Thank you for standing by, and welcome to the Q1 2022 Crescent Capital BDC Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. . As a reminder, today's conference call is being recorded. I will now turn the conference to your host, Mr. Dan McMahon. Sir, you may begin.

Good morning and welcome to Crescent Capital BDC, Inc.'s first quarter ended March 31st, 2022 earnings conference call. Please note that Crescent Capital BDC, Inc. may be referred to as CCAP, Crescent BDC or the company throughout the call. Before we begin, I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, we may discuss certain non-GAAP measures as defined by SEC Regulation G, such as adjusted net investment income or NII per share. The company believes that adjusted NII per share provides useful information to investors regarding financial performance because it's one method the company uses to measure its financial condition and results of operations. A reconciliation of adjusted net investment income per share, to net investment income per share. The most directly comparable GAAP financial measure can be found in the accompanying slide presentation for this call. In addition, a reconciliation of this measure may also be found in our earnings release. Yesterday, after the market closed, the company issued its earnings press release for the First Quarter ended March 31, 2022 and posted a presentation to the Investor Relations section of its website at www. crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call, will be Jason Breaux, Chief Executive Officer of CCAP, and Gerhard Lombard, Chief Financial Officer of CCAP. With that, I'd now like to turn it over to Jason.

Thank you, Dan. Good morning, everyone and thank you for joining our earnings call today. We appreciate your continued interest in CCAP. I'll provide some first quarter highlights, review our investing activity, provide some color on our current portfolio and positioning, and then turn it over to Gerhard to review our financial results in more detail. So let's begin. Please turn to Slide 6 where you'll see a summary of our results. We reported strong first quarter financial results with adjusted net investment income of $0.42 per share. Similar to the last four quarters, we accrued a capital gains-based incentive fee expense related to changes in net realized and unrealized gains and losses. This non-cash expense was $0.03 per share for the quarter. On a GAAP basis, our first-quarter net investment income per share inclusive of the accrued capital gains-based incentive fee expense was $0.39. Our net asset value per share reached its highest level since CCAP's inception, ending the quarter at $21.18, representing approximately 5% year-over-year growth. When you combine this NAV growth with cumulative dividends paid over the past 12 months, we generated a 13.2% total economic return for our shareholders. Let's turn to Slides 13 and 14 of the presentation, which provides a snapshot of the current portfolio. We ended the quarter with our largest portfolio since inception, with nearly $1.3 billion of investments at fair value across 130 portfolio companies with an average investment size of less than 1% of the total portfolio. Our investment portfolio consists primarily of senior secured first lien and unitranche first-lien loans, collectively representing 86% of the portfolio at fair value. And we remain well diversified across 18 industries, and continue to lend almost exclusively to private equity-backed companies, with 98% of our debt portfolio in sponsor-backed companies as of quarter-end.…

Thanks, Jason and good morning, everyone. Our adjusted net investment income per share, $0.42 for the first quarter of 2022 was in line with the $0.43 for the prior quarter. Total investment income of $26.4 million for the first quarter compares to $24.1 million for the prior quarter. Interest income excluding one-time accelerated amortization which represents the more recurring component of our revenues grew from $20.8 million in Q4 to $21.7 million for the first quarter and was a key driver of quarter-over-quarter total investment income growth. We benefited from a full quarter of interest income generation from the investments originated during our record fourth quarter which was largely back-weighted in November and December. Additionally, we had a sizable monetization from our investment in battery solutions and the previously unaccrued peak income recognized at . Dividend income increased to $2.3 million for the first quarter of 2022 from $1.8 million in the prior quarter. The increase was due to a dividend distribution from our equity investments in Southern Technical Institute or STI, provider of educational and training services in a variety of medical and technical areas. Our GAAP earnings per share or net increase in net assets resulting from operations for the first quarter of 2022 was $0.52, which compares to $0.44 per share for the prior quarter. Our GAAP earnings included net realized and unrealized gains on investments, $0.13 per share, offset by our second $0.05 per share special dividends. On March 31st, our stockholder’s equity was $654 million, resulting in a net -- record net asset value per share of $21.18, as compared to $652 million or $21.12 per share last quarter. And $570 million, or $20.24 per share, at March 31, 2021. Despite a lower deployment backdrop for the first quarter, as Jason discussed, our total investment…

Thanks, Gerhard. In closing, we've entered an operating environment which has changed meaningfully over the past few months. Inflation, rising rates, and geopolitical factors have begun to create headwinds for the economy that may persist for some time. However, similar to CCAP's positioning before heading into the uncertainty of COVID-19 during the first quarter of 2020, we continue to be invested in high-quality, strong free cash flow-generating companies in primarily non-cyclical industries. On the liability side, we've continued to enhance our liquidity profile and made further improvements this quarter with the upsize of our SMBC facility. Given our modest leverage and ample liquidity profile, we'd feel well-situated to lean into attractive opportunities created by market dislocation while, of course, maintaining the same rigorous underwriting standards we've always implemented. We'd like to thank all of you for your confidence and your continued support and with that, Operator, please open the line for questions.

