And welcome to the Crescent Capital BDC Inc. 3rd quarter ended September 30th, 2025 Earnings Conference Call. After the speaker's remarks, there will be a question and answer session. At that time, if you would like to ask a question, press star 1 on your telephone keypad. If you would like to remove your question, press star 1 again. Please note that Crescent Capital BDC Inc. may be referred to as CCAP, Crescent BDC, or the company throughout the call. 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 forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation for updating any search forward looking statements. Please also note that past performance or market information is not a guarantee of future results. I'll now turn the call over to Dan McMahon.

Thank you. Yesterday after the market closed, the company issued its earnings press release for the third quarter ended September 30th, 2025 and posted a presentation to the IR 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 CCAP's Chief Executive Officer Jason Brough, President Henry Chung, and Chief Financial Officer Gerhard Lombard. With that, I'd now like to turn it over to Jason.

Thank you, Dan. Hello, everyone, and thank you all for joining us. I'll start today's call by summarizing our third quarter results, follow that with some thoughts on the market, touch on our portfolio. In terms of third quarter earnings, we reported net investment income of 46 cents per share, unchanged from the prior quarter, translating into an annualized NII yield of 9.5. Earnings continue to remain in excess of our dividend, 110% base dividend coverage for the quarter. Net asset value was $19.28 per share as of September 30, compared to $19.55 per share as of June 30. The quarter-over-quarter decline was primarily due to unrealized and realized losses stemming from certain portfolio companies that have demonstrated weakened operating outlooks due to tariffs. Let me now discuss what we are seeing in our market. With respect to the macroeconomic environment, the U.S. economy has largely remained resilient. While we have been seeing signs of some slowing momentum amid mixed labor and economic data, we believe that the Federal Reserve's recent rate cuts combine with greater clarity on new investment opportunities. Given our focus on the core and lower middle markets, we believe we drive better structural protections than deals in the more competitive upper middle market, or BSL replacement. Our segment focus provides us with the opportunity to lead our transactions. We are focused on strong cash flow generation, tight EBITDA definitions, as well as enhanced monitoring. While we have no exposure to first brands, these recent bankruptcies highlight governance issues that we seek to avoid by working with well-established private equity sponsors. We have established our private credit business by partnering closely with our long-standing sponsor relationships to uphold strong governance and oversight. Let's shift gears and discuss the investment portfolio. Please turn to slides 13 and 14. We ended the quarter with approximately $1.6 billion of investments at fair value across the highly diversified portfolio of 187 companies. Average investment size was approximately 0.6% of the total portfolio. Our top 10 largest borrowers represented 16% of the portfolio, as we are believers in modulating credit risk. We have maintained an investment portfolio that consists primarily of firstly loans since inception, collectively representing 90% of the portfolio at fair value and quarter end. Additionally, we have positioned our portfolio to focus on domestic service-oriented businesses and, in our view, mitigate concentrated risks associated with tariffs, shifts in governance spending, and other policy changes. Finally, our investments are supported by well-capitalized private equity sponsors. With 99% of our debt portfolio in sponsor-backed companies, we have partnered with our sponsors to invest in well-capitalized borrowers with significant equity capital beneath us. We note that the weighted average loan-to-value in the portfolio at time of underwrite is approximately 40%. Moving on to our dividend, for the fourth quarter, our Board declared a regular dividend of $0.42 per share, which represents a 9% and 12% annualized dividend yield based on NAV and today's closing stock price. This dividend is payable on January 15, 2026 to stock orders of record as of this. This marks our 39th consecutive quarter of earning our regular dividend at CCAP. Before I turn it over to Henry, I'd like to take a moment to discuss our outlook for CCAP's earning potential and base dividend in light of recent rate cuts and potential further easing in 2026. Looking ahead, we anticipate that a lower base rate environment may gradually reduce portfolio yields and place some pressure on net investment income, given the largely floating rate nature of direct lending portfolios. We believe several factors positioned CCAF well to address base rate driven earnings at the start. In the third quarter of 2025, our net investment income once again exceeded our base dividend, 110% coverage. On the liability side, approximately half of our borrowings are also floating rates, allowing funding costs to adjust downward to preserve our net interest margin. We have several additional levers that may help offset potential earnings pressure on lower base rates. We ended the quarter with net debt-to-equity of 1.20 times, below the upper end of our 1.30. It provides us with flexibility to leverage Crescent's attractive origination pipeline and enhance earnings through prudent portfolio growth. Crescent's private credit platform covers $6 billion of capital committed to new and add-on investments on a trailing 12-1 basis, including over $1.7 billion during the third quarter. Being associated with Crescent's private credit platform provides ample opportunity for CCAP to reinvest. Second, a more accommodative rate environment should serve as a tailwind for new deal activities. Lower borrowing costs are expected to support renewed M&A and refinancing volumes, creating opportunities for attractive reinvestment and additional fee income. We are optimistic that over time, we may see higher levels of non-interest-related income as compared to this third quarter, driven by a pickup in origination and structuring fees on new investments, as well as accelerated amortizations on real estate. Third, our spillover income remains a meaningful source of earnings support. At approximately $1.10 per share, this balance provides a cushion as we navigate the current rate outlook. And finally, we have a demonstrated record of alignment with shareholder. Each of our portfolio ramping initiatives, both when we established CCAP in 2015 and listed CCAP in 2020, were supported by our fee structure. Additionally, we have committed substantial advisor support for accreted, non-diluted growth opportunities, including our two public acquisitions. As I noted last quarter, our positioning has and always will be for the long term, and today we are comfortable with our dividend level. With that, I will now turn the call over to Henry.

