Earnings call transcript: BlackRock TCP Capital Q3 2025 sees EPS beat, stock rises

BlackRock TCP Capital Corp (TCPC) reported its Q3 2025 earnings, revealing an earnings per share (EPS) of $0.32, surpassing the forecasted $0.2981 by 7.35%. Despite a slight revenue miss, with actual revenue at $50.52 million compared to the forecasted $51.01 million, the company’s stock price rose by 5.13% to $5.77 in pre-market trading, reflecting investor optimism.

Key Takeaways

• BlackRock TCP Capital’s EPS exceeded expectations by 7.35%.
• Revenue slightly missed projections, down by 0.96%.
• Stock price increased by 5.13% in pre-market trading.
• The company maintained its net asset value at $8.71.
• Strategic investments and operational efficiencies were highlighted.

Company Performance

BlackRock TCP Capital demonstrated resilience in Q3 2025, marked by a strong EPS performance that exceeded analysts’ expectations. The company’s strategic focus on high-quality investments and operational efficiencies bolstered its financial standing despite a minor revenue shortfall. The integration with BlackRock Private Financing Solutions and increased deal flow indicate robust operational momentum.

Financial Highlights

• Revenue: $50.52 million, a slight miss compared to forecasts.
• Earnings per share: $0.32, beating expectations by 7.35%.
• Dividend: $0.25 per share, payable on December 31.
• Net asset value: Steady at $8.71.

Earnings vs. Forecast

BlackRock TCP Capital’s EPS of $0.32 outperformed the forecast of $0.2981, marking a 7.35% surprise. This positive earnings surprise contrasts with a minor revenue miss of 0.96%, as the company reported $50.52 million against a forecast of $51.01 million. Historically, the company has shown variability in meeting revenue expectations, making this EPS beat particularly noteworthy.

Market Reaction

Following the earnings announcement, BlackRock TCP Capital’s stock price surged by 5.13% to $5.77 in pre-market trading. This positive movement is a reflection of investor confidence in the company’s strategic direction and financial health, despite the revenue miss. The stock remains closer to its 52-week low of $5.39, indicating room for further growth.

Outlook & Guidance

Looking forward, BlackRock TCP Capital plans to refinance its 2026 notes and continue resolving challenged portfolio positions. The company’s emphasis on high-quality deals with strong free cash flow positions it well for future growth. No significant revisions to future guidance were announced, maintaining a steady strategic course.

Executive Commentary

CEO Phil Tseng expressed confidence in the company’s progress, stating, "We are encouraged by the progress we’ve made this year in improving the credit quality and the diversity of our portfolio." President Jason Mearding highlighted the advantage of a larger deal funnel in identifying high-quality opportunities.

Risks and Challenges

• Limited high-quality investment opportunities could constrain growth.
• Potential credit risks due to market volatility.
• The impact of AI across industries presents both opportunities and challenges.
• Ongoing portfolio restructurings require careful management.
• Macroeconomic pressures may affect refinancing strategies.

Q&A

During the earnings call, analysts probed into BlackRock TCP Capital’s market deployment strategies and potential credit risks. The management’s focus on maintaining a high-quality portfolio and navigating operational challenges was a central theme, with particular attention to the evolving impact of AI and market dynamics.

Full transcript - BlackRock TCP Capital Corp (TCPC) Q3 2025:

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Ladies and gentlemen, good afternoon, and welcome to BlackRock TCP Capital Corp’s third quarter earnings call. Today’s conference call is being recorded for replay purposes. During the presentation, all participants will be in a listen-only mode. A question-and-answer session will follow the company’s formal remarks. To ask a question, please press the star key followed by the digit one. I will repeat these instructions once again before the Q&A session. Now, I would like to turn the call over to Alex Doll, a member of the BlackRock TCP Capital Corp investor relations team. Alex, please proceed.

