Financial Data and Key Metrics Changes - For the quarter ending December 31, 2024, the company reported net investment income of $0.8 million or $0.06 per share, down from $0.16 per share in the prior quarter [4] - The net asset value per share decreased by $0.16 to $5.39 compared to $5.55 as of September 30, 2024 [4] - The fair value of the portfolio was $191.6 million, an increase from $190.1 million at September 30 [17] - Net assets declined by $2.3 million from the prior quarter to $77.6 million [17] - The weighted average yield of the debt portfolio decreased slightly from 10.5% to 10.4% [17] Business Line Data and Key Metrics Changes - The median EBITDA of the portfolio remained flat at approximately $61.76 million, while the weighted average net leverage increased from 4.8 times to 5 times [9] - The percentage of covenant appeals increased from 70% to 77% [9] - The weighted average yield of debt investments made in the quarter was approximately 11.8% [11] Market Data and Key Metrics Changes - Approximately 30% of the portfolio may experience moderate effects from tariffs, with strategies in place to mitigate these risks [7] - The company is strategically targeting investments in critical sectors and defensive industries, including a recent investment in the data center sector [8] Company Strategy and Development Direction - The company remains focused on capital preservation and NAV stability, with a disciplined investment approach [22] - The management is adapting to market volatility and heightened competition among lenders, with a focus on quality assets [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties and delivering value to shareholders [6] - The potential impact of tariffs on the portfolio and M&A market is being closely monitored [36] Other Important Information - The company appointed Andrew Muns as Chief Operating Officer, enhancing the executive team [3] - The company declared a distribution of $0.12 per share for the quarter ending March 31, 2025, payable in cash [19] Q&A Session Summary Question: What was the cause for the drop in PIK income quarter-over-quarter? - The drop in PIK income was due to a reversal of non-accrual for one portfolio company in the previous quarter, which inflated PIK income [25] Question: What are the comments on the sustainability of the dividend given lower yields and higher leverage? - The company is constantly evaluating the sustainability of the dividend and will monitor the portfolio's performance [26][27] Question: Is the company changing to a calendar fiscal year? - Yes, the company has changed its fiscal year from June to December [28][30] Question: What is the trend for investment yield over the next quarter or two? - The investment yield is expected to remain similar, around 10.5% plus or minus, unless there is a significant economic shock [34][36]

Financial Data and Key Metrics Changes - For the quarter ending December 31, 2024, the company reported net investment income of $0.8 million or $0.06 per share, down from $0.16 per share in the prior quarter [4] - The net asset value per share decreased by $0.16 to $5.39 compared to $5.55 as of September 30, 2024 [4] - The fair value of the portfolio was $191.6 million compared to $190.1 million at September 30 [17] - Net assets were $77.6 million, a decline of $2.3 million from the prior quarter [17] - The weighted average yield of the debt portfolio decreased slightly from 10.5% to 10.4% [17] Business Line Data and Key Metrics Changes - The median EBITDA of the portfolio remained flat at approximately $61.76 million, while the weighted average net leverage increased from 4.8 times to 5 times [9] - The percentage of covenant appeals increased from 70% to 77% [9] - The weighted average yield of debt investments made in the quarter was approximately 11.8% [11] Market Data and Key Metrics Changes - Approximately 30% of the portfolio may experience moderate effects from tariffs, with strategies in place to mitigate these risks [7] - The company is strategically targeting investments in critical sectors and defensive industries, including a recent investment in the data center sector [8] Company Strategy and Development Direction - The company remains focused on capital preservation and NAV stability, with a disciplined investment approach [22] - The management is adapting to economic uncertainties and believes the portfolio is well-positioned for the shifting economic environment [6][7] Management's