the Chief Financial Officer (CFO), efficient March 31, 2024, was additionally introduced throughout the name.
The Company’s focus stays on portfolio administration and threat mitigation, with a technique geared toward capital preservation and sustaining a steady dividend.
Key Takeaways
- Net funding revenue for the quarter was $1.6 million, a lower of three% from the earlier quarter.
- Net asset worth per share declined by 6% to $5.48.
- Nonaccrual investments decreased to 4.6% of the portfolio.
- Distribution of $0.12 per share declared for the quarter.
- Gross leverage was 1.7x, and internet leverage was 1.51x.
- The Company’s CFO has resigned, efficient March 31, 2024.
- Investment technique targeted on portfolio rotation, diversification, and capital preservation.
Company Outlook
- The Company is seeking to rotate and diversify its portfolio whereas specializing in capital preservation.
- Maintaining a steady dividend is a key goal for the Company going ahead.
Bearish Highlights
- The Company skilled a lower in internet funding revenue and a decline in internet asset worth per share.
- The resignation of the CFO may point out a interval of transition and adjustment for the Company.
Bullish Highlights
- Successful refinancing of Archer Systems’ first lien time period mortgage resulted in a totally realized IRR of roughly 13.2%.
- Evergreen North America acquisitions LLC’s first lien time period mortgage was totally realized with an IRR of roughly 13.3%.
Misses
- The Company’s monetary outcomes mirrored changes to bills, contributing to the lower in internet funding revenue.
Q&A highlights
- The Company mentioned its funding exercise, together with the addition of latest portfolio firms and secondary purchases.
- The monetary outcomes, portfolio composition, and funding technique have been key subjects addressed throughout the Q&A session.
In conclusion, Investcorp Credit Management BDC’s second-quarter fiscal 12 months 2024 outcomes present a slight lower in efficiency metrics but in addition spotlight profitable funding outcomes and a continued technique for portfolio optimization and revenue stability. The Company’s concentrate on floating price devices and first lien investments positions it to doubtlessly profit from rising rates of interest, whereas the diversification efforts goal to mitigate threat. The departure of the CFO is a notable change in management that the Company might want to tackle within the coming quarter.
InvestingPro Insights
Investcorp Credit Management BDC’s latest monetary outcomes have drawn consideration to its strategic focus and the challenges it faces. In gentle of those developments, sure metrics and InvestingPro Tips can present further context for traders contemplating the corporate’s prospects.
InvestingPro Data highlights embrace a market capitalization of $49.09 million, reflecting the corporate’s dimension inside the funding administration sector. The P/E ratio stands at -13.58, indicating that the corporate is presently not worthwhile. This aligns with the reported internet funding revenue lower and the web asset worth per share decline. Furthermore, the income for the final twelve months as of Q2 2024 is $25.75 million, with a modest development price of three.75%, suggesting a comparatively steady income stream regardless of the challenges in profitability.
InvestingPro Tips for Investcorp Credit Management BDC reveal that analysts have revised their earnings expectations downwards for the upcoming interval, which can be an element for traders to think about given the latest monetary efficiency. Additionally, whereas the corporate pays a major dividend to shareholders, with a excessive dividend yield of 18.48%, it is essential to notice that the inventory value actions have been fairly risky. This volatility, coupled with a valuation that suggests a poor free money circulation yield, could possibly be indicative of the dangers related to investing within the firm.
For these seeking to delve deeper into the corporate’s monetary well being and future prospects, there are further InvestingPro Tips out there at https://www.investing.com/pro/ICMB. By utilizing the coupon code PRONEWS24, traders can get a further 10% off a yearly or biyearly Pro and Pro+ subscription, gaining entry to an intensive vary of insights and knowledge. There are a complete of 6 further InvestingPro Tips listed for Investcorp Credit Management BDC, offering additional priceless info for a complete funding evaluation.
The insights from InvestingPro provide a nuanced view of Investcorp Credit Management BDC, complementing the article’s dialogue on the corporate’s technique and up to date monetary outcomes. With a concentrate on sustaining a steady dividend and the challenges of portfolio administration and threat mitigation, these further knowledge factors and ideas can help traders in making knowledgeable selections.
Full transcript – Cm Finance Inc (ICMB) Q2 2024:
Operator: Good morning and thanks for becoming a member of immediately’s Investcorp Credit Management BDC Second Quarter Fiscal Year 2024 Earnings Call. It is now my pleasure to show the ground over to Rocco DelGuercio, CFO.
