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Investcorp Credit Management BDC, Inc. (ICMB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 delivered a strong rebound: NAV per share rose to $5.55 (+$0.34 QoQ), net assets increased to $79.9mm, and net increase in net assets from operations was $6.6mm ($0.46 per share), driven by mark-to-market gains and higher NII .
  • Net investment income rose to $2.33mm ($0.16/share), with management citing timing spillover of deals and the return of Klein Hersh to accrual (PIK-heavy) as key drivers; weighted average debt yield fell to 10.51% on tighter spreads and lower SOFR .
  • Dividend maintained: Board declared a $0.12 per-share base distribution for the quarter ending Dec 31, 2024 (payable Jan 8, 2025), implying a 15.34% yield on the 9/30 close price of $3.13; no supplemental dividend was announced .
  • Liquidity and leverage improved QoQ (cash $10.1mm; revolver capacity $52.5mm; gross/net leverage 1.39x/1.26x), positioning ICMB to pursue selective originations (6 investments, $13.1mm at cost) despite competitive spreads; watch list: Crafty Apes realized loss, with more to come .

What Went Well and What Went Wrong

What Went Well

  • NAV per share increased $0.34 QoQ to $5.55 on unrealized gains (Klein Hersh and BioPlan markups), lifting net assets +$4.9mm QoQ; CEO: “we delivered a strong quarter… resilient portfolio… selective opportunities” .
  • NII strengthened to $2.33mm ($0.16/share) as Klein Hersh moved back to accrual with PIK-heavy coupon; management confirmed deal timing spillover supported QoQ performance .
  • Active portfolio rotation and origination: $13.1mm deployed across 6 investments at 10.73% origination yield; realized two positions with $13.4mm proceeds and IRRs ~11–13% .

What Went Wrong

  • Weighted average debt yield declined to 10.51% (from 12.33% in Q4) amid tighter spreads and lower SOFR; weighted average spread/floor fell to 4.3%/0.9% .
  • Realized loss on Crafty Apes (on non-accrual), with management indicating “more to come” next period; offsets included markups on Klein Hersh and BioPlan .
  • Expense intensity remains a concern; management acknowledged expenses “heavy” vs revenues and outlined a plan to use technology to reduce the expense base over time .

Financial Results

Quarterly Comparison (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Total Investment Income ($mm)——$6.85
Net Investment Income ($mm)$2.10 $1.30 $2.33
NII per Share ($)$0.14 $0.09 $0.16
EPS ($, net increase in net assets from operations per share)—$(0.17) $0.46
Net Inc./Dec. in Net Assets from Operations ($mm)$2.40 $(2.50) $6.61
NAV per Share ($)$5.49 $5.21 $5.55
Investment Portfolio Fair Value ($mm)$192.2 $184.6 $190.1
Net Assets ($mm)$79.1 $75.01 $79.89
Weighted Avg Yield on Debt (at cost, %)12.36% 12.33% 10.51%
Gross Leverage (x)1.52 1.42 1.39
Net Leverage (x)1.36 1.35 1.26
# Portfolio Companies40 41 45
Cash ($mm)$12.9 $5.1 $10.1
Restricted Cash ($mm)$10.2 $4.95 $8.3
Revolver Capacity ($mm)$42.5 $57.0 $52.5
Distribution Paid per Share ($)—$0.15 $0.12

Notes:

  • Management on the call cited 90% floating/3% fixed and average position ~$4.2mm in Q1; press release showed 79.9% floating/2.6% fixed—interpretation likely methodology differences; we anchor to press release for composition while highlighting call color for spread/floor and position sizing .

YoY Quarter (Q1 FY2025 vs Q1 FY2024)

MetricQ1 2024Q1 2025
Total Investment Income ($mm)$5.90 $6.85
Net Investment Income ($mm)$1.63 $2.33
NII per Share ($)$0.11 $0.16
EPS ($)$(0.12) $0.46
Distribution Paid per Share ($)$0.15 $0.12

Portfolio Composition

MetricQ3 2024Q4 2024Q1 2025
First Lien (%)83.82% 85.02% 82.47%
Equity/Warrants/Other (%)16.18% 14.98% 17.53%
Floating Rate Debt (%)99.6% 97.4% 79.9%
Fixed Rate Debt (%)0.4% 2.6% 2.6%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Weighted Avg Spread (%)5.0% 5.0% 4.3%
Weighted Avg Floor (%)1.0% 1.0% 0.9%
Avg Position (FMV, $mm)~$4.8 ~$4.8 ~$4.2
Largest Position (FMV, $mm)BioPlan $14.6 Bioplan $13.5 BioPlan $17.4
Median Portfolio EBITDA ($mm)$63.5 $55.0 $61.0
Weighted Avg Net Leverage (x)4.6 5.1 4.7
Non-Accruals (% of FV)3.9% 5.0% 4.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Base Dividend per Share ($)Q4 FY2025 (quarter ending Dec 31, 2024)$0.12 for Q3 FY2025 (quarter ending Sep 30, 2024) $0.12 (payable Jan 8, 2025; record Dec 20, 2024) Maintained
Leverage Target (Gross/Net)Ongoing1.25x–1.5x target range reiterated 1.25x–1.5x “optimal” leverage reiterated Maintained

