Financial Data and Key Metrics Changes - The net asset value (NAV) per share was $11.29, a slight decrease of 0.2% from the previous quarter and an increase of 0.1% year-over-year [33] - Net investment income for the quarter was $0.28 per share, exceeding the dividend of $0.26 per share by $0.02, or 8% [34] - The weighted average yield at fair value was 10.4%, with a net leverage ratio of 1.16 times, slightly up from 1.09 in the previous quarter [18][38] Business Line Data and Key Metrics Changes - BBDC deployed $298 million of capital in the quarter, with net sales and deployment of $76 million, marking one of the most active deployment quarters in recent history [22] - The non-accrual rate declined from 50 basis points in September to 30 basis points as of December, with total non-accruals at 0.3% on a fair value basis [17][29] - The portfolio composition remains highly diversified, with 72% consisting of secured investments and approximately 69% being first lien securities [26] Market Data and Key Metrics Changes - Lending activity was muted in the first three quarters of 2024, but there was a meaningful uptick in deployment during the fourth quarter [7] - Economic data appears overwhelmingly positive, with credit fundamentals such as cash flows, revenue growth, and margins exhibiting positive trends [12] Company Strategy and Development Direction - The company continues to focus on the core of the middle market, reflecting lower leverage levels and more attractive risk-adjusted returns [8] - The strategy includes simplifying the portfolio and selectively investing in compelling middle-market direct lending opportunities [22] - The company remains cautious about the pace of new buyout opportunities due to regulatory and trade uncertainties [14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2025, noting that while the economic indicators are positive, regulatory uncertainties have created a pause in private market activities [12][13] - The company anticipates continued strength in portfolio performance, with a focus on credit quality and underwriting [20][29] Other Important Information - The board declared a fourth-quarter dividend of $0.26 per share and special dividends totaling $0.15 per share, equating to an 11% yield based on NAV [19][41] - The company repurchased over 650,000 shares in 2024 and authorized a new $30 million share repurchase plan for 2025 [42] Q&A Session Summary Question: Can you outline the spirit of a PIK non-accrual and how it compares to regular definitions? - Management explained that a PIK non-accrual indicates that while cash payments are being made, the full value including PIK may not be recoverable [46][50] Question: How much of the CSA marks were interest rate or timing related versus fundamental? - The majority of the change was associated with the valuation of Black Angus Steakhouse, with some impacts from interest rate and timing [52] Question: What are the expectations for portfolio rotation in 2025? - Management indicated a focus on rotating out non-Barings names and maximizing value from income-producing assets, while remaining cautious about market timing [58] Question: How much of the portfolio is exposed to regulatory uncertainty? - Preliminary indications suggest that 60% to 75% of the portfolio will be unimpacted by regulatory uncertainty, with ongoing monitoring of the most impacted issuers [63] Question: Will fee and other income be flat to down in 2025? - Management expects fee income to be flat, with potential for amendment fees to offset any losses from OID acceleration [70][72] Question: Was there a one-time deal that contributed to higher fee income in Q4? - Yes, there was a transaction with a substantive fee component that created an outlier dynamic for the fourth quarter [74]

FEBRUARY 20, 2025 Barings BDC, Inc. Fourth Quarter 2024 Earnings Presentation Important Information & Cautionary Notice Regarding Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation are "forward-looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs, and which are subject to r ...

