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Investcorp Credit Management BDC, Inc. (ICMB)·Q2 2025 Earnings Summary

Executive Summary

  • ICMB’s Q2 2025 (fiscal period ended December 31, 2024) showed weaker earnings: net investment income was $0.8mm ($0.06 per share), NAV declined to $5.39, and weighted average debt yield fell to 10.36% from 10.51% in Q1 2025 . Versus consensus, ICMB materially missed on EPS ($0.04 actual vs $0.10 est.) and revenue ($4.55mm actual vs $5.32mm est.) for Q2 2025; see Estimates Context below (values from S&P Global).*
  • Management maintained the quarterly base distribution at $0.12 for the March quarter, payable May 16, 2025, and highlighted liquidity ($12.1mm cash; $41.5mm undrawn revolver) and a recent revolver repricing to cut spread by 60 bps .
  • Portfolio repositioning continued with selective deployment and realizations (two full exits, $7.6mm proceeds; IRR ~17.2%) while credit quality improved (lower nonaccrual rate, stronger mix), although macro headwinds and tariff risks tempered near‑term yield outlook .
  • Near-term stock narrative likely hinges on dividend sustainability, spread/yield trajectory, and evidence of NII stabilization; management indicated ongoing evaluation of the dividend given non‑income generating assets and leverage flexibility .

What Went Well and What Went Wrong

What Went Well

  • Selective originations and strong realizations: $9.9mm invested across 4 positions at 11.81% weighted average origination yield; realized two investments for $7.6mm proceeds at ~17.20% IRR .
  • Liquidity and funding cost: $12.1mm cash (incl. $11.3mm restricted) and $41.5mm available under revolver; facility spread reduced from 310 bps to 250 bps during the quarter .
  • Management tone on disciplined underwriting and defensive posture: “highly selective stance on new deals… preserving portfolio stability” (CEO) .

What Went Wrong

  • Earnings softness and NAV decline: Q2 NII $0.8mm ($0.06/share) and net decrease in net assets from operations of $(0.6)mm ($(0.04)/share); NAV per share fell to $5.39 from $5.55 in Q1 .
  • Yield compression: weighted average debt yield at fair value decreased to 10.36% from 10.51% in Q1, reflecting tighter spreads and macro uncertainty .
  • Estimate misses: Q2 EPS and revenue both missed Wall Street consensus; management suggested asset yields to remain “10.5% plus or minus,” limiting near‑term upside without a spread-widening catalyst (Estimates Context values from S&P Global).*

Financial Results

MetricQ1 2025 (Sep 30, 2024)Q2 2025 (Dec 31, 2024)Q3 2025 (Mar 31, 2025)
Total Investment Income ($USD Millions)$6.85 $4.55*$4.37
Net Investment Income ($USD Millions)$2.33 $0.80 $0.68 (before taxes)
NII per Share ($USD)$0.16 $0.06 $0.05 (before taxes)
Net Assets from Operations per Share ($USD)$0.46 $(0.04) $0.15
NAV per Share ($USD)$5.55 $5.39 $5.42
Weighted Avg Yield on Debt (%)10.51% 10.36% 10.78%
Investment Portfolio Fair Value ($USD Millions)$190.1 $191.6 $192.4

Note: Asterisked values retrieved from S&P Global.*

Segment/KPIs

KPIQ1 2025Q2 2025Q3 2025
First Lien (% of portfolio FV)82.47% 81.17% 77.04%
Equity/Warrants/Other (%)17.53% 18.83% 22.96%
Floating Rate Debt (% of debt portfolio)79.9% 96.4% 98.18%
Fixed Rate Debt (%)2.6% 3.6% 1.82%
Portfolio Companies (count)45 43 43
Cash ($mm)$10.1 $12.1 $13.0
Undrawn Revolver Capacity ($mm)$52.5 $41.5 $44.0
Gross / Net Leverage (x)1.39 / 1.26 1.50 / 1.42 1.53 / 1.37

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Base Dividend per ShareQ4 2024 (pay Jan 8, 2025)$0.12 declared Nov 6, 2024 ——
Quarterly Base Dividend per ShareQ1 2025 (pay May 16, 2025)—$0.12 declared Mar 20, 2025 Maintained base dividend
Quarterly Base Dividend per ShareQ2 2025 (pay Jun 14, 2025)—$0.12 declared Apr 15, 2025 Maintained base dividend
Revenue, Margins, OpEx, OI&E, Tax RateQ2 2025Not providedNot providedN/A