Thanks, Jason. Please turn to slide 15, where we highlight our recent activity. Gross deployment in the second quarter totaled $74 million, as you can see on the left hand side. During the quarter, we closed seven new platform investments. Even as spreads have tightened, these new investments were loaned to private early basis points. $22 million came from incremental investments. The $74 million in gross deployment compares to approximately $86 million, resulting in net realizations of approximately $12 million. Our portfolio activity resulted in net realizations during the quarter due to several commitments to new portfolio companies. Turning back to the broader portfolio, please flip to slide 16. You can see that the weighted average yield of our income-producing securities at cost remains stable quarter-over-quarter. As of June 30th, 97% of our debt investments at fair value were floating rates, with a weighted average floor of 77 basis points. Average interest coverage of the companies in our investment portfolio at quarter-end was stable at 2.1 times, demonstrating durability and strength within the earnings at our underlying portfolio companies. As a reminder, this calculation is based on the latest annual... Please flip to slide 17, which shows the trends in internal performance ratings. Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings. Anyway, you'll see that 1 and 2 rate of 86% to 87% continuing throughout June 30th to 1.6% capitalization, as well as a sale of an investment that has previously been. This is partially offset by two new non-accrual investments. The overall portfolio continues to demonstrate resilient business fundamentals, supported by the fact that the vast majority of our borrowers experience steady revenue and EBITDA growth year over year. We have seen weakness in search and watchlist investing resulting from tariff impacts, one which picks up the other which sources overseas negatively impacted NAV this quarter, collectively accounting for $15.7. may face direct. We do not believe this exposure has increased in any meaningful way since our initial review. We continue to monitor closely for potential adverse in policy. Corporally speaking, we have continued to take a preemptive and rigorous approach to our watch list, recognizing that there are a variety of approaches to how managers think about these categorizations. It's worth noting that as of the end of the third quarter, the CCAS watch list, which we define as three, but 13% as compared to non-accruals of 1.6%, so a gap of over 11%. Based on an analysis of our public peers, this gap is a problem. We do not wait until there's default for moving an investment down the risk rating scale. We strive to be transparent about the health of our portfolio with the market, and one of the ways we do so is by your watch list of investments.

