BlackRock TCP Capital (US:TCPC)2025-05-08 12:01Part I. Financial Information Financial Statements The consolidated financial statements present BlackRock TCP Capital Corp.'s financial position as of March 31, 2025, and December 31, 2024, along with its operational results and cash flows for the first quarters of 2025 and 2024 Consolidated Statements of Assets and Liabilities As of March 31, 2025, total assets decreased slightly to $1.90 billion from $1.92 billion at year-end 2024, primarily due to a decrease in the fair value of investments Consolidated Balance Sheet Summary | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments, at fair value | $1,769,273,768 | $1,794,758,336 | | Total Assets | $1,898,903,559 | $1,923,031,363 | | Total Liabilities | $1,117,584,635 | $1,137,907,696 | | Total Net Assets | $781,318,924 | $785,123,667 | | Net Assets Per Share | $9.18 | $9.23 | Consolidated Statements of Operations For the three months ended March 31, 2025, total investment income was $55.9 million, nearly flat year-over-year, with net income from operations surging to $20.9 million due to lower expenses and reduced losses Quarterly Operating Results Summary | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total Investment Income | $55,888,915 | $55,729,309 | | Total Operating Expenses | $23,686,246 | $27,468,036 | | Net Investment Income | $32,202,669 | $28,261,273 | | Net Realized and Unrealized Gain (Loss) | $(11,308,081) | $(23,204,132) | | Net Increase in Net Assets | $20,894,588 | $5,057,141 | | Earnings Per Share (Basic and Diluted) | $0.25 | $0.08 | - Operating expenses in Q1 2025 were reduced by a management fee waiver of $1,827,948 and the absence of incentive fees, which were $5,880,378 in Q1 202410 Consolidated Statements of Changes in Net Assets Net assets decreased by $3.8 million from $785.1 million to $781.3 million, primarily due to dividends paid to shareholders partially offset by net income from operations Reconciliation of Net Assets (Q1 2025) | Description | Amount | | :--- | :--- | | Balance at December 31, 2024 | $785,123,667 | | Repurchase of common stock | $(26,915) | | Net investment income | $32,202,669 | | Net realized and unrealized loss | $(11,308,081) | | Dividends paid to shareholders | $(24,672,416) | | Balance at March 31, 2025 | $781,318,924 | Consolidated Statements of Cash Flows The company generated $52.5 million in cash from operating activities, a significant increase from the prior year, while cash used in financing activities was $45.0 million, ending the period with $99.1 million in cash Quarterly Cash Flow Summary | Cash Flow Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $52,504,101 | $33,412,598 | | Net Cash from Financing Activities | $(44,978,951) | $(25,081,834) | | Net Increase in Cash | $7,525,150 | $8,330,764 | | Cash at End of Period | $99,114,852 | $120,572,710 | Consolidated Schedule of Investments The total investment portfolio had a fair value of $1.77 billion, primarily concentrated in debt investments (90.1%), diversified across 146 companies, with a weighted average effective yield of 12.2% Portfolio Composition as of March 31, 2025 | Investment Type | Fair Value | % of Total Investments | | :--- | :--- | :--- | | Debt Investments | $1,594,279,600 | 90.1% | | Equity Securities | $174,994,168 | 9.9% | | Total Investments | $1,769,273,768 | 100.0% | - The portfolio is invested across 146 companies with an average investment size of approximately $12.1 million at fair value302 - Debt and preferred equity investments in eight portfolio companies were on non-accrual status, representing 4.4% of the portfolio at fair value and 12.6% at cost305 Notes to Consolidated Financial Statements This section details accounting policies, the BCIC merger's treatment as an asset acquisition, debt facilities, management fees, and related-party transactions - The March 18, 2024 merger with BCIC was accounted for as an asset acquisition under ASC 805, with consideration allocated to acquired assets and liabilities based on their relative fair values230233 - Effective upon the merger closing, the base management fee was reduced from 1.50% to 1.25% on assets up to 200% of NAV, and the Advisor voluntarily waived one-third of its management fee for the first three quarters of 2025144 - As of March 31, 2025, the company had total debt outstanding of $1.11 billion with an additional $530.0 million available under its various credit facilities154 - The company has unfunded commitments to portfolio companies totaling $134.7 million as of March 31, 2025193195 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion provides an overview of Q1 2025 financial results, highlighting stable investment income, increased net investment income due to lower expenses, and strong liquidity, while detailing the impact of the BCIC merger and non-GAAP adjustments Portfolio and Investment Activity In Q1 2025, the company invested $66.0 million and received $84.9 million from sales and repayments, maintaining a portfolio fair value of $1.77 billion primarily in senior secured loans with a 12.2% effective yield Q1 2025 Investment Activity | Activity | Amount | | :--- | :--- | | Investments Made | $66.0 million | | Proceeds from Sales/Repayments | $84.9 million | - As of March 31, 2025, 82.6% of total assets were invested in qualifying assets, satisfying the BDC requirement of at least 70%276 - The portfolio's largest industry concentration was Internet Software and Services (14.0%), followed by Software (12.9%) and Diversified Financial Services (11.2%)305 Results of Operations For Q1 2025, net investment income rose to $32.2 million due to decreased operating expenses, including no incentive fees and a management fee waiver, leading to a net increase in net assets of $20.9 million despite realized and