TCP Capital Corp. Stock

Hello, everyone. Thank you for joining us, and welcome to the BlackRock TCP Capital Corp. Q2 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Alex Doll, a member of the BlackRock TCP Capital Corp. Investor Relations team. Alex, please go ahead.

Thank you, operator. Before we begin, I will note that this conference call may contain forward-looking statements based on management's estimates and assumptions at the time such statements are made, which are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. For more information, please refer to the risk factors discussed in our Form 10-Q in the Form 8-K filed with the SEC today, along with the associated press release.

Any forward-looking statements made on this call are 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. Before we begin, I would also like to note that today's discussion includes references to certain non-GAAP financial measures, including adjusted net investment income.

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 the earnings press release and 10-Q.

Earlier today, we issued a press release announcing our results for the second quarter ended June 30, 2026, as well as the portfolio sale transaction we just completed. We posted a supplemental presentation with information on both to our website at www.tcpcapital.com. To view the slide presentation, which we will refer to on today's call, please click the Investor Relations link and select Events and Presentations. These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today.

Now I will turn the call over to our Chairman and CEO; and Co-CIO, Phil Tseng.

Thank you, Alex, and thank you to our investors and analysts for joining us. Today, I'll start with an overview of the portfolio-sale transaction we announced this morning, followed by the highlights of our second quarter 2026 performance. Then Jason Mehring, our President, will cover portfolio and investment activity, and Erik Cuellar, our CFO, will walk through our financial results and our balance sheet.

I'll provide closing remarks before we open the call for questions. We're also joined by Dan Worrell, our Co-CIO, who will be available for questions. Let me begin with the transaction. This is a milestone for TCPC that meaningfully accelerates the work already underway to strengthen our financial position and reshape our investment portfolio. This transaction materially lowers leverage, reduces investment position sizes and significantly enhances our investment capacity while realizing a substantial premium to the value implied by TCPC's current share price.

Looking forward, it provides substantially, greater financial, investment, and operational flexibility, creating a stronger foundation for delivering long-term shareholder value. We will step through the transaction at a high level. Additional detail can be found in the Subsequent Events Disclosure section of the 10-Q. TCPC transferred approximately $523 million of investments across 78 portfolio companies into a continuation vehicle sponsored by Pantheon.

The assets sold comprised approximately 48% of the fair market value of our pre-transaction debt portfolio and have broadly similar sector, lien, and credit characteristics. The assets include all collateral underlying the recently issued BlackRock DLF 2026 CLO plus additional contributed investments. TCPC retained a direct interest in substantially all of the portfolio companies, transferring on average approximately 2/3 of each investment position to the vehicle.

In addition, the company retained a 5% equity interest in the continuation vehicle, and TCPC's investment adviser will also act as the investment adviser for the vehicle without compensation. The continuation vehicle assumed all of the CLO liabilities. The transaction was priced at 95% of the December 31, 2025, gross fair market value of the assets sold, subject to customary adjustments, including unfunded commitments, portfolio repayments, and investment income generated prior to closing and other items as more fully outlined in Appendix A of the 8-K we filed this morning.

The transaction is expected to result in a NAV decline of approximately 10.4% or $0.68 per share, based on June 30 NAV. Our Board of Directors obtained a third-party fairness opinion from Lincoln International in connection with the transaction. The strategic impact of the transaction is substantial. The approximately $152 million of proceeds were used primarily to reduce debt.

And together with deconsolidation of the CLO and post-quarter-end repayments, TCPC has reduced net leverage to approximately 0.4x on a pro forma basis and unfunded commitments to below $40 million, significantly improving TCPC's financial flexibility and creating substantial new investment capacity.

To help evaluate the best way to use that flexibility to create further long-term shareholder value, the Board has engaged Keefe, Bruyette & Woods to assist with a strategic review. This review will consider a range of options, including, but not limited to, reinvesting the portfolio, returning capital to shareholders, pursuing strategic combinations or other corporate transactions, or some combination of these options.

I want to thank everyone involved in the transaction. It was a complex process, and the hard work required reflects the firm's commitment to TCPC and its shareholders. With that, let me turn to our second quarter results. Apart from the transaction, we continue to make progress against our strategic priorities during the second quarter, including reducing non-accruals, strengthening the balance sheet, and advancing our portfolio repositioning efforts.