With that, I will now turn it over to Gerhard. Thanks, Henry, and hello, everyone. Yesterday evening, we reported net investment income of $0.46 per share, which is in line with the prior quarter. Net income for the third quarter was $0.19 per share, compared to $0.41 in the prior quarter. The quarter-over-quarter change primarily reflects higher net realized and unrealized losses. The tariff-impacted investments that Henry noted accounted for the majority of the change in realized and unrealized losses. While these items impacted results this quarter, they represent isolated credit events within an otherwise stable and well-diversified. Turning to the balance sheet, as of September 30, 2020, portfolio at Fairback, total net assets were $714 million, and NAS per share was $19.28, a decrease from $19.55 at the end of the second year. Let's shift to our capitalization and liquidity. I'm on slide 19. On that of the continued tightening in credit spreads, we are actively pursuing opportunities to optimize the priceification of our financials, leveraging more constructiveness. At the end of October, we priced $185 million of new senior unsecured notes, broken down into three tranches, first $67.5 million due February 2029, second $67.5 million due February to $50 million due May 2020. The notes will be issued in two closings. $135 million will be issued in February 2022 in May 2026. The proceeds from these respective issuances will be used to repay the majority of our existing unsecured debt maturing in 2020. Pro forma for this activity, over 90 percent total committed debt now matured. The weighted average stated interest rates on our Total borrowings were 5.99% as of quarter-end, down from 6.09% in the prior quarter, due primarily to a 50 basis point spread reduction in our SPV asset facility, which we right-sized during the second quarter and discussed on last quarters. A quarter-end debt-to-equity ratio was 1.23 times or 1.20 times on a net basis, unchanged from the prior quarter and within a stated target range of 1.1 times to 1.3. with $240 million of undrawn capacity subject to leveraged borrowing base and other restrictions and $28 million of cash. We have sufficient liquidity to selectively fund further investment activity while maintaining a debt-to-equity ratio inside our market. Third and final previously announced $0.05 per share special cash dividend related to undistributed taxable income was paid in September. As Jason noted, for the fourth quarter of 2025, our board has declared our regular dividend of $0.42 per share. While our existing variable supplemental dividend framework remains in effect, CCAP will not pay a Q4 supplemental dividend as the measurement cap exceeded 50% of this quarter's excess available earnings. And with that, I'd like to turn it back to Jason for closing remarks.

Thank you, Gerard. In closing, as we enter the last two months of the year and look towards 2026, we believe CCAP remains well positioned with respect to our experienced investment team. high-quality, diversified portfolio, and strong capital structure. We remain optimistic about the long-term prospects of the company, given our position as a leader in the core and lower middle market, with access to the breadth and resources of the broader Crescent platform. And we are focused on continuing to deliver a stable NAP profile and attractive total economic return in excess of the public BDC space.

Thank you all for joining us today and your interest in ZCAP. i'll now turn the call over to the operator for q a at this time i would like to remind everyone in order to ask a question press star then the number one on your telephone keypad and your first question comes from the line of robert dodd with raymond james please go ahead hi guys thanks for all the color on uh kind of the earnings outlook and and the dividend um question.

So, I mean, dig it into that. I mean, as you said, spill over $1.10. So you have that as a cushion if necessary. But I mean, obviously, that eats away NAV if you dip into that. I mean, what do you think between your liability side, sort of the leverage, activity, fees, et cetera, what do you think the probability is that you have enough levers to actually keep NII high coverage of the dividend at 100% or more, or do you think spillover is going to be necessarily consumed during 2026?