Financial Performance - The company paid $0.2 million in brokerage commissions during the fiscal year ended December 31, 2024, compared to no commissions in the previous two fiscal years[73]. - The company intends to distribute substantially all of its income to stockholders to minimize U.S. federal income taxes, having met distribution requirements for 2022, 2023, and 2024[103]. - The company may face challenges in meeting the Annual Distribution Requirement if it recognizes taxable income without corresponding cash receipts[145]. - If the company fails to satisfy the Annual Distribution Requirement, it will be subject to corporate-level U.S. federal income tax on all taxable income[153]. - The company is authorized to borrow funds and sell assets to satisfy distribution requirements, but this may limit its ability to make advantageous investment decisions[152]. Investment Management - The Base Management Fee paid to Barings is calculated at an annual rate of 1.25% based on the company's gross assets, excluding cash and cash equivalents[89]. - The Income-Based Fee is calculated quarterly based on the Pre-Incentive Fee Net Investment Income exceeding a Hurdle Amount, which is 2.0625% of the NAV at the beginning of each quarter[90]. - The Catch-Up Amount is determined quarterly as 2.578125% of the NAV, allowing Barings to receive a 20% incentive fee on Pre-Incentive Fee Net Investment Income once it reaches this threshold[91]. - If Pre-Incentive Fee Net Investment Income exceeds the Catch-Up Amount, the Income-Based Fee equals 20% of the excess amount[92]. - The Capital Gains Fee is calculated annually, equal to 20% of cumulative realized capital gains minus cumulative realized capital losses, starting from the year ended December 31, 2018[92]. Compliance and Regulation - The company is regulated as a Business Development Company (BDC) under the 1940 Act, requiring a majority of directors to be non-interested persons[110]. - The company must ensure that qualifying assets represent at least 70.0% of total assets at the time of acquisition[112]. - The company is required to maintain a coverage ratio of total assets to total senior securities of at least 150% due to its BDC status[106]. - The company must provide significant managerial assistance to portfolio companies to count portfolio securities as qualifying assets[119]. - The company is subject to compliance with the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act, including filing quarterly and annual reports[131]. Corporate Governance - The company has adopted a Global Code of Ethics Policy and corporate governance guidelines applicable to its directors and employees[122]. - The Barings BDC Advisory Agreement was re-approved for an additional one-year term ending June 24, 2025, and can be terminated with 60 days' notice[96]. - The Administration Agreement allows Barings to perform necessary administrative services, with costs reimbursed by the company, capped at a mutually agreed quarterly amount[98]. - The company is prohibited from making certain negotiated co-investments with affiliates without prior SEC approval[128]. - The company is required to review its compliance policies and procedures annually for adequacy and effectiveness[124]. Investment Strategy - The company assists portfolio companies in developing exit strategies, including sales or mergers[70]. - The company competes with various investment funds and financial services companies, some of which have greater resources and fewer regulatory restrictions[71]. - The company estimates the fair value of investments in certain entities using the NAV and ownership percentage as a practical expedient[68]. - The company has wholly-owned taxable subsidiaries to hold certain portfolio investments, preserving its RIC status and tax advantages[104]. - The company has qualified and elected to be treated as a RIC under Subchapter M of the Code since the taxable year ended December 31, 2007[138]. Debt and Financing - As of December 31, 2024, approximately $1,881.9 million of the debt portfolio investments bore interest at variable rates, primarily SOFR-based[543]. - Approximately 50.5% of total borrowings, amounting to $738.6 million, bore interest at variable rates under the February 2019 Credit Facility and the February 2029 Notes[543]. - A hypothetical increase of 300 basis points in interest rates would result in an increase in net income by $34,299 thousand[545]. - A hypothetical decrease of 50 basis points in interest rates would result in a decrease in net income by $5,717 thousand[545]. - The balance of unused commitments to extend financing as of December 31, 2024, was reported, indicating adequate financial resources to satisfy unfunded commitments[548]. Shareholder Returns - A new 12-month share repurchase program was authorized, allowing the company to repurchase up to $30.0 million of its common stock starting March 1, 2025[557]. - The Board declared a quarterly distribution of $0.26 per share, payable on March 12, 2025, along with three special dividends totaling $0.15 per share throughout 2025[558]. - The first special dividend of $0.05 per share will be paid on March 12, 2025, with subsequent payments scheduled for June 11 and September 10, 2025[559].