Alex Doll, Investor Relations, BlackRock TCP Capital Corp: Thank you, Operator. Before we begin, I’ll note that this conference call may contain forward-looking statements based on the estimates and assumptions of management at this time. Such statements are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. Any forward-looking statements made on this call are made as of today and are subject to change without notice. Additionally, certain information discussed and presented may have been derived from third-party sources and has not been independently verified. Accordingly, we make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the third quarter ended September 30, 2025, and posted a supplemental earnings presentation to our website at www.tcpcapital.com.

To view the slide presentation, which we will refer to on today’s call, please click on the investor relations link and select events and presentations. These documents should be reviewed in conjunction with the company’s Form 10Q, which was filed with the SEC earlier today. Now, I will turn the call over to our Chairman, CEO, and co-CIO, Phil Tseng.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Thank you, Alex, and thanks to all of our investors and analysts for joining us today. I’ll begin with an overview of our third quarter performance. Our President, Jason Mearding, will then provide details on our portfolio and investment activity, and Eric Cuellar, our CFO, will review our financial results. I’ll then share commentary on the current market environment before we open the call for your questions. We are also joined today by Dan Laurel, our co-CIO, who will be available to answer questions. I’ll begin with our results for the quarter. We made continued progress in executing on the strategic priorities we outlined at the start of the year, resolving challenged credits, improving the quality of our investment portfolio, and positioning TCPC to return to historical performance levels. Third quarter NAV was unchanged from the previous quarter at $8.71.

Importantly, non-accruals improved to 3.5% of the portfolio at fair market value compared to 5.6% at the end of 2024. During the third quarter, we sold one non-accrual investment above our valuation estimate and placed two smaller previously restructured investments back on non-accrual. I’d also like to share an update on our investment in Renovo, which, as you may recall, is a direct-to-consumer home remodeling business. Renovo was previously removed from non-accrual status following a comprehensive recapitalization in the second quarter. However, early in the fourth quarter, company-specific performance and liquidity issues led the Renovo board to determine that the best available path forward was a liquidation process, which started on November 3rd of 2025. The position in Renovo represented approximately 0.7% of our total investments at fair value as of September 30th.

We do not expect to recover value on our investment in Renovo, and we expect to fully write down this position in the fourth quarter of 2025. Further, we expect this to impact fourth quarter NAV by approximately $0.15 per share on a pro forma basis. We view this outcome as the result of issues specific to the issuer rather than a reflection of broader sector weakness. We also realized portfolio gains this quarter, the largest of which was NEP Group, a global leader in broadcast and live production services for sports entertainment. In September, NEP announced a recapitalization that closed in October, strengthening its balance sheet while adding new junior capital below our position. As a result, our investment was upgraded from a second lien to a first lien term loan, improving our recovery prospects and demonstrating our team’s success in executing a complex restructuring.

Now, I’ll share an update on capital allocation, starting with our dividend. Our board declared a third-quarter dividend of $0.25 per share, payable on December 31 to shareholders of record on December 17. This is consistent with the base dividend level we have paid since the first quarter of the year and reflects recent Fed cut rates and spreads we are seeing in the market. As part of our commitment to supporting our shareholders, we also repurchased more than 25,000 shares of TCPC stock during the third quarter and an additional 170,000 shares after quarter-end. Now, I’ll turn the call over to Jason to discuss our portfolio in more detail as well as our recent investment activity.

Jason Mearding, President, BlackRock TCP Capital Corp: Thanks, Phil, and welcome, everyone. During the third quarter, we selectively deployed capital into opportunities that are directly aligned with our investment strategy, investing primarily in core middle-market companies, maintaining a well-diversified portfolio, prioritizing first lien loans, and leveraging the extensive resources of BlackRock. As we mentioned last quarter, BlackRock and HPS created a new platform called Private Financing Solutions, or PFS. PFS combines the firm’s private credit, GPLP solutions, liquid and private credit CLOs, and leverage finance businesses into a single integrated platform. The integration of the BlackRock and HPS businesses has already been an important catalyst for expanding TCPC’s access to deal flow. In the third quarter, we saw a 20% increase in the number of deals we reviewed relative to last quarter and a 40% increase in the number of deals we advanced to the screening stage.