Hey, Robert. Jason here. Thanks for the question. We certainly think that the levers will be available to us on a go-forward basis here. I think for the immediate near term, we do believe that we are going to cover our base dividend with NII. I think we are certainly going to be tactical about how we think about generating incremental NII to support our base dividend. And as noted on the call, we've got an availability to certainly increase the size of the portfolio. We do think that there is the potential for increased non-interest-related income that can be driven from a pickup in activity relative to a more subdued line item for non-interest-related income. And then lastly, as noted, I think we've always tried to do the right thing and support CCAP and support our shareholders. And so, between all of those levers, you know, we're focused on covering the dividend.

Thank you for that. So, just giving some notes. On the couple of assets that got marked down, the tariff question, to Henry's point, I don't think that the tariff exposure has increased, but has the ability of the exposed companies deteriorated, the ability to handle the tariffs deteriorated? Because the exposure doesn't seem to have gone up, but some of them have been marked down fairly significantly on a tariff issue that, I mean, I want to say it's been known about all year, because it hasn't. But, you know, it wasn't a new surprise this quarter. Is there something that's changed in the ability to cope on specific tariffs or anything like that?

Yeah, Robert, this is Henry. I'll take that. The short answer is in aggregate, no, nothing has changed there. We've actually been, on a broader portfolio perspective, pleased with how management teams have responded with respect to either enacting price increases, repositioning supply chains, or exercising customer power that they have over their suppliers to be able to address potential pressures from tariffs. We highlighted the two names that we saw pronounced reduction to near-term operating outlooks because while overall in the portfolio we've certainly seen resilience, those two companies, at least in the near-term outlooks, are going to have to have a longer road in terms of being able to exercise all those levers to get back to what I would say is more historical level. holds the profitability. So in order to summarize that, I would say that for the broader portfolio, it's certainly the case that we have seen management teams and sponsors been able to respond proactively to the actions outside of specific portfolio companies where we just have seen – our view is that that outlook is going to be longer term.

Got it. Got it. Thank you for that. One more, if I can. You focus, obviously, core, lower and middle market. Lower and middle market isn't what it used to be. But the tone this quarter from other BDCs seems to be that the competition in the core and lower market has heated up in terms of spreads, et cetera, has heated up at kind of an accelerated rate as we've gone through this year. Can you give What do you think is the state of the market? You're still getting confidence, but are they as tight as they were? The spreads aren't necessarily where they were. Obviously, everybody's seen spread compression, but to some degree, has it exceeded your expectations for what you normally see in your core market? And when do you think that changes if it does?

Robert, Jason here. I would say we've certainly all seen spread compression this year across the middle market, whether it's lower core or upper. It's certainly been exacerbated in the upper where you're really competing with the broadly syndicated loan market. And quite frankly, you can get single B-type spreads in that market in the 300s. where we're operating. I would say not a significantly notable pickup in increased competition from actual new competitors. I think there's certainly competition for deals because of lower volumes, certainly in the first half of the year. And so that has resulted in some spread compression in our end of the market as opposed to new entrants. But what I would say is that I think that we're still seeing transactions, high-quality private transactions in the lower end core in the S-plus 450 to 500 range versus what you might see in the upper mid, in the low 400 range, and importantly, different leverage structures, right? So, in the upper mid market, you might see deals getting done at the low 400s at one or two turns more leverage than what you might see in the lower and core. So, from a risk-adjusted standpoint, we like where we're investing. I do think from a spread standpoint, we have some optimism that with the demonstrated rate cuts by the Fed, we are seeing increased pipeline activity, increased dialogue. And so, now we've said this before, but we do have some optimism around a real pickup in activity in 2026.

And just to add to that, across the platform, as you know, Robert, DCAP is a small part of Crescent's broader private credit platform. You know, we've been actually quite active with a lot of activity coming in recent quarters. We're just at around $6 billion total over the last 12 months that have been deployed across private credit here, and that's with picking our spots. You know, it's certainly been competitive on the rate side, but we are – what we're not really willing to compromise is on how these businesses are capitalized and our corresponding documentation that goes with it. So with that, I think there's a strong case here for, in the near term, expecting that opportunity set to be larger over the next 12 months than it was over the prior 12 months, which I think feeds to your original question as well, which is thinking about levers here to continue to drive track of reinvestment and consistent investment income here.