Rocco DelGuercio: Thank you, operator. I want to remind everybody that this name is being recorded and that this name is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this name in any type is strictly prohibited. Audio replay of the decision will likely be out there by visiting our Investor Relations web page on our web site at icmbdc.com. I’d additionally wish to name your consideration to the protected harbor disclosure in our press launch concerning forward-looking info and remind everybody that immediately’s name could embrace forward-looking statements and projections. Actual outcomes could differ materially from these projections. We is not going to replace forward-looking statements until required by regulation. To acquire copies of our newest SEC filings, please go to our Investor Relations web page on our web site. At this time, I want to flip the decision over to our Chairman and CEO, Michael Mauer.
Michael Mauer: Thanks, Rocco and thanks to everybody for becoming a member of us on our second quarter fiscal 12 months 2024 earnings name. I’m joined by Suhail Shaikh, my Co-CIO and President of Investcorp Credit Management BDC, and Rocco DelGuercio, our CFO. Before I start the decision, I’d first like to handle a change in management and the information that was introduced in our 8-Ok on November 28, 2023, Rocco DelGuercio has determined to resign as the corporate’s CFO, CCO, Treasurer and Secretary, efficient March 31, 2024. We’d wish to personally thank Rocco for his partnership and all his contributions over his eight years with us. We introduced our revised monetary outcomes on Wednesday, for our fiscal second quarter ended December 31, 2023, to mirror roughly $388,000 or $0.02 per share of changes regarding the inaccurate accrual of sure bills reported within the firm’s consolidated monetary statements contained within the press launch issued by the corporate February 12, 2024. On immediately’s name, I’ll present an replace concerning our efficiency within the quarter, the market commentary and our nonaccrual investments in addition to our leverage, the dividend and our outlook. Suhail will stroll by means of our funding exercise throughout the December quarter and after quarter finish. Rocco will then undergo our monetary outcomes. And as at all times, we are going to finish with Q&A. During the quarter ended December 31, our internet funding revenue was $1.6 million or $0.11 per share. This was a lower of roughly 3% from the earlier quarter’s internet funding revenue. Additionally, internet asset worth per share declined roughly 6% to $5.48 per share from $5.83 per share on the finish of the prior quarter. The decline in NAV was largely as a result of adjustments in valuations for 2 investments: Klein Hersh and American Nuts in addition to the restructuring of ArborWorks, which closed on November 6. We stay extremely targeted on portfolio administration and threat mitigation, particularly for our debtors which might be experiencing intervals of stress. We didn’t add any new positions to nonaccruals throughout this quarter and our positions on nonaccrual declined to 4.6% as a proportion of complete gross sales worth of the portfolio in comparison with 10% as of the earlier quarter. We proceed to rotate — I’m sorry, we proceed to make progress rotating our portfolio and count on progress on the remaining nonaccruals within the subsequent 12 months. Regarding 1888, the corporate has entered right into a sale settlement, which is predicted to shut within the subsequent week. We don’t count on any adjustments to the worth because of this sale. We barely under-earned our December quarterly dividend and the corporate is predicted to earn its dividend by means of the subsequent quarter ending March 31. We are happy to announce that on February 8, 2024, the Board of Directors declared a distribution for the quarter ended March 31, 2024 of $0.12 per share in addition to a supplemental distribution of $0.03 per share, each payable on April 5, 2024 to stockholders of document as of March 15. Our gross leverage this quarter was 1.7x and our internet leverage 1.51x, each above our steering of 1.25x to 1.5x. As of February 16, our gross and internet leverage have been roughly 1.62x and 1.6x. With recognized repayments, we count on this to scale back this leverage to roughly 1.5x throughout the quarter. I’ll flip briefly to handle the tendencies in market yield volumes have picked up in comparison with the earlier quarter on this atmosphere. We are targeted on cheap leverage and strong constructions. Since quarter finish, our funding pipeline has picked up primarily pushed by add-on financings, refinancings and to a lesser extent, new LBOs. We are particularly targeted on lending into firms which might be sponsor-backed have monetary covenants, excessive free money circulation and recession resilience. As we have a look at our debtors working efficiency, the credit score high quality of our portfolio continues to stay strong. Our weighted common loan-to-value for our portfolio of debt investments is roughly 50%, a rise from 41% final quarter. We proceed rotating and diversifying the portfolio. Our portfolio diversification has improved since prior 12 months. During the quarter, we had investments in 44 debtors towards 25 industries, which is up from 37 debtors and 19 industries within the prior 12 months’s December quarter. Suhail will now stroll by means of our funding exercise throughout the December quarter and after quarter finish. With that, I’ll flip it over to Suhail.