Comments on Operating Environment and Future Outlook - Management noted that heightened market volatility has created a tightening spread environment, impacting investment yields [5] - There is optimism for a resurgence in M&A activity post-election, although risks from tariff wars and fiscal policy changes create uncertainty [5][6] - The company does not foresee significant changes in investment yields in the near term, expecting them to remain around 10.5% [34] Other Important Information - The company appointed Andrew Muns as Chief Operating Officer, enhancing the executive team [3] - The company has approximately $12.1 million in cash, with $11.3 million being restricted cash [20] - A distribution of $0.12 per share was declared for the quarter ending March 31, 2025, payable in cash [19] Q&A Session Summary Question: What was the cause for the drop in PIK income quarter-over-quarter? - The drop was due to a reversal of non-accrual for one portfolio company in the previous quarter, which inflated PIK income [25] Question: What are the comments on the sustainability of the dividend given lower yields and higher leverage? - The company is constantly evaluating the dividend sustainability and will monitor the portfolio's performance [26][27] Question: Is the company changing to a calendar fiscal year? - Yes, the company has changed its fiscal year from June to December [28][30] Question: Where does the company see the trend for investment yield over the next quarter or two? - The investment yield is expected to remain stable around 10.5%, barring any economic shocks [34][36]

Financial Performance - The Company reported net investment income of $2.3 million, or $0.16 per share, for the quarter[3]. - Total investment income for the three months ended September 30, 2024, was $6,846,775, an increase from $5,897,706 in the same period last year, representing a growth of approximately 16.1%[13]. - Net investment income for the quarter was $2,325,943, compared to $1,627,667 in the prior year, reflecting an increase of about 42.8%[13]. - The net increase in net assets resulting from operations was $6,606,629, a significant recovery from a net decrease of $1,684,362 in the previous year[13]. - Basic and diluted earnings per share for the quarter were $0.46, compared to a loss of $(0.12) per share in the same quarter last year[13]. - Total expenses for the quarter were $4,590,410, up from $4,356,669 in the prior year, marking an increase of approximately 5.4%[13]. Investment Activity - Total investments made during the quarter amounted to $13.1 million, with a weighted average yield of 10.73%[2][7]. - The Company realized investments totaling $13.4 million during the quarter, achieving an internal rate of return of 11.75%[2]. - The company reported a net realized loss from investments of $(4,056,505) for the quarter, while the net change in unrealized appreciation was $8,337,191, indicating a strong recovery in investment values[13]. - Interest income from non-controlled, non-affiliated investments was $4,674,329, down from $5,465,288, a decrease of about 14.4%[13]. Asset Management - Net asset value increased by $0.34 per share to $5.55, reflecting a 6.50% increase in net assets, totaling $4.9 million[2]. - Total assets as of September 30, 2024, were $203.0 million, with net assets of $79.89 million[3][12]. - Cash resources included $10.1 million, with $8.3 million classified as restricted cash[11]. - The weighted average yield on debt investments at cost for the quarter was 10.51%, down from 12.33% in the previous quarter[2]. - The Company had net repayments of $7,500 on existing credit commitments during the quarter[2][8]. - As of September 30, 2024, the investment portfolio consisted of 45 portfolio companies, with 82.47% in first lien investments[10]. Shareholder Returns - The Company declared a distribution of $0.12 per share for the quarter ending December 31, 2024, with a yield of 15.34% based on a share price of $3.13 as of September 30, 2024[2][6]. - The weighted average shares of common stock outstanding increased slightly to 14,403,752 from 14,392,714 year-over-year[13]. Strategic Outlook - The company has a strategy focused on investing in middle-market companies with annual revenues of at least $50 million and EBITDA of at least $15 million[14]. - Forward-looking statements indicate that the company anticipates potential market volatility and interest rate changes may impact future performance[15].