Got it. Thank you.

Thank you.

Your next question comes from the line of Mickey Schlain with ClearStreet. Please go ahead.

Good afternoon, everyone. Sticking to the issue of spreads, looking at page eight of your presentation, it was, I'd say, gratifying to see that spreads on your new investments increased quarter-to-quarter. Could you help us understand what drove that increase?

Yeah. Thanks for the question. This is Henry. We've actually been able to, I'd say over the last five quarters here, hold new origination spreads at around that 500 over SOFR baseline. It's going to be a mix of incremental activity from our existing portfolio, a strong source of our origination on a quarter-to-quarter basis, our add-ons with existing portfolio companies, as well as just opportunities that we're seeing within our specific market segments that kind of tie closer to that $4.75, $5.25 over so per band. So as you kind of think about where we play in the market, as well as add-ons being a large, you know, maybe anywhere from a third to a half of our origination on a quarter-to-quarter basis, those two dynamics are certainly providing us the ability to maintain spreads here even in this market.

So, would it be reasonable to say that the spread expansion quarter-to-quarter did not include taking on excessive risk?

Yes, I would absolutely agree with that. We're very conscious to stay within our lane in terms of where we're underwriting with respect to security. So we haven't deviated from being focused on top of the capital structure. Everything we do historically and today remains sponsored by portfolio companies, and it's never been our ethos to stretch for yield by either taking on leverage on what we think is prudent or expanding to company types that are outside of our comfort zone.

I understand. That's helpful. Staying with the presentation, but switching to page 15, new equity investments represented 20% of this quarter's new investments. Could you equity investments were and what did you see that made them interesting to you?

Yeah, so those new equity investments are actually tied to restructurings of portfolio companies where we recapitalize part of the capital structure into both the debt and equity components. So when you think about the breakdown there, the majority of what you'll see on that page is tied to the recapitalization and change of control that we did with two portfolio companies during the quarter.

Okay. So I guess it's new in sort of quotation marks. Another question on investing. I noticed your investment in family dollar, which is interesting. What is your thesis there? You know, we're getting such mixed messages on the health of the consumer, particularly at the low end of the spectrum. So I wanted to understand what your thinking is there.

Yeah, that loan was actually done in conjunction with equity investment that we have in an asset-based lender called Whitehaw. This is a group that we've been investing in and alongside, going back to 2017, across multiple vintages. Historically, they were called Great American Capital Partners. And selectively, we have participated in co-investment opportunities alongside them from time to time. So, if you kind of look back at our history, some notable investments that would fall down a category in the past include Amorous, as well as EJ Services, and Family Dollar is one of the more recent ones that we've done with them. When you think about the investment pieces there, given that their focus is on asset-based lending, that is an asset-based loan where the primary collateral there is not the ongoing operations of the business, so we're not underwriting to necessarily consumer demand for that specific type of retailer, but more so the hard assets that underpinned the loan there. So it's something that we've done in spots historically over the last eight years or so. Never a large percentage of that portfolio, but that investment would be part of that categorization.

Okay, that's interesting. We've seen other BTCs do really well in that space. Just one final question, if I can. It's more of a, I guess, a philosophical question. It's a small position referring to, I don't know if it's SECO or SECO. I don't know how you pronounce it. It's valued above par, but it's on non-accrual, which is unusual. What is the valuation reflecting there? And just philosophically, if you can explain the approach.