In today’s market environment, a larger deal funnel is an advantage in identifying high-quality opportunities. Now, I’ll highlight two of our third-quarter investments, beginning with KBRA, where we invested $2.4 million as part of a new $1.1 billion first lien term loan financing for the company. KBRA is a major U.S. credit rating agency that provides independent ratings and research across corporate, financial, and public markets, and it has been a portfolio company of ours for three and a half years. The business is owned by a sector-focused sponsor that we have partnered with on multiple deals, and the BlackRock PFS platform led this transaction, which refinanced KBRA’s existing debt, funded a shareholder dividend, and provided growth capital for M&A. Our investment in KBRA aligns closely with our strategy of investing in companies with substantial barriers to entry that generate recurring revenue, healthy margins, and strong free cash flow.

We believe these characteristics support our ability to deliver risk-adjusted returns that are attractive to our shareholders. We also made a $5.2 million follow-on investment in Syndigo, a software company that helps brands and retailers manage and share product information across online and in-store channels. This transaction was part of a $930 million first lien term loan led by PFS that facilitated Syndigo’s recent acquisition of OneWorldSync, a content management company. This business combination advances Syndigo’s goal of using AI to help companies deliver accurate and consistent product content across the entire customer experience. BlackRock has long been a lender to Syndigo, and this transaction demonstrates our continued commitment to the company’s growth and success. We view it as an attractive opportunity to support a scaled market leader with resilient recurring revenue and strong free cash flow.

Since the start of the year, we’ve invested $241 million in 18 new and 13 existing portfolio companies with a granular average position size of $7.8 million. This is a significant decrease from an $11.7 million average position size across our portfolio at the end of 2024 and reflects progress in creating a more diversified, lower-risk portfolio. All of our investments in the third quarter were in first lien term loans to companies with strong fundamentals that are positioned for long-term growth. Incumbency has remained an important competitive advantage for TCPC, and repeat borrowers represented 51% of our year-to-date originations. At the end of the quarter, our portfolio had a fair market value of $1.7 billion, invested across 149 companies in more than 20 industry sectors. 89% of the portfolio was invested in senior-secured debt, all of which is in floating-rate instruments.

Investment income was broadly distributed across our diverse portfolio, with 78% of portfolio companies each contributing less than 1% of total income. The weighted average annual effective yield of our portfolio was 11.5% in the third quarter compared to 12% in the prior quarter. New investments had a weighted average yield of 10.1%, while those we exited carried an average of 11.7%. Paydowns this quarter were $140 million compared to $48 million in the prior quarter. This higher level of paydowns was mainly due to timing, as several repayments we expected to close in the second quarter closed in the third quarter instead. Now, I’ll turn the call over to Eric, who will walk through our financial results and capital and liquidity position.

Eric Cuellar, CFO, BlackRock TCP Capital Corp: Thank you, Jason. I will begin with a review of our financial results for the third quarter. As detailed in our earnings press release, adjusted net investment income excludes the amortization of the purchase accounting discount resulting from our merger with BCIC and is calculated in accordance with GAAP. A full reconciliation of adjusted net investment income to GAAP net investment income, as well as other non-GAAP financial metrics, is included in our earnings press release and Form 10Q. Third quarter adjusted net investment income was $0.30 per share, and gross investment income was $0.59 per share in the third quarter. This compares to $0.31 and $0.61 per share, respectively, in the second quarter. This quarter’s gross investment income included recurring cash interest of $0.46 per share, non-recurring income of $0.03, recurring discount and fee amortization of $0.02.

Pick income of $0.06, and dividend income of $0.02 per share. Pick interest income represented 9.5% of total investment income, down from 11.4% last quarter. Operating expenses for the third quarter were $0.27 per share, including $0.20 per share of interest and other debt expenses. As of September 30, 2025, our cumulative total return did not exceed the total return hurdle. Therefore, no incentive compensation was accrued for the third quarter. As you will recall, our market-leading fee structure is particularly shareholder-friendly, which aligns interests between investors and management. Additionally, we waived a portion of our base management fee again this quarter, in line with our advisor’s decision to waive one-third of our base management fee for the first three quarters of 2025. Net realized losses for the quarter were approximately $97.0 million, or $1.14 per share.