Financial Data and Key Metrics Changes - The net asset value increased by $0.34 per share to $5.55 from $5.21 as of June 30, 2024, driven by higher net investment income and unrealized gains on investments [6][21] - Net investment income for the quarter was $2.3 million or approximately $0.16 per share, reflecting a $1 million increase over the prior quarter [7] - The fair value of the portfolio rose to $190.1 million from $184.6 million, with net assets increasing by $4.9 million to $79.7 million [21][25] - The weighted average of the debt portfolio decreased to 10.5% from 12.3% in the previous quarter, influenced by declining SOFR and tighter spreads [22] Business Line Data and Key Metrics Changes - The median EBITDA of the portfolio increased from approximately $55 million to $61 million, while the weighted average net leverage declined from 5.1 times to 4.7 times [11] - Non-accruals as a percentage of total fair market value improved to 4.8% from 5% in the previous quarter [11] Market Data and Key Metrics Changes - New deal flow in M&A and LBO activity remained subdued, but origination volumes increased due to refinancing deposits [8] - The investment pipeline is described as robust, with a focus on high-quality sponsors and companies in defensible industries [10] Company Strategy and Development Direction - The company aims to build a business around core middle market companies, focusing on those with $15 million to $75 million in EBITDA [35][38] - The strategy includes increasing the average EBITDA of the portfolio, decreasing leverage, and sourcing more directly from sponsors [38] - The company is also looking to improve operating efficiencies and reduce expenses over time [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties and delivering value to shareholders [5] - The company is optimistic about future opportunities despite intense competition and a challenging market environment [10][27] Other Important Information - The Board of Directors declared a distribution of $0.12 per share for the quarter ended December 1, 2024, payable on January 8, 2025 [24] - As of September 30, the company had approximately $10.1 million in cash, with $52.5 million of capacity under its revolving credit facility [25] Q&A Session Summary Question: What was the driver of the PIK income for the quarter? - The primary driver was the reversal of non-accrual to accrual of Klein Hersh, which had been on non-accrual for the previous three quarters [28] Question: Were there any timing issues affecting the quarter's results? - Yes, some deals that were expected to close last quarter spilled over into this quarter, which is common in this business [29] Question: Can you provide details on realized loss and unrealized gain? - The realized loss was due to Crafty Apes, while unrealized gains were attributed to the markups of Klein Hersh and Bioplan [33] Question: What is the vision for sourcing deals in the market? - The focus is on core middle market companies, with a significant portion of transactions sourced directly from sponsors [35][36] Question: Are there plans to improve operating efficiencies? - The company is conducting a deep dive into managing expenses efficiently, with expectations that the expense ratio will decrease as the business grows [40]

Investment Objectives and Strategy - Investcorp Credit Management BDC, Inc. has a primary investment objective to maximize total return to stockholders through investments in debt and equity of privately held middle-market companies [148]. - The company has a strong track record of consistent performance and growth, positioning it well to manage current market challenges [156]. - Revenue is primarily generated from interest on debt, with additional income from royalties, dividends, and capital gains [172]. Financial Position and Assets - As of September 30, 2024, Investcorp manages assets totaling $21.8 billion, indicating a strong position in the credit investment market [149]. - As of September 30, 2024, the investment portfolio represented 93.7% of total assets, down from 96.0% as of June 30, 2024 [165]. - The company had a total cash balance of $1.7 million, $8.3 million in restricted cash, and $52.5 million of capacity under the Capital One Revolving Financing [193]. Debt and Financing - The Base Management Fee for the Adviser is set at 1.75% of gross assets, with an Incentive Fee of 20% on pre-incentive fee net investment income above an 8% hurdle rate [152]. - The company is permitted to issue multiple classes of indebtedness if asset coverage is at least 150% immediately after issuance [155]. - Borrowings under the Capital One Revolving Financing amounted to $47.5 million as of September 30, 2024, compared to $43.0 million as of June 30, 2024 [166]. - The company amended the Capital One Revolving Financing to extend the maturity date to January 17, 2029, and increased applicable interest spreads [166]. Investment Performance - Investment income for the three months ended September 30, 2024, increased to $6.8 million from $5.9 million for the same period in 2023, primarily due to an increase in PIK interest income [186]. - Net investment income rose to $2.3 million for the three months ended September 30, 2024, compared to $1.6 million for the same period in 2023, driven by increased PIK interest income and lower interest expenses [188]. - Net realized loss from investments was $4.1 million for the three months ended September 30, 2024, primarily due to losses from the restructuring of the investment in Klein Hersh, LLC [189]. Regulatory Compliance and Risk Management - The company has no Taxable Subsidiaries as of September 30, 2024, maintaining compliance with RIC requirements [154]. - The company is required to comply with regulatory requirements, including maintaining at least 70% of total assets in qualifying assets [170]. - The company is subject to financial market risks, including changes in interest rates, which could materially affect net investment income [204]. Valuation and Investment Process - Fair value of portfolio investments is determined based on principles set forth by the board of directors, with significant reliance on market quotations [159]. - The valuation process for investments involves a multi-step review by the board of directors and independent valuation firms [163]. - The investment rating system indicated that as of September 30, 2024, 12.1% of the portfolio was rated 1, 62.0% rated 2, and 19.4% rated 3, with 4.8% rated 5 [185]. Cash Flow and Distributions - For the three months ended September 30, 2024, the total cash balance increased by $5.0 million, with cash from operating activities contributing $0.5 million, primarily due to $14.3 million from sales and repayments of portfolio companies [192]. - The company intends to distribute between 90% and 100% of its annual taxable income to stockholders, but may face limitations due to covenants in financing arrangements [199]. - The board of directors declared a distribution of $0.12 per share for the quarter ended December 31, 2024, payable on January 8, 2025 [203]. Interest Rate Exposure - Approximately 96.9% of debt investments bore interest based on floating rates as of September 30, 2024, exposing net interest income to interest rate fluctuations [205]. - A 1.00% increase in interest rates would increase the company's net interest income by approximately 7.42%, while a 2.00% increase would raise it by approximately 18.38% [207]. - The company had no hedging transactions in place as of September 30, 2024, as management deemed the interest rate risk acceptable [209].

Portfolio Overview - As of June 30, 2024, the company's portfolio had a fair value of $184.6 million, consisting of 85.02% first lien investments and 14.98% equity and other positions[12]. - The total fair value of the portfolio as of June 30, 2024, is $184,569,530, with 60 investments, compared to $220,111,329 with 65 investments as of June 30, 2023[48]. - The company's portfolio as of June 30, 2024, consisted of 85.02% first lien investments and 14.98% equity, warrant, or other positions[91]. Investment Strategy - The company focuses on middle-market companies due to reduced availability of capital and robust demand for debt capital, with private equity firms holding approximately $965.0 billion of uncalled capital as of March 31, 2024[25]. - The company primarily invests in middle-market companies with annual revenues of at least $50 million and EBITDA of at least $15 million[28]. - Investments typically range in size from $5 million to $25 million, with a focus on standalone first and second lien loans, unitranche loans, and selectively in unsecured debt[28]. - The investment strategy includes a focus on companies with significant asset or franchise values and strong free cash flow[28]. - The company aims to capitalize on the limited competition in the middle-market lending space, facilitating higher quality deal flow[24]. - The company believes that current market conditions allow for attractively priced debt investments with potential return-enhancing mechanisms[27]. Risk Management and Underwriting - The company emphasizes disciplined underwriting policies