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BlackRock TCP Capital Corp. (TCPC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered adjusted net investment income (NII) of $0.38 per share and GAAP NII of $0.42 per share, covering the $0.34 dividend; Board declared a Q3 2024 dividend of $0.34 per share. Adjusted annualized NII ROE was ~14% with dividend coverage of 112% .
  • NAV per share fell to $10.20 (from $11.14 in Q1), driven by higher non‑accruals and realized/unrealized losses; non‑accruals increased to 4.9% of portfolio at fair value and 10.5% at cost .
  • Capital position strengthened: issued $325M of 6.95% 2029 notes and extended the Operating Facility maturity to August 1, 2029; liquidity rose to ~$779.8M .
  • Management emphasized proactive credit work on challenged names (SellerX, Pluralsight, McAfee) and maintained confidence in long‑term returns and the pipeline; reiterated disciplined deployment and dividend stability .

What Went Well and What Went Wrong

What Went Well

  • Sustained dividend coverage with adjusted NII of $0.38 and 112% coverage; “we generated adjusted net investment income of 38 cents per share… and strong dividend coverage of 112%,” said CEO Raj Vig .
  • Capital access and balance sheet flexibility improved: $325M 6.95% 2029 notes and Operating Facility maturity extension; liquidity ~$779.8M .
  • Healthy deployment and pipeline: $129.7M invested, all Q2 debt investments first‑lien; examples include AlphaSense and SumUp; new investments yielded ~12.6% .

What Went Wrong

  • Non‑accruals spiked: 10 companies on non‑accrual status (4.9% FV; 10.5% cost), including SellerX, Pluralsight, Lithium; contributed to net unrealized losses of $51.6M and net realized losses of $35.5M .
  • NAV decline: NAV/share dropped to $10.20 from $11.14; net decrease in net assets from operations was $(51.3)M or $(0.60) per share for Q2 .
  • Yield compression: portfolio yield moved to 12.4% (from 13.4% in Q1), partly due to exiting higher-yield positions (exited investments ~14.2% yield vs new ~12.6%) .

Financial Results

MetricQ4 2023Q1 2024Q2 2024YoY (Q2)Vs Estimates
Total Investment Income ($USD Millions)$50.8 $55.7 $71.5 —N/A – S&P Global consensus unavailable
GAAP NII ($USD Millions)$25.3 $28.3 $35.8 —N/A – S&P Global consensus unavailable
GAAP NII per Share ($USD)$0.44 $0.46 $0.42 $0.48 (Q2’23) vs $0.42 N/A – S&P Global consensus unavailable
Adjusted NII per Share ($USD)—$0.45 $0.38 $0.48 (Q2’23) vs $0.38 N/A – S&P Global consensus unavailable
Basic & Diluted EPS ($USD)$0.23 (net decrease per share) $0.08 $(0.60) $0.28 (Q2’23) vs $(0.60) N/A – S&P Global consensus unavailable
NAV per Share ($USD)$11.90 $11.14 $10.20 —N/A – S&P Global consensus unavailable

Notes: The company reports “Total investment income” as top-line; adjusted NII excludes purchase discount amortization from the BCIC merger .

Portfolio Composition and Yields

KPIQ1 2024Q2 2024
Portfolio Companies (Count)157 158
Portfolio Fair Value ($USD Billions)~$2.1B ~$2.0B
Senior Secured (%)91.4% 91.1%
First Lien (%)80.2% 81.3%
Floating Rate Debt (%)97.1% (floors 92.0%) 93.4% (floors 97.1%)
Weighted Avg Effective Yield (Debt)14.1% 13.7%
Weighted Avg Effective Yield (Total Portfolio)13.4% 12.4%
New Investments ($USD Millions)$20.0 $129.7
Exits/Repayments ($USD Millions)$24.3 $185.0
New Investments Yield (%)14.7% 12.6%
Exited Investments Yield (%)14.0% 14.2%

Risk and Capital KPIs (Trend)

KPIQ4 2023Q1 2024Q2 2024
Non‑Accruals (% FV / % Cost)2.0% / 3.7% 1.7% / 3.6% 4.9% / 10.5%
Available Liquidity ($USD Millions)~$359.0 ~$408.7 ~$779.8
Weighted Avg Interest Rate on Debt (%)4.29% 5.08% 5.00%
Net Leverage (x)—1.08x 1.13x
Dividend Declared ($/share)$0.34 (Q1 2024) $0.34 (Q2 2024) $0.34 (Q3 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Regular Dividend per ShareQ3 2024$0.34 (Q2 declared) $0.34 Maintained
Dividend Coverage Support (Advisor fee waiver)4 quarters post‑merger (through YE 2024)Waive fees if adjusted NII < $0.32 Two quarters remaining; no waiver required in Q2 (coverage 112%) Maintained
Operating FacilityFacility maturity2026 (pre‑amendment) Expiration Aug 1, 2028; loan maturity Aug 1, 2029 Extended
Unsecured NotesDebt profile2024/2026 outstanding Issued $325M 6.95% due 2029 New issuance

