BlackRock TCP Capital Corp. Announces Third Quarter 2024 Financial Results

Net Investment Income of $0.40 Per Share; Declares Fourth Quarter Dividend of $0.34 Per Share and a Special Dividend of $0.10 Per Share; 50 Consecutive Quarters of Dividend Coverage

BlackRock TCP Capital Corp. ("we," "us," "our," "TCPC" or the "Company"), a business development company (NASDAQ:TCPC), today announced its financial results for the third quarter ended September 30, 2024 and filed its Form 10-Q with the U.S. Securities and Exchange Commission.

FINANCIAL HIGHLIGHTS

• On a GAAP basis, net investment income for the quarter ended September 30, 2024 was $33.9 million, or $0.40 per share on a diluted basis, which exceeded the regular dividend of $0.34 per share paid on September 30, 2024. Excluding amortization of purchase discount recorded in connection with the Merger⁽¹⁾, adjusted net investment income⁽¹⁾ for the quarter ended September 30, 2024 was $30.8 million, or $0.36 per share on a diluted basis.
• Net asset value per share was $10.11 as of September 30, 2024 compared to $10.20 as of June 30, 2024.
• Net increase in net assets from operations on a GAAP basis for the quarter ended September 30, 2024 was $21.6 million, or $0.25 per share, compared to a $51.3 million, or $0.60 per share, net decrease in net assets from operations for the quarter ended June 30, 2024.
• Total acquisitions during the quarter ended September 30, 2024 were approximately $72.8 million and total investment dispositions were $139.2 million during the three months ended September 30, 2024.
• As of September 30, 2024, net leverage was 1.08x compared to 1.13x at June 30, 2024.
• As of September 30, 2024, debt investments on non-accrual status represented 3.8% of the portfolio at fair value and 9.3% at cost, compared to 4.9% of the portfolio at fair value and 10.5% at cost as of June 30, 2024.
• On August 1, 2024, the Company amended the Operating Facility to extend the maturity date to August 1, 2029. Additionally, on August 23, 2024, the Company paid off $250.0 million in aggregate principal amount of 3.90% notes due 2024 (the "2024 Notes").
• On November 6, 2024, our Board of Directors declared a fourth quarter dividend of $0.34 per share and a special dividend of $0.10 per share, both payable on December 31, 2024 to stockholders of record as of the close of business on December 17, 2024.

"We delivered solid adjusted net investment income of $30.8 million, or $0.36 per share, for the third quarter, resulting in an adjusted annualized NII return on average equity of 14%, which continues to be at the high end of historical levels," said Raj Vig, Chairman and CEO of BlackRock TCP Capital Corp. "Our dividend remains well covered at 106%. We are also pleased to report that our board approved a special dividend of $0.10 per share payable to our shareholders this quarter and also re-approved our authorization to repurchase up to $50.0 million of our common stock."

"Our portfolio showed signs of improvement since last quarter as non-accrual investments declined; however, an additional non-accrual investment and certain markdowns resulted in a slight reduction in the NAV. We are working diligently with our borrowers, their lenders, and their sponsors to resolve credit issues with the goal of achieving positive outcomes for our shareholders."

"At quarter end, our portfolio remained well diversified with 156 investments primarily in senior secured, first-lien loans. We have a strong capital and liquidity position to capitalize on a growing pipeline of attractive investment opportunities to deliver attractive risk-adjusted returns for our shareholders over the long term."