$72.6 million of this amount was due to the restructuring of our investment in Razor. The remaining amount was related to our dispositions of Connergy, Iracore, and INH Buyer, which resulted in losses of $13.2 million, $4.1 million, and $3.9 million, respectively. Importantly, these impacts were already substantially reflected in our net asset value as of June 30, 2025. Net unrealized gains were $94.1 million, or $1.11 per share, primarily reflecting the markup of NEP that Phil mentioned earlier, along with the reversal of previously recognized unrealized losses from the restructuring and disposition of the investments I mentioned. The net increase in net assets for the quarter was $24.4 million, or $0.29 per share. As of September 30, nine portfolio companies were on non-accrual status, representing 3.5% of the portfolio at fair value and 7.0% at cost. This is down from 3.7%.

10.4%, respectively, as of June 30. 5.6% and 14.4%, respectively, at December 31, 2024. As Phil noted, we continue to work closely with our borrowers, their sponsors, and creditors to optimize our recovery value. Now, I’ll discuss our balance sheet and liquidity positioning. Our balance sheet remains strong. Total liquidity at quarter-end was approximately $528 million, including $466.1 million of available leverage and $61 million in cash. Unfunded loan commitments represented 9.0% of our $1.7 billion investment portfolio, or approximately $154 million, including $48.3 million in revolver commitments. Net regulatory leverage was 1.2 times at quarter-end compared to 1.28 times at the end of the second quarter and in line with our target range of 0.9-1.2 times. The decrease was primarily due to repayments during the quarter. Our diverse leverage program includes three low-cost credit facilities, three unsecured note issuances, and an SBA program.

The weighted average interest rate on our debt outstanding at quarter-end was 5.0%. Looking ahead, we are taking proactive steps to manage our capital structure, including evaluating the best alternatives to refinance our 2026 notes. Given our credit debt ratings, we plan to address the notes through a combination of our credit facilities and a potential private placement. While spreads have widened over the past few weeks, we continue to monitor market conditions closely to determine the most cost-effective path forward. Now, I’ll turn the call back to Phil for his closing remarks.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Thank you, Eric. Now, I will provide some market commentary. As we mentioned, we have seen an increase in deal flow, and our pipeline is growing. While M&A activity has begun to show some signs of life, most borrowers are currently focused on refinancing existing debt at lower rates or extending maturities to execute on continued growth plans. At the same time, the volume of high-quality investment opportunities remains limited. Against this backdrop, we are pleased to see and review more opportunities as part of the PFS platform, and we are intently focused on deploying capital into high-quality deals. In closing, we are encouraged by the progress we’ve made this year in improving the credit quality and the diversity of our portfolio.

Looking to the final quarter of the year, we are focused on continuing to resolve challenged positions in our portfolio and positioning TCPC to deliver strong, sustainable returns to our investors. Thank you for your continued support and interest in TCPC. I will now turn the call to the operator to open the call for questions.

Operator: Thank you. If you would like to ask a question, please press Star 1 on your telephone keypad now. If you would like to withdraw your question, please press Star 2. Our first question is from Robert Dodd at Raymond James. Please go ahead.

Robert Dodd, Analyst, Raymond James: Hi, guys. First, if we can discuss the—I think Phil was beginning to say there were two previous restructurings that were returned to NOLACOR, and then obviously, Renovo was restructured and is now going to be written off. Can you give us any kind of any themes here? I mean, that’s three restructurings in relatively short order that sort of did not stick, right? Is there any commonality between what occurred there or any changes that you can make? Obviously, you might not have been in control of all of the restructuring steps there, but any changes you can make to the restructuring process to kind of—I mean, maybe the structures need to be more aggressive the first time or just any thoughts there? I mean, three in short order is, yeah, not great.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Yeah. Yeah, thanks, Robert. We share your sentiments. We’re obviously disappointed that deals that have been restructured do come back on. As you know, these are restructurings that get completed back to their capital structure. It takes time for the business itself to kind of go through its operational restructuring plan and execution. I think that’s what we’re seeing here. Credit issues or operational issues do not resolve themselves quickly. It does take time. It’s not linear. With these specifically, there’s no commonality amongst these. I mean, there are others, by the way, that have gone through restructurings and have come out continuing to perform and on a positive path. We have a number of those cases that we can talk about as well. I would say there’s no common theme amongst these three that went back on.