No explicit revenue, margin, OpEx, tax, or segment‑specific forward guidance was provided; management emphasized disciplined deployment and portfolio credit actions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Non‑Accruals/CreditQ4’23: non‑accruals 2.0%; discussed aggregator stress (Thrasio) . Q1’24: non‑accruals 1.7%; added Aventiv, Gordon Brothers; maintained credit quality .Non‑accruals to 4.9% FV/10.5% cost; main names SellerX, Pluralsight, McAfee; proactive restructuring .Deteriorated near term; management working to resolve.
Capital Markets AccessQ4’23: pending merger expected improved access . Q1’24: addressing 2024 notes; comfort with IG and mix .Issued $325M 6.95% 2029 notes; extended facility maturities .Strengthened.
Dividend PolicyQ4’23: covered; $0.34 declared for Q1 . Q1’24: $0.34 declared; coverage 132% (adjusted) .$0.34 declared for Q3; coverage 112% (adjusted) .Stable; covered.
Deployment/Deal EnvironmentQ4/Q1: core middle market focus, disciplined underwriting; bifurcation in direct lending .Deployments up to $129.7M; all first‑lien in Q2; yield tightening; selective stance .Activity normalizing; conservative stance maintained.
Industry Concentration RiskQ1: aggregator challenges; idiosyncratic names like Edmentum .Analyst challenged niche concentration; mgmt sees limited correlation outside aggregators; healthcare regulatory noted historically .Focused remediation; monitoring niche exposures.
Leverage & LiquidityQ1: net leverage 1.08x; liquidity $409M .Net leverage 1.13x; liquidity ~$780M; plan to repay 2024 notes with cash .Adequate; temporary elevation due to cash timing.

Management Commentary

  • “Adjusted net investment income of 38 cents per share… adjusted annualized NII return on average equity of 14%… strong dividend coverage of 112%… Our NAV declined, reflecting higher non‑accruals… proactively working… to resolve credit issues… our overall portfolio remains healthy.” — Rajneesh Vig, Chairman & CEO .
  • “We invested $130 million… all of our debt investments in the second quarter were first lien loans… new investments had a weighted average effective yield of 12.6%, while investments we exited had a yield of 14.2%…” — Philip Tseng, President .
  • “Net investment income… $0.38 per share on an adjusted basis… operating expenses… $0.42 per share… net realized losses $35.5 million… net unrealized losses $52 million… available liquidity $780 million… net leverage… 1.13x.” — Erik Cuellar, CFO .

Q&A Highlights

  • Leverage management: Mgmt emphasized net leverage 1.13x (net of cash) and intent to use cash to repay 2024 notes imminently; comfortable within 0.9–1.2x target range .
  • Deployment vs. credit spike: Mgmt characterized Q2 deployment as normal, with upsizing support for strong incumbents (e.g., AlphaSense, SumUp); non‑accrual spike seen as convergence of idiosyncratic events .
  • Industry concentration concern: Discussion focused on aggregator niche correlation; mgmt does not see broader correlation across software/healthcare subsegments, but monitors healthcare reimbursement risk .
  • Restructuring leadership: Mgmt typically leads or is highly influential in restructurings given sole/led/small‑club deal structures, aiming for above‑average recoveries .
  • Dividend support clarification: Advisor fee waiver at $0.32 for four quarters post‑merger; two quarters remaining; current coverage makes waiver moot .

Estimates Context

  • S&P Global consensus estimates were unavailable at the time of this analysis due to temporary access limits (tool quota). As a result, a direct comparison to Wall Street consensus could not be provided. We note that Q2 GAAP EPS was $(0.60) while adjusted NII per share was $0.38; given heightened non‑accruals and losses, consensus for NAV trajectory may need to reset lower, while NII coverage remains solid due to recurring investment income .

Key Takeaways for Investors

  • The quarter shows solid recurring earnings power (adjusted NII $0.38, 112% coverage) despite a credit hit; dividend appears well‑supported near term .
  • Credit remediation is the swing factor: outcomes on SellerX, Pluralsight, and McAfee will drive NAV path and potential reversals; mgmt is actively engaged and often in lead positions .
  • Balance sheet optionality improved: terming out debt via 2029 notes and extending facility maturities supports deployment capacity and cushions against market volatility .
  • Yield tightening and disciplined underwriting suggest focus on quality first‑lien exposure; expect moderated portfolio yields vs 2023/Q1 levels as higher‑yield exits roll off .
  • Near‑term trading: stock likely sensitive to updates on non‑accrual resolutions and NAV stabilization; dividend declarations and capital actions are supportive catalysts .
  • Medium‑term thesis: durable NII from a largely floating‑rate, first‑lien portfolio in core middle market; merger synergies and lower fee rate enhance earnings power through cycle .
  • Watch leverage and liquidity: temporary leverage elevation should normalize post repayment; ample liquidity provides flexibility for opportunistic deployments and portfolio support .

Sources: Q2 2024 8‑K and Exhibit 99.1 (press release) ; Q2 2024 press release ; Q2 2024 earnings call transcript ; Q1 2024 8‑K and call ; Q4 2023 8‑K .