and rigorous portfolio management to achieve favorable risk-adjusted returns[26]. - The underwriting process includes evaluating historical and projected financial performance, management team experience, and industry dynamics[35][37]. - The investment rating system categorizes investments from 1 (performing above expectations) to 5 (substantially below expectations), with 18.4% of the portfolio rated 3 or below as of June 30, 2024[45][46]. - The company utilizes hedging techniques, such as interest rate swaps, to mitigate potential interest rate risks on indebtedness[58]. - A 1.00% increase or decrease in interest rates would affect the company's net interest income by approximately 5.93%[410]. - A 2.00% increase or decrease in interest rates would affect the company's net interest income by approximately 14.94%[410]. Management and Advisory Fees - The Base Management Fee is set at an annual rate of 1.75% of gross assets, calculated based on the average value at the end of the two most recently completed calendar quarters[66]. - The Income-Based Fee is 20.0% of the Pre-Incentive Fee Net Investment Income exceeding a 2.0% hurdle rate, with a catch-up provision for amounts between 2.0% and 2.5%[68]. - The management fee is set at an annualized rate of 1.75%[82]. - The advisory fee structure is considered reasonable and beneficial to stockholders, particularly due to the exclusion of cash and cash equivalents from the Base Management Fee calculation[90]. - The board of directors concluded that the proposed advisory fees are reasonable, considering indirect benefits to the Adviser[94]. Compliance and Regulatory Requirements - The company is a BDC under the 1940 Act, which imposes restrictions on transactions with affiliates and requires a majority of independent directors[103]. - The company must provide significant managerial assistance to portfolio companies, except in cases of control or group purchases[107]. - 70% of the company's assets are required to be in qualifying assets or temporary investments, which include cash and U.S. government securities[108]. - The company is required to distribute at least 90% of its investment company taxable income to qualify as a Regulated Investment Company (RIC)[124]. - To avoid a 4% excise tax, the company must distribute 98% of its net ordinary income and 98.2% of its capital gain net income annually[125]. - The company must satisfy the 90% Income Test and Diversification Tests to maintain its RIC status[130]. - If the company fails to maintain its RIC qualification, it could be subject to corporate-level U.S. federal income taxes on all taxable income[131]. Performance and Returns - The weighted average total yield of debt and income-producing securities at amortized cost was 12.47%, while the total portfolio yield was 10.60%[12]. - The company expects to receive interest income over the investment period, providing significant returns on invested capital prior to final exit[57]. - The company aims to exit investments through company sales, recapitalizations, or loan repayments, with a focus on maintaining significant underlying equity value[31]. - Cumulative incentive compensation accrued for the preceding 11 calendar quarters was $9,000,000, with a cumulative net increase in net assets of $8,000,000[80]. Competition and Market Position - The company faces competition from larger public and private funds, other BDCs, and commercial banks, which may have access to funding sources not available to it[60]. - The investment adviser, CM Investment Partners, has a team with over 100 combined years of experience in structuring customized debt solutions for middle-market companies[18]. - The investment team has extensive networks for sourcing investment opportunities, enhancing the company's competitive advantage in identifying investments[26]. Governance and Operations - The company does not have direct employees; day-to-day operations are managed by the Adviser, with key officers being employees of the Adviser[62]. - The Advisory Agreement allows for a termination notice of 60 days without penalty from either party[85]. - The Board of Directors approved the continuation of the Advisory Agreement on July 23, 2024, considering various factors including advisory fees and operating expenses[87]. - The Administration Agreement allows the Adviser to provide various administrative services, including maintaining financial records and preparing reports for stockholders[95]. - The company has adopted a code of ethics to govern personal investments and restrict certain transactions by its personnel[112].

