BlackRock TCP Capital Corp. Q2 FY2026 earnings call

• Major Portfolio Sale Transaction Milestone

  • Completed a transaction transferring ~$523 million of investments across 78 portfolio companies to a Pantheon-sponsored continuation vehicle, representing 48% of the pre-transaction debt portfolio fair value. On average, two-thirds of each position was transferred, with TCPC retaining a direct interest in most portfolio companies and a 5% equity stake in the continuation vehicle.
  • The continuation vehicle assumed all associated CLO liabilities, with the transaction priced at 95% of the assets' December 31, 2025 gross fair value. Pro forma for the transaction and post-quarter-end repayments, net leverage fell to ~0.4x (expected to drop below 0.3x after the announced Domo transaction closing), and unfunded commitments were reduced to below $40 million.
  • The transaction is expected to result in a 10.4% (68 cent per share) NAV decline, which includes all transaction-related expenses. The board of directors received a third-party fairness opinion from Lincoln International for the transaction.

• Portfolio Management and Quality Improvement

  • Non-accrual positions improved to 1.6% of portfolio fair value (7.4% at cost) from 2.8% (7.6% at cost) at the end of Q1 2026, driven by full repayment progress at Thrasio. Thrasio's remaining $3.7 million position was removed from non-accrual status, as full repayment is expected.
  • Strong repayment activity: $111.6 million in total payoffs and paydowns, resulting in $86.6 million in net repayments during Q2. An additional $97.4 million in repayments were received post-quarter-end, including $55.2 million from Motive Technologies and $39 million from Pico Quantitative Trading. Domo's announced sale to Progress Software is expected to result in full repayment of TCPC's $69 million debt holding in Q4 2026.
  • Pre-transaction quarter-end portfolio: $1.29 billion fair value across 134 portfolio companies, 89.8% first lien exposure, average position size of $9.6 million. Pro forma for the transaction: $671 million fair value across 132 companies, average position size of $5.1 million, software exposure reduced to ~23% (17% including the expected Domo repayment).
  • Investment activity remained intentionally limited and highly selective in Q2, with only $25 million in total capital deployed, mostly to previously committed investments and one new borrower. The firm prioritized opportunities among existing portfolio companies where it has established relationships.

• Balance Sheet and Liability Optimization

  • Completed two Q2 liability management initiatives: Issued $406 million in new CLO debt to fully repay existing TCPC Funding II and merger sub-facilities, extending maturity of secured debt; repaid the remaining $107 million in SBIC debt and surrendered the SBIC license, as the firm concluded there was limited benefit to maintaining the structure.
  • End-of-Q2 total liquidity was $533.7 million, including $376.2 million in available revolver borrowing capacity and $157.5 million in cash. Net leverage fell to 1.38x at quarter end from 1.48x at the end of Q1.
  • Pro forma for the transaction and recent repayments, total available liquidity is approximately $395 million, providing significant financial and investment flexibility.

• Capital Allocation Actions

  • Declared a Q3 2026 dividend of 17 cents per share, payable September 30 to shareholders of record as of September 16.
  • Repurchased 156,370 shares in Q2 at a weighted average price of $3.78 per share.

• Strategic Review Initiation

  • The board engaged KBW to assist with a full strategic review to evaluate all options for maximizing long-term shareholder value, including portfolio reinvestment, capital return to shareholders, strategic combinations, or a combination of these alternatives.

BlackRock TCP Capital Corp. is a business development company focused on direct debt and equity investments in private middle-market companies, with portfolio performance broken out by investment type and sector as of Q2 2026:

• Senior secured floating rate loans: Represented 91.5% of total portfolio fair value, with first lien loans accounting for 89.8% of total portfolio fair value. Weighted average effective yield across the entire loan portfolio was 10.5%, new investments issued in the quarter carried a 9.4% weighted average yield, and exited investments had a 10.9% weighted average yield.
• Equity investments: Represented the remaining 8.5% of total portfolio fair value.
• Sector allocation: Software was the largest sector exposure, representing 29.7% of total portfolio fair value across 45 portfolio companies, with 97% of software exposure held in debt and 3% in equity. The remaining 70.3% of fair value is spread across 34 other industry sectors.