While quarterly NAV performance reflected issuer-specific developments and a small number of portfolio companies, broader portfolio performance was generally in line with our expectations, and we experienced strong repayment volumes. NAV, in the quarter declined approximately 2.1% to $6.58 per share, primarily reflecting developments at Pluralsight, PVHC, and Zilliant as well as realized losses on our exits of AutoAlert and BCOM.

Non-accruals declined to 1.6% of the portfolio at fair value and 7.4% at cost from 2.8% and 7.6%, respectively, at the end of the first quarter. The improvement was driven in large part by positive developments at Thrasio, which repaid $22 million. We removed our remaining $3.7 million position in Thrasio for non-accrual status as we expect this position will be paid down in full given the current health of the business.

As you may recall, we restructured our investment in Thrasio in early 2024, and we are pleased with this outcome, which we believe reflects the benefits of active portfolio management and patients. Repayment activity was strong in the second quarter, totaling $111.6 million in payoffs and paydowns and resulting in net repayments of $86.6 million, which advanced our portfolio-repositioning efforts.

In addition to Thrasio, we received repayments of $14.9 million from Starz, $13.1 million from AutoAlert and an additional $48.7 million across 5 other companies. This repayment activity also strengthened the balance sheet with net leverage declining to 1.38x at quarter end, from 1.48x at the end of the first quarter. Following the portfolio sale transaction and post-quarter-end repayments completed to date, net leverage is expected to decline to approximately 0.4x on a pro forma basis into less than 0.3x after additional portfolio company paydowns from transactions that have been announced.

Turning to capital allocation. On July 30, 2026, our Board declared a third-quarter dividend of $0.17 per share, payable on September 30 to shareholders of record as of September 16. We also repurchased 156,370 shares of TCPC stock during the second quarter at a weighted-average price of $3.78 per share.

Now I'll turn the call over to Jason to discuss the portfolio and investment activity in more detail.

Thanks, Bill, and welcome, everyone. With the portfolio sale transaction now complete, I'll review our second quarter portfolio metrics and then highlight how the transaction and post quarter end repayments have positioned the portfolio going forward. At quarter-end, the portfolio had a fair market value of $1.29 billion invested across 134 portfolio companies in 35 industry sectors with an average position size of $9.6 million. 91.5% of the portfolio was invested in senior secured loans, all of which were floating-rate-with the balance of the portfolio in equity.

Substantially all new investments during the quarter were in first-lien loans, bringing total first-lien exposure to 89.8% on a fair value basis. Our largest investment based on fair value represent 8.9% of the portfolio and the 5 largest investments accounted for 27.6%. As of June 30, software represented 29.7% of the portfolio at fair value across 45 portfolio companies with approximately 97% invested in debt and 3% in equity.

This software exposure decreased modestly from 30.5% across 47 companies in Q1, primarily reflecting the successful exits of Persado and StarRisk during the period. The current software portfolio was originated at a loan-to-value of approximately 26%, providing a considerable equity cushion. As we've discussed previously, we do not view software and potential AI risk as monolithic because certain segments are fundamentally more resilient than others.

For some time, our underwriting has focused on systems of record with proprietary data assets, and solutions that are deeply embedded in customer workflows or serve regulated end markets, which we believe are generally more insulated from AI-related disruption. In line with our focus on enhancing portfolio quality, disciplined deployment, and strengthening our balance sheet, we intentionally kept investment activity limited and highly selective in the second quarter.

The majority of the $25 million of capital deployed during the quarter was directed towards previously committed investments, and we added one new borrower. Capitalizing on incumbency remains a priority for us, and we continue to find compelling investment opportunities among our existing portfolio companies where we have long-standing relationships and industry experience.

As Phil mentioned, we saw meaningful payoffs and paydowns this quarter, totaling $111.6 million and resulting in net repayments of $86.6 million. Subsequent to quarter-end, we also received $97.4 million in additional repayments, including $55.2 million from Motive Technologies, formerly known as KeepTruckin, and $39 million from Pico Quantitative Trading.

In addition, Domo announced that it had entered into a definitive agreement to sell substantially all of its operating businesses to Progress Software. We expect this will result in full repayment of $69 million debt investment when the transaction closes in the fourth quarter. This is a significant positive development in our software book and another example of our ability to create value through active engagement with our portfolio companies.

Together, these developments address more than $150 million of exposure across 3 larger portfolio positions and represent meaningful progress towards reducing concentration in advancing our broader portfolio position -- repositioning efforts. We also see increasing repayment volumes as a sign of general borrower health. At the end of the second quarter, the weighted-average effective yield on our portfolio was 10.5%.