unrealized losses - The increase in net investment income was primarily driven by a decrease in incentive fee expense and a management fee waiver, partially offset by higher interest expense from debt assumed in the Merger309310 - Net realized loss of $(40.9) million was primarily from the dispositions of investments in Securus, CIBT, and McAfee311 - Net change in unrealized appreciation was $29.6 million, largely due to the reversal of previously recognized unrealized losses on dispositions and unrealized gains on investments like Job and Talent and AutoAlert312 Liquidity and Capital Resources As of March 31, 2025, the company had $99.1 million in cash, $1.1 billion in total debt, and $530.0 million available for borrowing, maintaining a strong asset coverage ratio of 179.0% - The company's asset coverage ratio was 179.0% as of March 31, 2025, exceeding the 150% regulatory minimum331 - The company has exemptive relief from the SEC to exclude SBA Debentures from its asset coverage test, providing increased borrowing flexibility332 - During Q1 2025, the company repurchased 3,150 shares for a total cost of $26,915 under its share repurchase plan326 Supplemental Non-GAAP Information The company provides non-GAAP financial measures, such as 'Adjusted net investment income,' to exclude purchase discount accounting effects from the BCIC merger, with GAAP NII at $32.2 million ($0.38/share) and Adjusted NII at $30.7 million ($0.36/share) for Q1 2025 GAAP vs. Non-GAAP Results (Q1 2025) | Metric | GAAP Amount | GAAP Per Share | Adjusted Amount | Adjusted Per Share | | :--- | :--- | :--- | :--- | :--- | | Net Investment Income | $32,202,669 | $0.38 | $30,700,296 | $0.36 | | Net Realized/Unrealized Gain (Loss) | $(11,308,081) | $(0.13) | $(9,805,708) | $(0.11) | - These non-GAAP measures are provided to enhance investors' understanding of performance by excluding the non-cash accounting impacts of the BCIC merger321322 Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to interest rate risk, with 94.0% of debt investments being floating-rate, where a 100 basis point increase in base rates would increase annual net investment income by approximately $13.1 million - As of March 31, 2025, 94.0% of the company's debt investments bore interest at floating rates, making net investment income sensitive to changes in market interest rates359 Interest Rate Sensitivity Analysis (Annual Impact) | Basis Point Change | Change in Net Investment Income | Change in NII Per Share | | :--- | :--- | :--- | | +300 bps | $39,391,880 | $0.46 | | +200 bps | $26,261,253 | $0.31 | | +100 bps | $13,130,627 | $0.15 | | -100 bps | $(13,130,627) | $(0.15) | | -200 bps | $(26,014,014) | $(0.31) | | -300 bps | $(37,600,879) | $(0.44) | Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the reporting period, with no material changes to internal control over financial reporting identified during the quarter - Based on an evaluation as of the end of the period covered by the report, the CEO and CFO concluded that the company's disclosure controls and procedures were effective363 - There were no changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, such controls364 Part II. Other Information Legal Proceedings The company is a defendant in a lawsuit filed in September 2023 related to a third-party sponsored collateralized loan obligation, seeking approximately $15 million plus interest and fees, with the outcome uncertain - The company was named as a defendant in a lawsuit filed on September 13, 2023, concerning a third-party sponsored collateralized loan obligation366 - The suit seeks to recover approximately $15 million from the Company, plus interest and fees, and the company intends to vigorously defend against these claims, but the outcome is uncertain366 Risk Factors This section highlights key risks including potential adverse effects of tariffs, economic recessions, and the impact of covenants in credit facilities, which could lead to increased non-performing assets or accelerated debt repayment - The company and its portfolio companies face risks from potential tariffs, which could increase production costs or reduce demand for products368 - Economic recessions or downturns could impair portfolio companies' ability to repay loans, potentially increasing non-performing assets and decreasing the value of the company's portfolio369 - The company's Leverage Program contains various financial and operational covenants, and failure to comply could result in default and acceleration of debt repayment, materially impacting liquidity373 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, with 3,150 shares repurchased for a total cost of $26,915 during the three months ended March 31, 2025 Share Repurchases (Q1 2025) | Period | Shares Repurchased | Weighted Avg. Price Per Share | Total Cost | | :--- | :--- | :--- | :--- | | Q1 2025 | 3,150 | $8.54 | $26,915 | Defaults upon Senior Securities Not applicable Mine Safety Disclosures None Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during Q1 2025, and the stock traded at a high of $9.45 and a low of $7.72 per share relative to its NAV - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter381 Q1 2025 Stock Price and NAV Data | Metric | Value | | :--- | :--- | | NAV per Share (End of Q1) | $9.18 | | High Stock Price | $9.45 | | Low Stock Price | $7.72 | | Premium/(Discount) to NAV | +2.9% to -15.9% | Exhibits This section lists the exhibits filed with the 10-Q, including the merger agreement, corporate governance documents, an amendment to the senior secured revolving credit agreement, and various certifications - Key exhibits filed include an amendment to the Amended & Restated Senior Secured Revolving Credit Agreement and certifications from the CEO and CFO pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act386