Full Q2 2026 financial performance:

• Total investment income: $40.0 million ($0.48 per share)
• Operating expenses: $21.9 million ($0.26 per share), including $15.0 million ($0.18 per share) in interest and debt expenses
• GAAP net investment income: $18.1 million ($0.22 per share); Adjusted net investment income (excluding purchase accounting discount amortization from the BCIC merger): $17.5 million ($0.21 per share)
• Net realized losses: $14.8 million ($0.18 per share), driven primarily by a $10 million loss on the exit of Auto Alert
• Net unrealized gains: $1.3 million ($0.01 per share), from $11.3 million in unrealized loss reversals for Auto Alert and Thrasio, partially offset by $9.5 million in markdowns for Pluralsight, PVHC, and Zillion
• Net asset value (NAV) per share: Declined 2.1% to $6.58 per share at quarter end, with a total net asset decrease of $13.1 million for the quarter

Management did not issue formal quarterly or full-year financial guidance for 2026/2027, but provided forward-looking expectations based on completed transactions:

• Net leverage is expected to decline to less than 0.3x after closing of the announced Domo sale transaction, which is scheduled for Q4 2026
• The Domo transaction is expected to result in full repayment of the firm's $69 million debt investment in the company
• No fixed timetable has been set for completion of the strategic review process; management will provide updates as appropriate as the review progresses
• The firm expects to continue organic portfolio repositioning and can pursue new investments and shareholder-friendly initiatives (including share repurchases) while the strategic review is ongoing, enabled by the new financial flexibility from the portfolio sale transaction

• Forward-looking statements related to the strategic review, expected future repayments, leverage, and long-term performance are based on management's current assumptions, and actual results may differ materially due to market and transaction-specific risks
• The firm's prior relatively concentrated portfolio meant that individual issuer-specific developments could have a material impact on NAV, a risk that has been reduced but not eliminated by the portfolio sale transaction and position size reduction
• AI-related disruption risk varies across the software sector, though management has focused underwriting on more resilient software sub-segments that are insulated from disruption
• Transaction completion risks: The expected Domo repayment is contingent on closing of Domo's sale transaction, which is scheduled for Q4 2026 but may be delayed or fall through

Q: Robert Dodd (Raymond James) asked two key questions: what is the expected timeline for the ongoing strategic review, and will the firm pursue reinvestment or share buybacks while the review is in process? / A: Management stated there is no fixed timetable for the review. KBW will work with management and the board to evaluate a full range of alternatives, which may include a combination of options to deliver long-term shareholder value. The portfolio sale has already put the firm in a strong position to evaluate all options, and the firm will continue organic portfolio repositioning during the review process.

Q: Dodd followed up by asking how much more portfolio positioning (reducing concentrations in larger positions) can be completed this year, beyond the recent portfolio sale and large repayments. / A: Management explained that prior high leverage had inhibited the firm's ability to reposition the portfolio, make meaningful new investments, diversify, or pursue larger share buybacks. The portfolio sale accelerated this process dramatically, putting the firm at 0.4x leverage (0.3x after Domo) with over $300 million in new investment capacity. The firm will continue organic repositioning in the interim, and now has the flexibility to pursue new investments, diversification, and shareholder-friendly actions in the near term.

Q: Paul Johnson (KBW) asked whether the 10.4% expected NAV decline from the portfolio sale includes all transaction-related expenses. / A: CFO Erik Cuellar confirmed the 10.4% NAV impact does include all transaction-related expenses. The base 5% portfolio discount to fair value plus other standard transaction adjustments bring the total effective discount to ~10%, with transaction expenses adding the remaining 0.4% to reach the 10.4% total NAV impact.

Q: Johnson asked whether BlackRock has a specific preferred outcome for the strategic review, particularly regarding rebuilding the BDC franchise or resolving past challenges. / A: Management stated there is no pre-set agenda or preferred outcome for the review. The only goal is evaluating all alternatives to deliver maximum long-term shareholder value, and BlackRock remains fully committed to supporting the process and delivering value for shareholders.