Financial Performance - Barings BDC reported net investment income of $29.5 million, or $0.28 per share, for Q4 2024, with a total investment income of $70.6 million[6]. - Net investment income after taxes for the full year 2024 was $131,194,000, compared to $134,660,000 for the previous year, reflecting a decrease of about 3.5%[29]. - Total investment income for the full year 2024 was $286,169,000, a decrease from $286,169,000 in the previous year[29]. - The company reported a total dividend/distribution per share of $1.04 for the full year 2024, consistent with the previous year[31]. - The company recorded net unrealized appreciation of $9.2 million in Q4 2024, despite a net unrealized depreciation of $46.0 million on its current portfolio[9]. Assets and Liabilities - Total assets increased to $2,695.7 million, while total net assets (equity) decreased slightly to $1,190.4 million[4]. - Total liabilities increased from $1,480,894,000 in 2023 to $1,505,306,000 in 2024, representing an increase of approximately 1.6%[27]. - Total debt as of December 31, 2024, was $1,463,590,000, up from $1,372,811,000 as of September 30, 2024[36]. - The debt-to-equity ratio as of December 31, 2024, was 1.23x, up from 1.15x as of September 30, 2024[4]. - The total net debt-to-equity ratio increased to 1.16x as of December 31, 2024, compared to 1.09x as of September 30, 2024[36]. Cash and Investments - Cash and cash equivalents increased from $57,187,000 in 2023 to $74,381,000 in 2024, an increase of approximately 29.9%[27]. - Cash and foreign currencies at the end of the period increased to $91,339,000 from $70,528,000 in 2023[33]. - The investment portfolio at fair value as of December 31, 2024, was $2,449.3 million, with a weighted average yield on performing debt investments of 10.2%[4]. - Total investments at fair value decreased from $2,488,715,000 in 2023 to $2,449,272,000 in 2024, a decline of approximately 1.6%[27]. - Purchases of portfolio investments totaled $637,440,000 in 2024, compared to $614,648,000 in 2023, indicating a slight increase of 3.0%[33]. Shareholder Actions - The company declared a quarterly cash dividend of $0.26 per share and special dividends totaling $0.15 per share, to be paid in three equal installments in 2025[1]. - The company authorized a new share repurchase program allowing for the repurchase of up to $30.0 million of its common stock over the next 12 months[12]. - The company did not report any cash consideration paid for the Sierra merger in 2024, while it had $101,896,000 in 2023[33]. Operational Highlights - During Q4 2024, Barings BDC made 15 new investments totaling $137.9 million and invested an additional $156.5 million in existing portfolio companies[8]. - Net cash provided by operating activities for 2024 was $122,161,000, an increase of 58.8% compared to $76,944,000 in 2023[33]. - The company reported a net increase in net assets resulting from operations of $110,289,000 for 2024, down from $127,999,000 in 2023[33]. - The net realized losses on investments for the full year 2024 amounted to $23,773,000, compared to $6,129,000 in the previous quarter, indicating a significant increase in losses[31]. - Subsequent to December 31, 2024, Barings BDC made approximately $81.3 million of new commitments, with $49.9 million closed and funded[16].

Industry Overview - The Zacks SBIC & Commercial Finance industry focuses on providing financing to small and mid-sized privately held firms, often underserved by traditional banks [3] - The industry offers customized financing solutions, including senior debt instruments and equity capital, targeting firms undergoing ownership changes, buyouts, and growth initiatives [3] Key Themes - **Economic Strength and Interest Rates**: The Federal Reserve's interest rate cuts are expected to enhance demand for SBIC & Commercial Finance products, supported by solid economic growth and cooling inflation [4][5] - **Regulatory Changes**: The 2018 amendment to the Investment Company Act allowed increased leverage for these companies, enhancing funding flexibility and growth opportunities [6] - **Asset Quality Concerns**: Prolonged high interest rates may lead to a deterioration in asset quality as portfolio companies struggle to service debt, compounded by geopolitical risks [8] Performance Metrics - The Zacks SBIC & Commercial Finance industry ranks 42, placing it in the top 17% of over 250 Zacks industries, indicating robust prospects [9][10] - The industry has underperformed the S&P 500 and the broader finance sector over the past two years, with a collective rise of 17.8% compared to 48.5% for the S&P 500 [12] Valuation - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 1.03X, significantly lower than the S&P 500's 17.24X, indicating a solid discount compared to the market [13][16] Investment Opportunities - **Main Street Capital Corporation (MAIN)**: Specializes in equity and debt capital for lower-middle-market companies, with total investments of $4.53 billion and a market cap of $5.4 billion [19][21] - **Barings BDC, Inc. (BBDC)**: Focuses on senior secured loans and has total investments of $2.42 billion, with a market cap of $1.09 billion [24][26] - **Crescent Capital BDC, Inc. (CCAP)**: Invests in the debt of private middle-market companies, with total investments of $1.59 billion and a market cap of $739.9 million [29][30]