Suhail Shaikh: Thank you, Mike. We noticed a rise on this quarter’s exercise in comparison with the prior quarter, primarily pushed by investments in new portfolio firms and to a lesser extent, opportunistic secondary purchases. We are additionally targeted on managing our watchlist names corresponding to Klein Hersh, ArborWorks and American Nuts. As we rotate the portfolio, we’re in search of to spend money on credit which might be usually bigger in dimension. We have rotated roughly a 3rd of the ebook inside the previous 12 months. The weighted common EBITDA of the portfolio went from $55.6 million on the finish of December 31, ’22 to $59.9 million on the finish of this quarter. In the identical interval, the weighted common leverage of the portfolio firms has elevated barely as we proceed to rotate into bigger, extra steady debt. We proceed to be extremely selective in new buyout finance. Sponsored center market direct lending new cash quantity within the quarter ended December 31, was greater than 20% larger than the quarter ended September 30, however nonetheless decrease when in comparison with this — to the quarter ended December 31, 2022. We noticed an identical pattern with main deal circulation selecting up throughout the quarter as in comparison with the earlier quarter. Our pipeline continues to stay sturdy, and we consider we will proceed to execute on our mandate to spend money on sponsor again core center market firms, as Mike talked about. During the quarter ended December 31, we invested in 5 new portfolio firms and one current portfolio firm. We additionally totally realized our place in 4 portfolio firms. During the quarter, fundings for commitments and new investments totaled roughly $19.1 million at price with a weighted common yield of roughly 13.9% in the identical interval, repayments totaled roughly $29.2 million from 4 investments with an IRR of roughly 15.8%. First, we supported the LBO of Alphia by PAI Partner. Alphia is a contract producer premium dry pet meals elements. We invested within the first-lien time period mortgage and our yield at price is roughly 10.7%. We have been traders in Alphia by means of our different funds and have been capable of re-underwrite the danger for the brand new LBO. Second, we invested within the first lien time period mortgage of Victra, also called LSF9 Atlantis Holdings, LLC. Victra is the biggest unique impartial retailer for Verizon (NYSE:) Wireless. We bought Victra within the secondary market a lovely value, a yield at price of roughly 13.7%. And our crew has had a long-standing historical past with this identify, which is what led us to re-underwrite this threat. We additionally invested in medicated options. This was a straight sourced alternative from BrightStar Capital Partners, and we supported the sponsor and rightsizing the capital construction. [indiscernible] one of many largest impartial suppliers of economic fleet upkeep. Our yield at price is roughly 13.7%. We invested within the first lien time period mortgage of Northstar Group Services. This is a liquid instance of an opportunistic, secondary buy of the credit score that we had been tracked. NorthStar is a portfolio firm of JF Lehman. This is a big supplier of diversified construction and environmental providers throughout the U.S. We have been beforehand invested on this identify and have been capable of re-underwrite the danger. Our yield at price is roughly 10.7%. We made a most popular fairness funding in Discovery (NASDAQ:) Behavioral Health of Webster Equity Partners portfolio firm. This firm is without doubt one of the largest suppliers of residential and outpatient remedy for behavioral well being providers throughout consuming problems, psychological well being and substance abuse dysfunction. Our yield at price is roughly 20.4%. Lastly, we made a follow-on funding within the incremental fairness of Visa (NYSE:) Power, listed in our schedule of investments as Investcorp Transformer aggregator LP. RESA is certainly one of our fairness co-investment positions alongside Investcorp’s North American non-public fairness group. On the realizations that we — that occurred throughout this quarter, first we totally realized our place within the first lien time period mortgage of Advanced Solutions International, also called ASI. We initially invested within the first lien time period mortgage and most popular fairness in September of 2020 and stay invested in the popular fairness. Our totally realized IRR on the time period mortgage was roughly 10.8%. We additionally totally realized our place within the first lien time period mortgage of Cook & Boardman, which was repaid as a part of an LBO by Platinum Equity. Our totally realized IRR was roughly 8.7%. We additionally totally realized our place within the first lien time period mortgage of SWN, which we’ve got been investing since May of 2024. The firm was offered throughout the quarter and our totally realized IRR was roughly 22.2%. Lastly, our place within the first lien time period mortgage of Archer Systems was refinanced. Our totally realized IRR was roughly 13.2%. After quarter finish, we totally realized our first lien time period mortgage place in Evergreen North America acquisitions LLC, realized IRR was roughly 13.3%. As of December 31, our largest business concentrations have been buying and selling firm and distributors at 13.6%; business providers and provides at 9.6%, skilled providers at 8.8%, containers and packaging at 7%, adopted by IT providers at 4.3% and broadline retail at 4.3%. Our portfolio firms in 25 GICS industries as of quarter finish, together with our fairness and warrant positions, which is a rise of 1 business from the earlier quarter. I’d now like to show the decision over to Rocco to debate our monetary outcomes.