(1) On March 18, 2024, the Company completed its previously announced merger with BlackRock Capital Investment Corporation ("Merger"). The Merger has been accounted for as an asset acquisition of BlackRock Capital Investment Corporation ("BCIC") by the Company in accordance with the asset acquisition method of accounting as detailed in ASC 805-50 ("ASC 805"), Business Combinations-Related Issues. The Company determined the fair value of the shares of the Company's common stock that were issued to former BCIC shareholders pursuant to the Merger Agreement plus transaction costs to be the consideration paid in connection with the Merger under ASC 805. The consideration paid to BCIC shareholders was less than the aggregate fair values of the BCIC assets acquired and liabilities assumed, which resulted in a purchase discount (the "purchase discount"). The consideration paid was allocated to the individual BCIC assets acquired and liabilities assumed based on the relative fair values of net identifiable assets acquired other than "non-qualifying" assets and liabilities (for example, cash) and did not give rise to goodwill. As a result, the purchase discount was allocated to the cost basis of the BCIC investments acquired by the Company on a pro-rata basis based on their relative fair values as of the effective time of the Merger. Immediately following the Merger, the investments were marked to their respective fair values in accordance with ASC 820 which resulted in immediate recognition of net unrealized appreciation in the Consolidated Statement of Operations as a result of the Merger. The purchase discount allocated to the BCIC debt investments acquired will amortize over the remaining life of each respective debt investment through interest income, with a corresponding adjustment recorded to unrealized appreciation or depreciation on such investment acquired through its ultimate disposition. The purchase discount allocated to BCIC equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company may recognize a realized gain or loss with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired.

As a supplement to the Company's reported GAAP financial measures, we have provided the following non-GAAP financial measures that we believe are useful:

• "Adjusted net investment income" – excludes the amortization of purchase accounting discount from net investment income calculated in accordance with GAAP;
• "Adjusted net realized and unrealized gain (loss)" – excludes the unrealized appreciation resulting from the purchase discount and the corresponding reversal of the unrealized appreciation from the amortization of the purchase discount from the determination of net realized and unrealized gain (loss) determined in accordance with GAAP; and
• "Adjusted net increase (decrease) in net assets resulting from operations" – calculates net increase (decrease) in net assets resulting from operations based on Adjusted net investment income and Adjusted net realized and unrealized gain (loss).

We believe that the adjustment to exclude the full effect of purchase discount accounting under ASC 805 from these financial measures is meaningful because of the potential impact on the comparability of these financial measures that we and investors use to assess our financial condition and results of operations period over period. Although these non-GAAP financial measures are intended to enhance investors' understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The aforementioned non-GAAP financial measures may not be comparable to similar non-GAAP financial measures used by other companies.

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2024, our consolidated investment portfolio consisted of debt and equity positions in 156 portfolio companies with a total fair value of approximately $1.9 billion, of which 90.6% was in senior secured debt. 81.3% of the total portfolio was first lien. Equity positions, which include equity interests in diversified portfolios of debt, represented approximately 9.1% of the portfolio. 92.7% of our debt investments were floating rate, 97.0% of which had interest rate floors.

As of September 30, 2024, the weighted average annual effective yield of our debt portfolio was approximately 13.4%⁽¹⁾ and the weighted average annual effective yield of our total portfolio was approximately 11.9%, compared with 13.7% and 12.4%, respectively, as of June 30, 2024. Debt investments in ten portfolio companies were on non-accrual status as of September 30, 2024, representing 3.8% of the consolidated portfolio at fair value and 9.3% at cost.

During the three months ended September 30, 2024, we invested approximately $72.8 million, primarily in 9 investments, comprised of 6 new and 3 existing portfolio companies. Of these investments, $62.7 million, or 86.2% of total acquisitions, were in senior secured loans, and $7.6 million, or 10.4% of total acquisitions, were in senior secured notes. The remaining $2.5 million, or 3.4% of total acquisitions, were comprised of equity investments. Additionally, we received approximately $139.2 million in proceeds from sales or repayments of investments during the three months ended September 30, 2024. New investments during the quarter had a weighted average effective yield of 11.3%. Investments we exited had a weighted average effective yield of 13.4%.

As of September 30, 2024, total assets were $2.0 billion, net assets were $865.6 million and net asset value per share was $10.11, as compared to $2.2 billion, $873.1 million, and $10.20 per share, respectively, as of June 30, 2024.