Group 1: Barings BDC (BBDC) - Barings BDC is an externally managed business development company focused on debt investments in middle market companies [1] - The Zacks Consensus Estimate for its next year earnings has increased by 6.5% over the last 60 days [1] - The company has a dividend yield of 10.3%, which is higher than the industry average of 9.8% [1] Group 2: Noble Corporation PLC (NE) - Noble Corporation is an offshore drilling contractor serving the oil and gas industry [2] - The Zacks Consensus Estimate for its current year earnings has risen by nearly 4.3% over the last 60 days [2] - The company offers a dividend yield of 6.4%, significantly above the industry average of 0.0% [2] Group 3: Premier Financial (PFC) - Premier Financial operates as a Home Savings Bank and full-service insurance agency [3] - The Zacks Consensus Estimate for its current year earnings has increased by nearly 1.9% over the last 60 days [3] - The company has a dividend yield of 4.6%, compared to the industry average of 2.5% [3]

NOVEMBER 7, 2024 | --- | --- | --- | |-------------------|-------|-----------------------| | | | | | | | | | Barings BDC, Inc. | | | | | | Third Quarter 2024 | | | | Earnings Presentation | Important Information & Cautionary Notice Regarding Forward-Looking Statements Cautionary Notice: Certain statements contained in this presentation are "forward-looking" statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made an ...

Financial Data and Key Metrics Changes - Net asset value per share increased to $11.32, reflecting a 0.4% increase from the prior fiscal year-end [10] - Net investment income for the quarter was $0.29 per share, exceeding the dividend of $0.26 per share by $0.03 or 10% [26] - Nonaccruals as a percentage of fair value remained low at 0.5%, down from 1.5% on a fair value basis as of December 31, 2023 [12] Business Line Data and Key Metrics Changes - The investment portfolio's weighted average yield at fair value was 11% [13] - BBDC deployed $125 million of capital in the quarter, offset by $121 million of sales and repayments, resulting in net deployments of $4 million [15] - The portfolio composition remains highly diversified, with 72% consisting of secured investments and approximately 68% being first lien securities [19] Market Data and Key Metrics Changes - LBO activity in 2024 remains muted, but the third quarter showed signs of improvement in deployment opportunities compared to the first half of the year [16] - Only 13% of transaction volume year-to-date represented "new money financings," indicating a focus on refinancings and repricings [16] Company Strategy and Development Direction - The company continues to focus on the top of the capital structure investments and sponsor-backed middle-market issuers, which are seen as the best segment for risk-adjusted returns [6] - BBDC's portfolio strategy includes simplifying the portfolio and selectively investing in compelling direct lending opportunities [16] - The company aims to align fees and credit performance hurdles with shareholders, with a hurdle rate of 8.25% compared to a median of 7.03% among peers [24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a potential soft landing for the economy, which could lead to a reduction in interest rates and improved credit metrics [8] - The company is confident in its credit selection and underwriting discipline, which is expected to provide stable returns despite potential market volatility [9] - Management highlighted the importance of the portfolio's construction to withstand various economic scenarios [9] Other Important Information - The board declared a fourth quarter dividend of $0.26 per share, consistent with the previous quarter, representing a 9.2% yield on net asset value [35] - The company amended and extended its revolving credit facility, reducing the spread on borrowings and extending the maturity to November 2029 [33][34] - BBDC has $241 million of unfunded commitments to portfolio companies and $65 million of outstanding commitments to joint ventures, with strong overall liquidity of over $540 million [34] Q&A Session Summary - The call experienced technical difficulties, preventing access to questions from analysts and shareholders [37][38] - The company encouraged direct communication with the executive management team for any inquiries [38]

Barings BDC (BBDC) came out with quarterly earnings of $0.29 per share, missing the Zacks Consensus Estimate of $0.30 per share. This compares to earnings of $0.31 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -3.33%. A quarter ago, it was expected that this business development company would post earnings of $0.30 per share when it actually produced earnings of $0.40, delivering a surprise of 33.33%.Over the last four quart ...