Rocco DelGuercio: Thanks, Suhail. For the quarter ended December 31, 2023, our internet funding revenue was $1.58 million or $0.11 per share, a lower of roughly 3% from the earlier quarter’s internet funding revenue of $1.63 million or $0.11 per share. The honest worth of our portfolio was $207.4 million in comparison with $223.4 million on September thirtieth. Our internet property have been $78.8 million, a lower of $5 million of the — from the prior quarter. Our portfolio’s internet lower in internet property from operations this quarter was roughly $2.9 million. The weighted common yield of our debt portfolio was 11.5% in comparison with 11% for the quarter ended September 30. As of December 31, our portfolio consisted of 44 debtors, roughly 85% of our investments have been first lien. The remaining 15% is invested in fairness, warrants and different positions. 99.6% of our debt portfolio was invested in floating price devices and 0.4% in mounted price investments. The common flooring on our debt investments was 1%. Our common portfolio firm place was roughly $4.7 million and our largest portfolio firm funding is Bioplan at $14.5 million. We had a gross leverage of 1.7x and a internet leverage of 1.51x as of December 31, in comparison with 1.58x gross and 1.41x internet, respectively for the earlier quarter. With respect to our liquidity. As of December 31, we had roughly $14.7 million in money, of which $11.5 million was restricted money with $30 million capability beneath our credit score — beneath our revolving credit score facility with Capital One. Additional info concerning the composition of our portfolio is included in our Form 10-Q, which was filed on Tuesday. With that mentioned, I want to flip the decision again over to Mike.
Michael Mauer: Thank you, Rocco. As we glance in the direction of the second half of our fiscal 12 months, we are going to proceed to work on rotating and diversifying the portfolio. We are optimistic about our pipeline and our skill to deploy our capital in new high-quality investments. Our credit score choice stays disciplined and stay targeted on sustaining the standard of the ebook. Our funding technique has not wavered as we stay more and more targeted on capital preservation sustaining a steady dividend. That concludes our ready remarks. Operator, please open the road for Q&A.
Operator: Ladies and gents right now, we are going to conduct the question-and-answer session. [Operator Instructions]. We are actually prepared to start. And our first query comes from Mr. Christopher Nolan with Ladenburg Thalmann.
Christopher Nolan: Hey guys. And Rocco, congratulations. Good working with you, and I hope future endeavors are good.
Rocco DelGuercio: Thank you.
Christopher Nolan: Suhail within the feedback that you simply made by way of the — was it the scale of portfolio firms which might be going to extend going ahead? Or is it the scale of the investments the BDC will make? Or is it each?
Suhail Shaikh: Great query, Chris. It’s extra the scale of the portfolio firm. I believe the scale of the funding, as Mike identified and as I’ll have alluded to as properly, is definitely a lowering. So we elevated the variety of debtors. And so we’re attempting to diversify the portfolio as a lot as we will.
Christopher Nolan: And then for the portfolio firms, what’s the common EBITDA protection?
Suhail Shaikh: Interest protection?
Christopher Nolan: Yes, please.
Suhail Shaikh: Interest protection, we usually, once we are underwriting a brand new deal, we’re focusing on curiosity protection of a minimum of 2x, Christopher. And that is — it isn’t a rule of thumb, however that is — we have a look at money circulation and the flexibility for the corporate to service the debt. I imply, we’re laser targeted on that, clearly, on this market. So it is 2x, it will depend on the business, it will depend on the enterprise. And normally, it is north of 2x.
Christopher Nolan: Okay. That’s it for me. Thank you.
Operator: Thank you very a lot. [Operator Instructions] I do not see some other questions.
Michael Mauer: Thank you, operator, and thanks, everybody, on your time immediately.
Operator: This concludes immediately’s convention name. Thank you, everybody, for attending.
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