New investments had a weighted-average yield of 9.4%, while those we exited had a weighted-average yield of 10.9%. Current yields reflect lower base rates and spread compression consistent with the past several quarters. The portfolio sale transaction and post-quarter-end repayments have significantly reduced our leverage and unfunded commitments and increased our new investment capacity, meaningfully accelerating our ability to reposition the portfolio.

On a pro forma basis, the portfolio has a fair market value of $671 million invested across 132 portfolio companies, with an average position size of approximately $5.1 million. If we include the additional investment capacity available at a modest one-time debt-to-equity ratio and assume no new software investments with that capacity, software would represent approximately 23% of the pro forma portfolio. That level would be further reduced to approximately 17% if you factor in the expected repayment of Domo.

Following recent repayments and the portfolio sale transaction, we have approximately $395 million of liquidity, providing significant flexibility and investment capacity as the Board evaluates how best to create long-term shareholder value. We continue to benefit from the capabilities of the PFS platform, which provides access to a broad opportunity set, allowing us to remain highly selective and focused on granular, high-quality, first-lien investments.

Now I'll turn the call over to Erik to discuss our financial results, capital, and liquidity position.

Thank you, Jason. I'll begin with a review of our financial results for the second quarter of 2026. Total investment income was $40.0 million or $0.48 per share. This included recurring cash interest income of $0.35 per share, non-recurring income of $0.04 per share, recurring discount and fee amortization of $0.02 per share, PIK income of $0.04 per share, and dividend income of $0.03 per share.

PIK income represented 7.6% of total investment income, down from 8.5% in Q1. Operating expenses for the second quarter were $21.9 million or $0.26 per share, including $15.0 million, or $0.18 per share, of interest and other debt expenses. Net investment income was $18.1 million, or $0.22 per share, and adjusted net investment income was $17.5 million or $0.21 per share.

As of June 30, 2026, our cumulative total return did not exceed the total return hurdle, and therefore, no incentive compensation was accrued for the quarter. Net realized losses for the quarter were $14.8 million, or $0.18 per share, driven primarily by a $10 million loss on the exit of our investment in AutoAlert. Net unrealized gains were $1.3 million, or $0.01 per share, driven primarily by $11.3 million and reversals of previous unrealized losses related to AutoAlert and Thrasio.

These gains were partially offset by markdowns in Pluralsight, PVHC, and Zilliant, which together accounted for approximately $9.5 million of unrealized losses. Quarterly distributions to shareholders totaled $0.17 per share during the period. After net investment income, realized, and unrealized gains and losses, and distributions, NAV declined by $0.14 per share to $6.58 at June 30. The corresponding decrease in net assets for the quarter was $13.1 million.

Now I'll discuss our balance sheet and liquidity, which benefited from both repayment and liability optimization activity during the quarter, with improvements further accelerated by the portfolio sale transaction we completed today. During the quarter, we completed two important liability-management initiatives. In May, we issued $406 million of CLO debt and used the proceeds to fully repay our TCPC Funding II and merger facilities, allowing us to term out a significant portion of our secured debt.

Additionally, given the level of paydowns and realizations, including those related to the portfolio transaction and the absence of new development activity in our SBIC subsidiary, we elected to repay the remaining $107 million outstanding on our SBIC debt and subsequently surrender our license. We concluded there was limited benefit to maintaining the structure given the SBIC's cash position and fully-drawn facility.

Together, these two actions support our broader balance sheet objectives by extending liability maturities, increasing financing flexibility, and reducing complexity within our capital structure. As Jason mentioned, we also received $86.6 million in net repayments in the second quarter. As a result, total liquidity at the end of the second quarter was $533.7 million including $376.2 million in available borrowing capacity under our revolvers and $157.5 million in cash.

The combined weighted average interest rate on debt outstanding was 6.03% as of June 30, 2026. Net leverage was reduced to 1.38x at quarter end, resulting in total debt-to-equity ratio of 1.6x. With the combination of post-quarter-end repayment activity and this portfolio sale transaction, we estimate that our pro forma net leverage ratio further improved to approximately 0.4x and would be less than 0.3x if adjusted for future closure of the recently announced Domo transaction that Jason mentioned.

Unfunded loan commitments represented 7.0% of our $1.29 billion investment portfolio or $90 million, including $53 million in revolver commitments as of June 30, 2026. Pro forma for repayments and the portfolio sale transaction, unfunded loan commitments have been reduced to approximately $36 million. Overall, TCPC has a simpler balance sheet, enhanced liquidity, and substantially greater financial flexibility today than it did at the outset of the second quarter.