__________________________

⁽¹⁾ Weighted average annual effective yield includes amortization of deferred debt origination and accretion of original issue discount, but excludes market discount and any prepayment and make-whole fee income. The weighted average effective yield on our debt portfolio excludes non-accrual and non-income producing loans.

CONSOLIDATED RESULTS OF OPERATIONS

Total investment income for the three months ended September 30, 2024 was approximately $70.9 million, or $0.83 per share. Investment income for the three months ended September 30, 2024 included $0.08 per share from prepayment premiums and related accelerated original issue discount and exit fee amortization, $0.04 per share from recurring portfolio investment original issue discount and exit fee amortization, $0.05 per share from interest income paid in kind and $0.02 per share in dividend income. This reflects our policy of recording interest income, adjusted for amortization of portfolio investment premiums and discounts, on an accrual basis. Origination, structuring, closing, commitment, and similar upfront fees received in connection with the outlay of capital are generally amortized into interest income over the life of the respective debt investment.

Total operating expenses for the three months ended September 30, 2024 were approximately $37.1 million, or $0.43 per share, including interest and other debt expenses of $21.2 million, or $0.25 per share, and incentive compensation from net investment income of $6.5 million, or $0.08 per share. Excluding incentive compensation, interest and other debt expenses, annualized third quarter expenses were 4.2% of average net assets.

Net investment income for the three months ended September 30, 2024 was approximately $33.9 million, or $0.40 per share. Net realized losses for the three months ended September 30, 2024 were $31.4 million, or $0.37 per share. Net realized losses for the three months ended September 30, 2024 were comprised primarily of $24.1 million and $7.4 million in losses from the restructuring of our investments in Pluralsight and McAfee, respectively. Subsequent to its restructuring, our debt investment in Pluralsight is back on accrual status. Net unrealized gains for the three months ended September 30, 2024 were $19.2 million, or $0.22 per share. Net unrealized gains for the three months ended September 30, 2024 primarily reflect $24.1 million and $7.6 million reversals of previous unrealized losses from the restructuring of our investments in Pluralsight and McAfee, respectively, a $4.2 million unrealized gain on our investment in Securus, a $3.6 million unrealized gain on our investment in Domo and other unrealized gains across the portfolio, partially offset by an $8.0 million unrealized loss on our investment in Gordon Brothers, a $4.0 million unrealized loss on our investment in Seller-X, a $3.3 million unrealized loss on our investment in InMoment, a $2.8 million unrealized loss on our investment in Edmentum and a $2.2 million unrealized loss on our investment in Alpine. Net increase in net assets resulting from operations for the three months ended September 30, 2024 was $21.6 million, or $0.25 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2024, available liquidity was approximately $581.8 million, comprised of approximately $477.7 million in available capacity under our leverage program, $104.2 million in cash and cash equivalents, offset by $0.1 million in payable for investments purchased.

The combined weighted-average interest rate on debt outstanding at September 30, 2024 was 5.43%.

Total debt outstanding at September 30, 2024, including debt assumed as a result of the Merger, was as follows:

On February 27, 2024, the Board of Directors approved a new dividend reinvestment plan (the "DRIP") for the Company. The DRIP was effective as of, and will apply to the reinvestment of cash distributions with a record date after March 18, 2024. Under the DRIP, shareholders will automatically receive cash dividends and distributions unless they "opt in" to the DRIP and elect to have their dividends and distributions reinvested in additional shares of the Company's common stock. Notwithstanding the foregoing, the former shareholders of BCIC that participated in the BCIC dividend reinvestment plan at the time of the Merger have been automatically enrolled in the Company's DRIP and will have their shares reinvested in additional shares of the Company's common stock on future distributions, unless they "opt out" of the DRIP. For the three months ended September 30, 2024, approximately $0.7 million of cash distributions were reinvested for electing Participants through purchase of shares in the open market in accordance with the terms of the DRIP.

