BlackRock TCP Capital Corp. Q1 FY2026 earnings call

• Strategic priorities: Improving credit quality, repositioning investment portfolio, strengthening balance sheet. Deploying capital selectively into high-quality opportunities, leveraging PFS platform, reducing average position sizes, increasing first lien loans portion, reducing leverage. - First quarter execution: Non-accruals declined, net leverage reduced, full exits and partial paydowns totaled $135.3 million, received more than $50 million of additional paydowns since quarter end. - Portfolio composition: Five largest investments accounted for 24.9% of portfolio, new investments had effective yield of ~8.3%, average portfolio yield declined to 10.9%. - Capital allocation: Board declared second quarter dividend of 17 cents per share, repurchased shares during and subsequent to quarter end, re-approved stock repurchase plan to acquire up to $50 million in common stock. - Financial results: Total investment income $42.6 million, operating expenses $0.29 per share, net investment income $0.22 per share, adjusted net investment income 21 cents per share, net realized losses $32.7 million, net unrealized losses $2.0 million, net decrease in net assets $16.3 million. - Balance sheet and liquidity: Repaid all $325 million of 2026 notes, total liquidity $358.6 million, net regulatory leverage 1.29 times at quarter end, improved to 1.23 times subsequent to quarter end, well positioned to fund new investments with diverse leverage program.

In the first quarter, non-accruals declined to 2.8% of the portfolio at fair value and 7.6% at cost, down from 4% and 9.7% respectively last quarter. Net leverage declined to 1.29 times at quarter end from 1.41 times last quarter. Adjusted net investment income was 21 cents per share compared to 25 cents last quarter. Pick interest income was 8.5% of total investment income, down from 10.9% last quarter. NAV declined 4.9% to $6.72 per share at quarter end. Software represented 30.5% of the portfolio at fair value, spread across 47 companies with 95% in term loans and 5% in equity. Job & Talent was the largest contributor to NAV markdowns at ~$11 million, software-related investments accounted for ~$11 million of markdowns. Portfolio had a fair market value of $1.4 billion, invested across 139 companies in over 20 industry sectors, 91.8% in senior secured loans, 8.2% in equity investments, 94.4% of debt investments were floating rate.

Q: How would you rank the pace of restructuring occurring in terms of how quick or hard or easier you thought it was going to be say six months ago?

A: Robert, I would say that we always expect restructuring and workouts to not take a linear pattern here. Each deal has its own idiosyncratic issues. Sometimes they're great businesses with weaker balance sheets that restructurings really benefit the company with. We didn't really go in with any specific expectation but are doing everything we can to actively manage through these restructurings and monetizations and pay downs.

Q: On job and talent, an AI-enabled job and talent search business, what were the drivers of its markdown?

A: Jason says that the cause of drop in enterprise value is really more due to market valuation multiples as opposed to something tied specific to the business being challenged because of AI or otherwise. The relative performance of the business was more of a modest contributor as opposed to broader tech multiples.

Q: On software, can you use any relative scale on how much values have moved on the assets in the book?

A: The purpose of including the 26% LTV metric was to indicate cushion underwritten. Market multiples have come down meaningfully, cushion has come down as well. We don't have a number to disclose exactly how much, depends on credit, end market, software functionality. Cushion certainly hasn't vanished, but we feel still in reasonably good shape