Yeah, so SECO is a third-party logistics provider. That company, we actually restructured at the beginning or in the first half of the year. And the valuation that you see reflects its position in the capital structure as the prior re-revolver. As far as the accrual status of the loan goes, what that reflects is just the ultimate view here in terms of recovering the initial cost basis in that loan. CECO in particular operates in one of, I would say, the hardest hit in the subsectors that we've seen, which is third-party logistics following the Liberation Day announcement. and as a result, there's a fair amount of near-term operating uncertainty with the business just in terms of operating performance, given some of the revenue headwinds that we're seeing both on the rate as well as the volume side. So as a result, we made that determination just based on the latest near-term outlook that we had. To the extent that changes here, it's something that we'll reevaluate, but we really want to make sure that we're conservative in terms of factoring in the near-term outlooks, especially for businesses that are kind of at the front lines of potential macro headwinds like a business like SECO. So that's what you'll see as far as that particular line item goes.

Thank you for that. That's helpful. Those are all my questions this afternoon. Thank you for your time.

Thank you.

Your next question comes from the line of Christopher Nolan with Weidenberg-Solomon. Please go ahead.

Hi, thanks for taking my questions. Are there any non-recurring items in earnings this quarter?

Non-recurring items, you're heard. Yes, hi, I can take that question. Certainly in the revenue top line, I think Jason mentioned this earlier in response to the question, And our sort of fee income is running a little bit lower than sort of the, I'd say maybe at a third, about one-third of sort of the historical run rate. We only have about a penny of fee income, sort of non-interest fee income in our revenues this quarter. But other than that, there's nothing that I call out that's material from a non-recurring perspective. The sort of core interest income, meaning sort of cash income, tick income, you know, amortization of OID, unused fees, and what we view sort of the distribution, recurring distribution from the Loeb and JV represents about 97, 96, 97% of total top-line revenue. So nothing out of the ordinary or non-revenue.

And then following up on the earlier question, how you guys are holding the line in terms of the yields on new investments, are you seeing more PIC or OID as components of the overall weighted yield for these deals?

This is Henry. I can comment on that. Now, within our deals, the PIC component is something that we just de-emphasized from the beginning. So I think the short answer on PIC is no. We've certainly seen deals out there where there's more PIC, either in the form of PIC that can be toggled or just PIC premium that's added on the coupon at the beginning in order to deliver yields in excess of market. But as far as what we're originating, PIC is not a material component of the spreads at underwrite this quarter and just overall in terms of where we invest. On the OID side, I would say that OIDs generally have been tightening. About a year ago, OIDs are probably kind of in the one and a half to a point of the original deal, and now that's probably 25-fifths tight where we've seen. So that component, along with just market pricing as a whole, has tightened a bit. But OID is always kind of one component of upfront yield that we want to – we consider as we're thinking about our investments here. And like spreads, we've seen some modest tightening there.

And I guess the final question is, it's more broad-based in terms of the lower middle market and middle market sectors. I'm sure tariffs have been a headwind, but energy costs have gone down as well. And given the lower interest rates, do you think this is going to help company, the EBITDA multiples on deals that you're going to see or not? What's your thoughts on this?

Yeah, I think in the near term, it can potentially be a tailwind on both of those fronts. What we're seeing across our portfolio, just in terms of free cash generation, despite some of the tariff headwinds, is that with lower borrowing costs, interest coverages are the highest we've seen in really two years since the prior rate hiking cycle began. And with higher interest coverages kind of across the board, you have the ability potentially for borrowers to be able to service a larger quantum of debt, which allows buyers to justify larger purchase multiples. While we haven't seen that dynamic in a broad-based fashion yet, a lot of the multiples and business that we've seen trade in this market have really been amongst kind of the highest quality assets that have been out there. We can certainly see that being a potential tailwind coming in the coming quarters here as we see it to see broader M&A volumes increase.

Great. Thank you.

Again, if you would like to ask a question, press star 1 on your telephone keypad there are no further questions at this time I will now turn the call back over to Jason bro for closing remarks okay thank you operator thank you thank you all for your time and attention here today and your support of see cap we appreciate it and we look forward to speaking with you all again soon ladies and gentlemen that concludes today's call thank you all for joining you may now disconnect