Investment Portfolio - As of September 30, 2024, the total value of the investment portfolio was $2,416.7 million, down from $2,488.7 million as of December 31, 2023[358]. - The company had investments in 328 portfolio companies with an aggregate cost of $2,446.9 million as of September 30, 2024, compared to 336 portfolio companies with an aggregate cost of $2,535.6 million as of December 31, 2023[358]. - The total investment portfolio fair value was $2,416,714,000, a decrease from $2,488,715,000 on December 31, 2023[360]. - The total fair value of investments in joint ventures and private equity funds was $104,243,000 as of September 30, 2024, down from $110,066,000 at the end of 2023[360]. - The fair value of investments categorized as Risk Rating 1 increased to $250,611,000 (10.5% of total portfolio) as of September 30, 2024, compared to $207,279,000 (8.5%) at the end of 2023[370]. - The fair value of investments in Risk Rating Category 2 decreased to $1,542,076,000 (65.0%) from $1,787,077,000 (73.0%)[370]. Investment Income - The company generates revenues primarily from interest income, loan origination fees, and dividend income from debt securities[350]. - Total investment income for the three months ended September 30, 2024, was $70.851 million, slightly up from $70.846 million in the same period of 2023[383]. - Net investment income after taxes for the three months ended September 30, 2024, was $30.185 million, compared to $33.309 million for the same period in 2023[383]. - Dividends from portfolio companies for the three months ended September 30, 2024, were $9.8 million, up from $8.5 million in the same period of 2023[384]. - Total recurring fee and other income for the three months ended September 30, 2024, was $2,322,000, compared to $2,258,000 for the same period in 2023, reflecting a 2.83% increase[472]. - Total non-recurring fee and other income for the three months ended September 30, 2024, was $1,967,000, significantly higher than $392,000 for the same period in 2023[472]. - Total fee and other income for the nine months ended September 30, 2024, reached $11,532,000, compared to $10,250,000 for the same period in 2023, indicating a 12.47% increase[472]. Expenses and Losses - Total operating expenses for the three months ended September 30, 2024, were $39.633 million, an increase from $37.125 million in the same period of 2023[385]. - The company experienced a net realized loss of $12.6 million from the restructuring of investments in two portfolio companies during the nine months ended September 30, 2024[361]. - Net realized losses for Q3 2024 totaled $10.9 million, primarily from an $8.5 million loss on the investment portfolio and a $2.9 million loss on forward currency contracts[396]. - During the nine months ended September 30, 2024, net realized losses amounted to $24.3 million, with $17.6 million from the investment portfolio and $7.5 million from forward currency contracts[396]. - The company reported a net loss on its investment portfolio of $62.1 million for the nine months ended September 30, 2023, primarily due to a $43.6 million loss on debt investments[397]. Debt and Borrowings - The company had U.S. dollar borrowings of $131.0 million outstanding under the February 2019 Credit Facility, with a weighted average interest rate of 7.105%[410]. - The fair value of the borrowings outstanding under the February 2019 Credit Facility was $347.8 million as of September 30, 2024[411]. - The company issued $50.0 million in aggregate principal amount of Series A senior unsecured notes due August 2025, with a fixed interest rate of 4.66% per year[412]. - The Series B Notes and Series C Notes under the November 2020 NPA have fixed interest rates of 4.25% and 4.75% per year, respectively[417]. - The company had net repayments under the February 2019 Credit Facility totaling $377.1 million during the nine months ended September 30, 2024[404]. - The February 2019 Credit Facility was increased to $1,065.0 million as of April 1, 2022, with a maturity date extended to February 21, 2026[406]. Share Repurchase and Distributions - The company authorized a share repurchase program allowing for the repurchase of up to $30.0 million of common stock, which terminated on March 1, 2024[440]. - During the nine months ended September 30, 2024, the company did not repurchase any shares under the share repurchase program[440]. - The company authorized a new 12-month share repurchase program allowing for the repurchase of up to $30.0 million of common stock starting March 1, 2024[441]. - The company intends to pay quarterly distributions to stockholders, with a declared distribution of $0.26 per share payable on December 11, 2024[449]. Risk Management - The company is exposed to foreign currency fluctuations, with investments translated into U.S. dollars based on spot rates[495]. - Interest rate risk management systems are in place to monitor and hedge against fluctuations, utilizing instruments like interest rate swaps and options[494]. - The complexity of transitioning away from LIBOR could materially affect the company's financial condition and operations[492]. - A hypothetical increase of 300 basis points in interest rates could result in a net income increase of $36.121 million, while a decrease of 50 basis points could lead to a net income decrease of $6.020 million[496]. Investment Strategy - The company focuses on investing in senior secured private debt investments in well-established middle-market businesses across various industries[348]. - The company employs a strategy that targets investments with relatively low levels of cyclicality and operating risk, enhancing returns through prudent leverage[349]. - The company must distribute at least 90% of its investment company taxable income (ICTI) to maintain its status as a regulated investment company (RIC)[445]. - The company has historically met its minimum distribution requirements and continually monitors compliance with the Code[443].