Group 1 - The article emphasizes the importance of a proven ranking system that focuses on earnings estimates and revisions to identify winning stocks [1] - Value investing is highlighted as a popular strategy for finding undervalued stocks that have potential for profit [2] - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly in the Value category, where stocks with "A" grades and high Zacks Ranks are considered strong value stocks [3] Group 2 - Investcorp Credit Management BDC (ICMB) is identified as a stock to watch, currently holding a Zacks Rank of 2 (Buy) and an A for Value [4] - ICMB has a P/E ratio of 7.30, which is lower than the industry average of 8.56, indicating potential undervaluation [4] - The P/B ratio for ICMB is 0.59, compared to the industry average of 0.93, further suggesting that the stock may be undervalued [5] - ICMB's P/S ratio is 1.84, significantly lower than the industry's average P/S of 3.7, reinforcing the notion of undervaluation [6] - Overall, the key metrics indicate that ICMB is likely undervalued and presents an impressive value stock opportunity [7]

Financial Data and Key Metrics Changes - For the quarter ended March 31, 2024, net investment income was $2.1 million or $0.14 per share, an increase of approximately 32% from the previous quarter's net investment income of $1.6 million or $0.11 per share [23][28] - Net asset value per share increased approximately 0.2% to $5.49 per share from $5.48 per share at the end of the prior quarter, driven by an increase in capital gains [23][28] - The fair value of the portfolio was $192.2 million compared to $207.4 million on December 31, 2023 [28] Business Line Data and Key Metrics Changes - The weighted average yield of the debt portfolio increased to 12.36% compared to 11.46% for the quarter ended December 31, 2023 [28] - Fundings for new investments totaled approximately $8.9 million at cost with a weighted average yield of approximately 12.49% [25] - Six portfolio company realizations during the quarter totaled $21.2 million in proceeds with an IRR of approximately 17.09% [25][26] Market Data and Key Metrics Changes - Sponsored middle market direct lending new money volume in the quarter ending March 31, 2024, was down almost 10% from the quarter ended December 31, 2023 [25] - The weighted average EBITDA of the portfolio increased from $42.6 million as of March 31, 2023, to $63.5 million this quarter [25] Company Strategy and Development Direction - The company is focused on capital preservation and maintaining a stable dividend while rotating and diversifying the portfolio into more stable credits [29] - The strategy includes investing in larger credits backed by known sponsors and managing watch list names diligently [25][29] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline and capacity to invest capital in high-quality opportunities despite a competitive market with tightening spreads [24][29] - The company is actively working on nonaccrual situations and believes the overall health of the portfolio remains strong [19][20] Other Important Information - The company covered its March quarterly dividend with net investment income and expects to earn its dividend through the next quarter end [24] - Gross leverage was 1.52 times and net leverage was 1.36 times as of March 31, 2024, compared to 1.70 times gross and 1.51 times net for the previous quarter [28] Q&A Session Summary Question: What was the driver for the change in the yields on the portfolio? - Management indicated that the change was largely due to market conditions, with spreads tightening and a lack of deal flow in the marketplace [14] Question: Any update on Klein Hersh, one of the larger nonaccruals? - Management stated that discussions are ongoing and they believe they are in a good place, with more information to be shared once restructuring is finalized [15] Question: Will earnings cover the base dividend or the entire base and supplemental? - Management confirmed that earnings are expected to cover the base dividend, but not necessarily the supplemental at this point [16] Question: Thoughts on refinancing the 2026 notes with a higher coupon? - Management is developing a strategy around the refinancing and has been reducing net leverage over time [17] Question: Resolution time frame for other nonaccruals and overall health of the credit portfolio? - Management expressed satisfaction with the overall health of the portfolio and indicated that there are no imminent issues, although a couple of situations are developing [18][19]

Core Viewpoint - Investcorp reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, but down from $0.18 per share a year ago, indicating a 16.67% earnings surprise [1][2] Financial Performance - The company achieved revenues of $6.62 million for the quarter ended March 2024, surpassing the Zacks Consensus Estimate by 13.52%, compared to $7.01 million in the same quarter last year [2] - Over the last four quarters, Investcorp has exceeded consensus EPS estimates three times and topped revenue estimates three times as well [2] Stock Performance - Investcorp shares have declined approximately 8.6% since the beginning of the year, contrasting with the S&P 500's gain of 9.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $5.71 million, and for the current fiscal year, it is $0.47 on revenues of $23.68 million [7] Industry Outlook - The Financial - SBIC & Commercial Industry, to which Investcorp belongs, is currently ranked in the top 40% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other Jurisdiction of Incorporation or Organization ...