Now I'll turn the call back to Phil for closing remarks.

Thanks, Erik. Over the past year, we have made strong progress strengthening our financial position and reshaping our investment portfolio, and this transaction pulls forward the realization of those efforts. The outcome is significantly lower leverage, reduced investment position sizes and enhanced investment capacity.

We believe these outcomes provide substantially greater financial, investment and operational flexibility creating a stronger foundation from which to evaluate and pursue strategic alternatives that can deliver greater long-term value to shareholders. We look forward to working with KBW and sharing more details as that process progresses as appropriate. With that, I'd like to thank our investors and analysts for their continued support of TCPC.

Operator, we are now ready to open the call for questions.

[Operator Instructions] Your first question comes from the line of Robert Dodd with Raymond James.

And congrats on kind of the landmark transaction. To your point, Phil, it kind of does raise the question, though, of what next. Can you address that? Like there's a strategic review -- so it's kind of 2 components to the question on that. Like how long do you think the strategic review, and obviously that's hard to say that.

I think that's likely to take -- and two, while that's ongoing, what are you likely strategies. Obviously, if the review -- part of the review is, should we reinvest or should we buy back stock, for example, among other things. Are you likely to do those things while the review is ongoing? Or is it kind of semis on your hands until the review is complete and you have a strategic mandate to produce -- to pursue something.

Yes, Robert, thanks for the question. So there's no specific timetable on the strategic review. Obviously, we are now in a very good position where we've created a great foundation from which to evaluate various alternatives that we otherwise were in a position, too. So we feel that this transaction has given us and certainly accelerated our position to be here to evaluate variety of alternatives, which includes the investment flexibility and capacity that we've talked about on the call and also going deeper into a variety of other initiatives that we've been undertaking at the company.

And we made good progress, but this certainly accelerates it. In terms of specifically around timing, we'll see. Obviously, KBW will do its work, work together with management and the Board, and come back with a variety of alternatives from which we can evaluate and maybe it's a combination of alternatives to drive longer-term shareholder value.

In terms of how we're going to be investing over the subsequent period between now and then, we're going to continue doing what we've been doing, which is being prudent about our capital and obviously, the strategic review goes hand in hand with how we allocate that capital, so we're going to have that lens as we proceed through this period.

Moving on from that for a second. And again, I think the transaction definitely puts you in a position where it's appropriate to review options before where your position was kind of dictating what you had to do before. So congrats on that. On -- Moving on -- I mean, to your point, like, I mean, I think you've got a Thrasio, you expect to be fully paid down the $69 million that should get repaid in the fourth quarter.

There's a lot of repayments coming in as well how -- I mean to that point, quite apart from the transaction, there's been a lot of movement as well. How much more can be done on that on the portfolio side, kind of like, this year. I mean, longer term, obviously, things do what they do. But how many more things that could potentially be accelerated maybe not purely from your actions, but in terms of beyond the transaction even also reducing even beyond Delmar, et cetera, et cetera, some of the chunky investments in the portfolio?

Well, maybe it's worthwhile, Robert, to take a step back about why we embarked on this transaction because I think that speaks to what we can do in terms of continuing to drive shareholder value here in terms of repayments and portfolio positioning. But with our leverage level in the last several quarters, we've been bumping up against 1.3x, 1.4x, even north of 1.4x. It's really inhibited our ability to reposition the portfolio. I think you and other investors and analysts in the community have commented on that for good reason.

For example, we haven't been able to make meaningfully sized new investments, right? Because that leverage -- so that's prevented us from diversifying the portfolio, prevent us from putting on newer investments to generate a more healthy income profile. And that limited capacity is also constrained our ability to buy back shares in a more meaningful way, aside from what we've done programmatically. And also, we've been inhibited from investing further or leaning further into strategic things, or assets that we would have otherwise wanted to go deeper on.

So this newfound financial and investment flexibility, that's what we've accomplished here. And we could have done it organically and we actually made quite a bit of -- we've been making quite a progress, organically with, as you've seen, healthy repayments, non-accruals coming down, PIK coming down, position sizes coming down. But that takes a long time, and I think you see that.