On August 1, 2024, our Board of Directors re-approved our stock repurchase plan to acquire up to $50.0 million in the aggregate of our common stock at prices at certain thresholds below our net asset value per share, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934. During the three months ended September 30, 2024, no shares were repurchased.

RECENT DEVELOPMENTS

On November 6, 2024, our Board of Directors declared a fourth quarter dividend of $0.34 per share and a $0.10 per share special dividend, both payable on December 31, 2024 to stockholders of record as of the close of business on December 17, 2024.

CONFERENCE CALL AND WEBCAST

BlackRock TCP Capital Corp. will host a conference call on Wednesday, November 6, 2024 at 1:00 p.m. Eastern Time (10:00 a.m. Pacific Time) to discuss its financial results. All interested parties are invited to participate in the conference call by dialing (833) 470-1428; international callers should dial (404) 975-4839. All participants should reference the access code 846824. For a slide presentation that we intend to refer to on the earnings conference call, please visit the Investor Relations section of our website (www.tcpcapital.com) and click on the Third Quarter 2024 Investor Presentation under Events and Presentations. The conference call will be webcast simultaneously in the investor relations section of our website at http://investors.tcpcapital.com/. An archived replay of the call will be available approximately two hours after the live call, through Wednesday, November 13, 2024. For the replay, please visit https://investors.tcpcapital.com/events-and-presentations or dial (866) 813-9403. For international replay, please dial (929) 458-6194. For all replays, please reference access code 616523.

(1) Includes $21,347,357 change in unrealized appreciation from application of Merger accounting under ASC 805 for the nine months ended September 30, 2024.

ABOUT BLACKROCK TCP CAPITAL CORP.

BlackRock TCP Capital Corp. (NASDAQ:TCPC) is a specialty finance company focused on direct lending to middle-market companies as well as small businesses. TCPC lends primarily to companies with established market positions, strong regional or national operations, differentiated products and services and sustainable competitive advantages, investing across industries in which it has significant knowledge and expertise. TCPC's investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. TCPC is a publicly-traded business development company, or BDC, regulated under the Investment Company Act of 1940 and is externally managed by its advisor, a wholly-owned, indirect subsidiary of BlackRock, Inc. For more information, visit www.tcpcapital.com.

FORWARD-LOOKING STATEMENTS

Prospective investors considering an investment in BlackRock TCP Capital Corp. should consider the investment objectives, risks and expenses of the company carefully before investing. This information and other information about the company are available in the company's filings with the Securities and Exchange Commission ("SEC"). Copies are available on the SEC's website at www.sec.gov and the company's website at www.tcpcapital.com. Prospective investors should read these materials carefully before investing.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in general economic conditions or changes in the conditions of the industries in which the company makes investments, risks associated with the availability and terms of financing, changes in interest rates, availability of transactions, and regulatory changes. Certain factors that could cause actual results to differ materially from those contained in the forward-looking statements are included in the "Risk Factors" section of the company's Form 10-K for the year ended December 31, 2023, and the company's subsequent periodic filings with the SEC. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the ability to realize the anticipated benefits of the Merger, including the expected accretion to net investment income and the elimination or reduction of certain expenses and costs due to the Merger; (ii) risks related to diverting management's attention from ongoing business operations; (iii) risks related to the retention of the personnel of TCPC's advisor; (iv) changes in the economy, financial markets and political environment, including the impacts of inflation and rising interest rates; (v) risks associated with possible disruption in the operations of TCPC or the economy generally due to terrorism, war or other geopolitical conflict (including the current conflict between Russia and Ukraine and the conflict in the Middle East), natural disasters or public health crises and epidemics; (vi) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (vii) conditions in TCPC's operating areas, particularly with respect to business development companies or regulated investment companies; and (viii) other considerations that may be disclosed from time to time in TCPC's publicly disseminated documents and filings. Copies are available on the SEC's website at www.sec.gov and the Company's website at www.tcpcapital.com. Forward-looking statements are made as of the date of this press release and are subject to change without notice. The Company has no duty and does not undertake any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106872955/en/