No revenue/margins/OpEx/tax guidance was provided; management emphasized disciplined originations, sponsor-sourced club deals, and expense efficiency initiatives .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Spreads/Market TightnessYield compression noted; spreads tightening due to competitive market and limited deal flow Weighted avg spread/floor down to 4.3%/0.9%; weighted avg yield at cost fell to 10.51% Downward pressure on yields
Non-Accruals/Watch ListNon-accruals declined to 3.9%; active work on Klein Hersh Klein Hersh back on accrual; non-accruals 4.8%; realized loss on Crafty Apes with more to come Mixed improvement with isolated stress
Originations/ActivityNew money volume down; focus on secondary trades and add-ons 6 investments; $13.1mm at cost; origination uptick; robust pipeline Improving activity
Leverage/LiquidityGross/net leverage 1.52/1.36; cash $12.9mm; revolver $42.5mm Gross/net leverage 1.39/1.26; cash $10.1mm; revolver $52.5mm Slight deleveraging; liquidity strong
Dividend PolicyDeclared $0.12 base + $0.03 supplemental for June quarter $0.12 base declared for Dec quarter (no supplemental) Base maintained; supplemental absent
Expense Discipline—Plan to reduce expenses using technology; aim to lower expense as business scales Newly emphasized
Industry Exposure22 industries; mix of trading/commercial services, etc. Professional services 14.6%; containers 11.7%; commercial services 10.3%, etc. Diversification maintained

Management Commentary

  • “I am 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.” — Suhail A. Shaikh .
  • “We continue to rotate the portfolio towards larger, more stable credits and focus on senior secured investments within the core middle market… maintaining our optimal portfolio leverage between 1.25x and 1.5x.” — Suhail Shaikh .
  • “The weighted average of our debt portfolio was 10.5%, a decrease from 12.3%… driven by declining SOFR and tighter spreads on new investments… weighted average spread 4.3% and floor 0.9%.” — Walter Tsin .
  • “A big driver [of PIK income] was the reversal of nonaccrual to accrual of Klein Hersh… big portion of that coupon is PIK.” — Suhail Shaikh .
  • “Unrealized was… a function of Klein Hersh markup and BioPlan markup… realized was Crafty Apes… we’ve had to take a realized loss… more to come.” — Suhail Shaikh .
  • “We are… looking at ways to use technology more efficiently to lower our expense base.” — Suhail Shaikh .

Q&A Highlights

  • PIK Income Driver: Return of Klein Hersh to accrual status (PIK-heavy) was the primary driver of higher PIK income in Q1 .
  • Timing/Deal Spillover: Some transactions spilled from Q4 into Q1, contributing to lumpy but stronger quarterly results; management is smoothing with selective secondary purchases .
  • Realized/Unrealized Details: Unrealized gains from Klein Hersh and BioPlan; realized loss on Crafty Apes with additional developments expected next period .
  • Strategy Under New CEO: Focus on “core middle market” (EBITDA ~$15–75mm), majority club, sponsor-sourced deals; leverage broader platform to write meaningful checks and increase average EBITDA while lowering leverage .
  • Expense Focus: Acknowledged heavier expense ratio; plan to improve operating efficiency via technology and scaling .

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable at time of retrieval due to vendor limit constraints; therefore, beat/miss analysis versus consensus cannot be provided at this time [GetEstimates error].
  • Given NII per share of $0.16 and maintained base dividend of $0.12, sell-side models may reassess dividend coverage durability amid yield compression, PIK contributions, and ongoing rotation to larger credits; once consensus is accessible, we will update beat/miss and revisions analysis .

Key Takeaways for Investors

  • NAV per share rose to $5.55 on mark-to-market gains (Klein Hersh, BioPlan), reversing prior quarter declines; this supports book value stabilization narrative despite tighter spreads .
  • NII strengthened to $0.16/share, aided by Klein Hersh’s return to accrual and deal timing; watch sustainability as spreads compress and SOFR declines .
  • Base dividend of $0.12/share maintained (15.34% yield on 9/30 price), with leverage inside target range and ample revolver capacity—near-term cash yield remains a key draw .
  • Yield headwinds: Weighted average yield and spread/floor compressed; expect returns to hinge on credit selection, sponsor access, and secondary opportunities rather than rate tailwinds .
  • Credit quality trajectory positive but idiosyncratic risk remains: Non-accruals improving; Crafty Apes realized loss and further developments flagged—monitor next quarter .
  • Portfolio strategy: Continued rotation to larger, senior-secured credits across diversified industries; origination pipeline robust despite competitive environment .
  • Actionable: Position for dividend capture with vigilance on PIK drivers, spread trends, and watch-list names; catalysts include resolution of Crafty Apes, sustained NII coverage of dividend, and further NAV progress through disciplined rotation .

Additional Data Points and Activity Detail

  • Q1 investments: Argano (first lien term loan), Likewize (first lien + DDTL), Integrity Marketing (first lien + DDTL, secondary), Victra (secondary), Crafty Apes (follow-on) .
  • Realizations: Retail Services WIS and South Coast Terminals realized; IRR ~12.9% and ~10.7% respectively .
  • Portfolio concentrations: Professional services 14.6%; containers & packaging 11.7%; commercial services & supplies 10.3%; trading companies & distributors 8.8%; insurance 7.6%; specialty retail 7.2% .
  • Balance sheet Q1: Total assets $203.0mm; investment portfolio FV $190.1mm; net assets $79.89mm; cash $10.1mm (restricted $8.3mm); revolver capacity $52.5mm .

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