Robert Dodd, Analyst, Raymond James: Got it. Got it. Thank you. Then just on the market environment and obviously the expanded view, I mean, granularity down, right? I think you said the new investment’s like $7.8 million positions. So that’s good, right? More diversification in the portfolio. I mean. The comments that most borrowers are still focused on lowering costs. I mean, I’ve heard elsewhere, right, that the M&A cycle is starting to pick up. So I mean. Are you still—sounds like you’re still mainly experiencing refinancing activity rather than new borrower activity. I mean, how do you expect that to evolve over the next, I would say, 12 months? Because that’s a long time to project anything.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Yeah, it is. I think your comments about seeing a lot of refinancings, that is certainly how I’d characterize deployment in the past several quarters, largely in the market as well. I think the thoughts around M&A activity picking up, we are seeing that, Robert, and we are seeing new platforms, sponsors coming in and bidding on assets and a lot of deals in the pipeline really picking up. I would say that’s probably a leading indicator of hopefully higher volumes in the next several quarters. In terms of actual deployments, we’re seeing refinancings, incremental add-ons on our existing portfolio as being kind of the predominant source of deployment, probably closer to 50% at this point, or last quarter, rather.

Robert Dodd, Analyst, Raymond James: Got it. Yeah, got it.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Then your—.

Robert Dodd, Analyst, Raymond James: Go ahead. Sorry.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Sorry. Your point of portfolio diversification is a good one. We have been, since this management team really came in at the end of last year, really focused on that portfolio diversification point so that we do not—this portfolio does not fall victim to a lot of the concentration issues that it had previously. We have had 31 new investments this year at an average position size of $7 million-$8 million. That is a stark contrast to how this portfolio was managed previously.

Robert Dodd, Analyst, Raymond James: Got it. Got it. Thank you. I mean, then last one, I mean, are you seeing any—maybe not just in the portfolio, but more broadly, even in deals that get reviewed—are you seeing any incremental indicators of stress? I mean, obviously, there’s been some headlines. You do not have exposure to that in general. Are you seeing any areas of concern, either in the portfolio, obviously, but also in deals that are coming over the desk? Is there an increasing number of any commonality about why they’re being rejected by or anything like that?

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Yeah, we’re certainly always focused on credit risks in the portfolio and in new deals that we evaluate every week. Some of the common themes are, of course, always focusing around more cyclical names, really trying to understand vulnerabilities to a softer cycle or softer macro environment. And then with respect to software, a lot of folks have been talking about AI, and that’s real. Really trying to understand—and by the way, not just software, it’s for any other kind of business process—really trying to understand the risks around AI in terms of displacing or if that borrower has a strong competitive solution there on the AI solution themselves. So those are some of the things that we’re commonly talking about. But with respect to other specific industry sectors, nothing right now that are atypical risk factors that we wouldn’t otherwise be discussing. Sure, we’re talking about tariffs still.

We’re talking about geopolitical risks in those areas too.

Robert Dodd, Analyst, Raymond James: Got it. Thank you. That’s it for me.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Thank you, Robert.

Operator: For any further questions, please press Star 1 on your telephone keypad. At this time, we have no further questions on the call, so I will hand back to management for closing comments.

Phil Tseng, Chairman, CEO, and co-CIO, BlackRock TCP Capital Corp: Thank you, everyone, for dialing in and streaming on the webcast. I would like to thank our team for their continued efforts and hard work around the portfolio. Please contact us with any questions and have a great day.

Operator: Thank you. This concludes today’s conference call, and you may now disconnect.

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