Investcorp Credit Management BDC Inc (ICMB) Q1 2025 Earnings Call Highlights: Strong NAV Growth ...

GuruFocus.com
19 Nov 2024
  • Net Asset Value (NAV): Increased by $0.34 per share to $5.55 from $5.21 as of June 30, 2024.
  • Net Investment Income: $2.3 million or $0.16 per share, a $1 million increase over the prior quarter.
  • Portfolio Fair Value: $190.1 million, up from $184.6 million on June 30, 2024.
  • Net Assets: $79.7 million, an increase of $4.9 million from the prior quarter.
  • Net Increase in Net Assets from Operations: Approximately $6.6 million.
  • Weighted Average Yield of Debt Investments: Approximately 10.7% for the quarter.
  • Weighted Average Yield of Debt Portfolio: 10.5%, down from 12.3% in the previous quarter.
  • Non-Accruals: Improved to 4.8% of total fair market value from 5% last quarter.
  • Median EBITDA of Portfolio: Increased to $61 million from $55 million last quarter.
  • Weighted Average Net Leverage: Declined to 4.7 times from 5.1 times last quarter.
  • Gross Leverage: 1.39 times as of September 30, 2024.
  • Net Leverage: 1.2 times as of September 30, 2024.
  • Cash and Restricted Cash: Approximately $10.1 million, with $8.3 million as restricted cash.
  • Distribution Declared: $0.12 per share for the quarter ended December 1, 2024, payable on January 8, 2025.
  • Warning! GuruFocus has detected 3 Warning Signs with ICMB.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Investcorp Credit Management BDC Inc (NASDAQ:ICMB) reported a strong quarter with a net asset value increase of $0.34 per share, rising to $5.55.
  • The company generated net investment income of $2.3 million, marking a $1 million increase over the prior quarter.
  • ICMB successfully deployed $13.1 million across six portfolio companies, indicating an uptick in activity.
  • The portfolio's median EBITDA increased from $55 million to $61 million, while the weighted average net leverage declined from 5.1 times to 4.7 times.
  • Non-accruals as a percentage of total fair market value improved to 4.8% from 5% in the previous quarter.

Negative Points

  • New deal flow in M&A and LBO activity remains subdued, reflecting broader market challenges.
  • The weighted average yield of debt investments decreased to 10.5% from 12.3% in the previous quarter.
  • Competition for high-quality investment opportunities remains intense, limiting potential deals.
  • The company experienced a realized loss due to Crafty Apes being on nonaccrual status.
  • Operating expenses are relatively high as a percentage of revenues, prompting a need for improved efficiencies.

Q & A Highlights

Q: Can you clarify the driver of the PIK income for the quarter? A: The primary driver was the reversal of nonaccrual to accrual status for Klein Hersh, which had been on nonaccrual for the last three quarters. The company is performing well, and a significant portion of the coupon is PIK. - Suhail Shaikh, President, Director

Q: Were there any timing issues affecting the quarter's results, with deals spilling over from the previous quarter? A: Yes, some deals did spill over into this quarter. This business can be lumpy, and while we try to smooth out activity by purchasing loans in the secondary market, timing can vary. - Suhail Shaikh, President, Director

Q: Could you provide details on the realized loss and unrealized gain for the quarter? A: The realized loss was due to Crafty Apes, which is on nonaccrual, while the unrealized gain was primarily from markups on Klein Hersh and BioPlan, both of which performed well. - Suhail Shaikh, President, Director

Q: As the new CEO, can you articulate your vision for ICMB's market strategy and competitive advantage? A: We aim to focus on the core middle market, targeting companies with EBITDA between $15 million and $75 million. Our strategy involves direct sourcing from sponsors and leveraging our expertise in secondary market opportunities. We plan to increase our relevance by writing larger checks and benefiting from a broader portfolio of opportunities. - Suhail Shaikh, President, Director

Q: Your expenses are high as a percentage of revenues. Are there plans to improve operating efficiencies? A: We are examining ways to manage expenses more efficiently, including using technology to lower our expense base. As our business grows, we expect expenses to decrease both organically and inorganically. - Suhail Shaikh, President, Director

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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