Thank you. . One moment please. Our first question comes from Matt Tjaden of Raymond James, your line is open.

Hey, guy. Good morning, and I appreciate you taking my questions. Jason, wanted to start off a little high level and ask, what's your outlook for the private credit default environment at year-end '22 versus maybe six months ago?

Hey, Matt. Thanks for joining, and thanks for the question. I think it's probably -- it's early to predict something like that. There are certainly counterbalancing factors at play here with respect to how we think about the default environment. Today, it's still quite low. We think our portfolio remains quite healthy. As we talked about in the prepared remarks, I think the discipline that we try to exercise on the private side in terms of underwriting to meaningful equity cushions and strong interest in leverage metrics puts our portfolio in a good position here today. As we look forward, there is certainly some uncertainty in the marketplace on the macro side. We'll see what happens with the Fed's ability to attain inflation and whether it will see a softer landing or a harder landing that might destroy more demand. So I think it's early to tell how things are going to play out. But what I would say here today is that we feel quite good about the health of the portfolio, and we're constructive on the new deal environment, without compromising any of our underwriting discipline.

Fair enough. If I could maybe follow up a little bit on that, given the uncertain economic outlook, anything you can tell us on expectations for net fundings for the remainder of 2022?

You know, Matt -- it's another good question, Matt. I think if you look back historically over the last few years, CCAP's net deployment is roughly $40 million to $50 million a quarter probably on average. As we all saw in the first quarter, deployment as an activity is definitely lighter seasonally but in addition to that, I would say we saw a slowdown from a busy Q4 with deals getting closed at the last week of the year as well as early stages of Omicron peaking around year-end which probably pushed out some deal launches an office opening. As we look forward, there's a tremendous amount of private equity dry powder that still needs to get deployed and what I would say is that the pipeline of activity that we've seen has picked up and it is picking up in a healthy way and has done so for the last several weeks. We feel good about the opportunities that we're seeing here today. What I would say is some of the fringier opportunities, maybe more cusp in terms of industry or adjustments to cash flow, might not get done in an environment like this but that's not really our focus. Our focus is really on the higher-quality deals and I think our view is that we will still continue to see those here over the course of the next couple of quarters. The other thing I mentioned is that --

Got it.

Sorry, Matt. The other thing I mentioned is that with rising base rates and certainly spreads on the rise, at least in the liquid markets, opportunistic refinancing activity should be slowing. That's our view. So from a net standpoint, you might factor that in as well.

Got it. Fair enough. Last one for me, just more housekeeping more than anything. The dividend income line, $2.3 million, any sense you can give us on how much of that we should interpret as non-recurring? And then, as a follow-up to that, the SLF obviously didn't pay a dividend this quarter. Should we be expecting one maybe in 2Q or 3Q from the resolution?

Yes, Gerhard, I can take that question. Thank you. We generally expect to have some level of income that is not kind of core cash-pay interest and just given the level of diversification of the portfolio and that could be in the form of dividends, accelerated OID peak or fee income and while we continue that, there'll be some level of continuing income from these sources. The core portfolio has increased very meaningfully by about 22% year-over-year. So the occurring cash income behind the additional fee and dividend income is also increasing. Slipping back to your question on the joint venture dividend, you're correct. I think as we mentioned in prior remarks, that structure is unwinding and so they will be a liquidating distribution, that may take the form of multiple distributions as that portfolio fully winds down, we repay the debt. So you're correct. I think that -- depending on timing, the timing of the wind down there, that could be a second quarter or third quarter event. And then certainly we expect some level of continuing dividend income from our equity positions. STI in particular, which we called out, has performed well to-date and it continues to be a healthy portfolio company.

That is it for me, I appreciate the time.

Thank you. . Our next question comes from Derek Hewett of Bank of America. Your line is open.

Good morning, everyone. In terms of the potential earnings accretion disclosed, given rising rates in the prepared remarks, did that figure include the incentive fee as well, or do we need to make that adjustment?

Hey Derek. This is Gerhard. You're correct. In the prepared remarks that includes the impact of the incentive fee and there's also disclosure in the 10-Q obviously, the MD&A section which does not include that net impact. But Jason prepared remarks included the impact of the fee.

Okay. Great. And then just given rising rates, how far would rates need to rise before your portfolio companies cash flow would start to get a little bit stretched and maybe could you talk about it in terms of maybe the run rate or the base-case for top-line growth, and then maybe under a static revenue case as well.

Derek, that's a really good question. We have run lots of sensitivities around the very questions that you're asking. I know that we pointed to interest coverage on the prepared remarks. I don't have the specific metrics by portfolio company here with me at the moment. That's something that we can follow up on.

Okay. Great. Thank you.

Thank you.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Jason Breaux for any closing remarks.

Okay. Thanks, Operator. Thank you, everyone, for joining our call here today for the first quarter results. We appreciate your continued interest and support. And we look forward to speaking with you soon.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you all for participating. You may now disconnect. Have a great day.