Management indicated ongoing evaluation of dividend sustainability given non‑income generating assets and leverage flexibility; no formal non‑dividend guidance ranges were issued .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025 Sep 30, 2024; Q3 2025 Mar 31, 2025)Current Period (Q2 2025 Dec 31, 2024)Trend
Tariffs/MacroQ1: focus on resilient portfolio; no tariff specifics . Q3: tariffs slowed deal flow; <20% portfolio may see moderate direct effects; mitigation via pricing/supply chain actions .Explicitly monitoring tariff risks; expect asset yields ~10.5%± absent shocks .Heightened sensitivity; cautious deployment.
AI/Technology InitiativesQ3: Invested in WorkGenius (AI-powered talent platform) .Noted investment in data center sector; targeted defensive industries .Building exposure to data/tech adjacency.
Portfolio Credit QualityQ1: nonaccrual FMV % improved to 4.8%; median EBITDA up; leverage down . Q3: nonaccruals reduced to ~1.7% of FV; continued cleanup .Improvement vs prior quarter; yield slightly down; stability prioritized .Improving credit quality; earnings stabilization focus.
Funding Costs/LiquidityQ1: $52.5mm revolver capacity; liquidity stable . Q3: $44mm capacity; gross/net leverage 1.53x/1.37x .$41.5mm capacity; revolver repriced to 250 bps spread; gross/net 1.50x/1.42x .Lower borrowing spread; robust liquidity.
Dividend PolicyQ3: Maintained $0.12; Board declared for June quarter .$0.12 declared for March quarter; management evaluating sustainability amid non‑income assets .Stable for now; under review with NII pressures.

Management Commentary

  • “Amid heightened market volatility, we remain focused on navigating the evolving landscape… prioritizing opportunities that align with our underwriting standards… preserving portfolio stability and positioning the company for long-term growth” (CEO Shaikh) .
  • “We are factoring in tariff risks… strategically target investments in critical sectors and defensive industry… recent investment in the data center sector” (CEO Shaikh) .
  • “Fair value of our portfolio was $191.6mm… net assets $77.6mm… weighted average yield of our debt portfolio was 10.4%… Board… declared a distribution… of $0.12 per share” (CFO Tsin) .
  • “We repriced the Capital One revolving credit facility… bringing the borrowing cost spread base rate from 310 bps to 250 bps” (CFO Tsin) .

Q&A Highlights

  • Dividend sustainability: Analyst flagged high leverage offering flexibility to sustain earnings/dividend; management acknowledged ~18% of portfolio in non‑income assets pressures income and said dividend is under ongoing Board evaluation, with no decision yet .
  • Fiscal year transition: Confirmed change from June to December fiscal year and filing of a 10‑KT; clarified quarter naming .
  • Yield trajectory: Management expects investment yields to remain around 10.5% absent macro shocks; monitoring potential tariff impacts on spreads and liquidity .

Estimates Context

MetricQ2 2025 EstimateQ2 2025 ActualSurprise
Primary EPS Consensus Mean$0.10$0.0419— miss (58%)
Revenue Consensus Mean ($USD Millions)$5.32$4.55— miss (14%)
MetricQ3 2025 EstimateQ3 2025 ActualSurprise
Primary EPS Consensus Mean$0.05$0.0352— miss (30%)
Revenue Consensus Mean ($USD Millions)$4.41$4.36— slight miss (1%)

Values retrieved from S&P Global.*

Implications: Consensus appears too optimistic on EPS and revenue during a period of spread compression and elevated non‑income assets; models likely need to trend lower NII/asset yields and incorporate slower deployment and lower nonaccrual income carry-over .

Key Takeaways for Investors

  • Earnings softness and estimate misses underscore near‑term risk to NII; with asset yields ~10.5%± and limited spread widening, expect muted earnings momentum unless macro improves .
  • Dividend is stable at $0.12 for now, but management explicitly acknowledged ongoing evaluation; dividend sustainability is a central stock driver in coming quarters .
  • Liquidity remains solid and revolver repricing lowers funding costs; leverage at ~1.5x gross/~1.42x net provides flexibility but can amplify downside if credit worsens .
  • Portfolio credit quality is improving (lower nonaccruals, disciplined underwriting); continued realizations and selective deployments in data center/defensive sectors could stabilize NAV/NII .
  • Watch tariff/geopolitical headlines: management and sponsors are monitoring and mitigating, but any spread-widening or liquidity shock could alter deployment pace and yields .
  • Model adjustments: lower revenue/NII assumptions, flat to slightly improving yields in H2 only if spreads widen; maintain $0.12 dividend with a probability of reassessment if non‑income assets remain elevated .
  • Potential catalysts: further fee waivers or platform scale reducing expense drag, realization of challenged names, evidence of spread widening/new deal flow pickup, and any Board actions on buybacks or dividend policy .

Additional detail and cross-reference:

  • Q2 portfolio metrics and distribution declaration ; 8‑K furnishing and consolidated statements .
  • Q3 quarter metrics and Board declaration ; Q1 quarter metrics and portfolio rotation .

Notes:

  • Prior-year quarter comparisons were not provided in Q2 materials due to fiscal-year change and the use of a 10‑KT; trajectory shown vs prior and subsequent reported quarters .
  • All non‑asterisk data points are sourced from company filings and earnings materials; asterisked values are from S&P Global.*