And we have a pretty concentrated book, and that's how the portfolio is managed previously. So when we have a hit, it has a significant impact on NAV. So the path wasn't necessarily certain either, right? And what we achieved today with this announced sale is that we're here, right? We're at 0.4x leverage, 0.3x with expected additional pay down. And we have north of $300 million of new investment capacity.

So we've really accelerated, and that's why I started my comments saying this is a milestone for the company because I think it really is in putting us in a good position. So we're going to continue on the organic path in the interim. Obviously, this new capacity gives us an ability to invest in new deals to accelerate the diversification of the portfolio to evaluate other holder-friendly initiatives like buybacks or otherwise. And that's what we're going to be looking out for in the near term.

Your next question comes from the line of Paul Johnson with KBW Capital Markets.

So, I'm just curious. I wanted to know the impact from the transaction, the asset sale, 10.4%, does that also include, I guess, like transaction, any sort of transaction-related expenses for completing the sale?

Paul, it's Erik. The $10.4 million does include the transaction-related expenses in there. I'd say the easiest way to think about the 10.4% approximate hit to NAV is by starting with that 5% discount that we stated as a portfolio of discount. And then other customary adjustments that are done in these type of transactions, which gives you sort of a rough effective discount of about 10% and then your transaction expenses take that out to about 10.4% of NAV hit.

And then I guess, my other question would just be, I guess, in terms of strategic alternatives, obviously, there's kind of a broad range of possibilities here. I mean, how should I guess we think about it in terms of, is this kind of a resolution all of the just kind of ongoing challenges from the years past? Or I think does BlackRock, I guess, have any sort of attention here, maybe sort of like a rebuild in terms of kind of like the BlackRock BDC franchise.

Paul, it's Phil. We don't have any comment on what we think will come out of the strategic evaluation process, and we're not going into it with a specific agenda except for generating long-term shareholder value. So BlackRock, as you can see, is very committed to the success of this -- of the shareholders here. As you can see with this transaction, which was very complex and was a lot of effort around the table in getting this done. So no preconceived notion of what's going to come out. But obviously, we want to hire a third-party adviser to really assist us and the Board.

We have reached the end of the Q&A session. I will now turn the call back to Phil for closing remarks.

Thanks, operator. Thank you all for joining our call today. I'd also like to thank our team for their continued effort and hard work to TCPC. As always, please reach out with any questions. Thank you very much.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the BlackRock TCP Capital Corp. Q1 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Alex Doll, Executive Director. Alex, please go ahead.

Thank you, operator. Before we begin, I will note that this conference call may contain forward-looking statements based on management's estimates and assumptions at the time such statements are made, which are not guarantees of future performance. Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected.

For more information, please refer to the risk factors discussed in our most recently filed report on Form 10-Q and the Form 8-K filed with the SEC today, along with the associated press release. Any forward-looking statements made on this call are 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 will make no representation or warranty with respect to such information. Earlier today, we issued our earnings release for the first quarter ended March 31, 2026, and posted a supplemental earnings presentation on our website at www.tcpcapital.com. To view the slide presentation, which we will refer to on today's call, please click the Investor Relations link and select Events and Presentations.

These documents should be reviewed in conjunction with the company's Form 10-Q, which was filed with the SEC earlier today. Now I will turn the call over to our Chairman, CEO and Co-CIO, Phil Tseng.

Thank you, Alex, and thank you to our investors and analysts for joining us today. I'll start with an overview of our first quarter 2026 performance. Then Jason Mehring, our President, will cover portfolio and investment activity; and Erik Cuellar, our CFO, will walk through our financial results. And then I'll come back with closing remarks before we open up the call for questions.

We're also joined today by Dan Worrell, our Co-CIO, who will be available to answer your questions. In the first quarter, we executed against our strategic priorities, which are improving credit quality, further repositioning our investment portfolio and strengthening our balance sheet. We are deploying capital selectively into high-quality opportunities, leveraging the origination power of the PFS platform while reducing average position sizes, increasing the portion of the portfolio in first lien loans and reducing leverage.

While there is work to do, we are taking steps to drive value for our shareholders. One of the most important metrics for us is nonaccruals. And during this quarter, these declined to 2.8% of the portfolio at fair value and 7.6% at cost, down from 4% and 9.7%, respectively, last quarter. This improvement reflects the completion of the restructurings of Alpine, 48forty and Suited Connector and the sale of Fishbowl.

Importantly, net leverage declined to 1.29x at quarter end, down from 1.41x last quarter, bringing it closer to our target range of 0.9 to 1.2x. The reduction in leverage was driven primarily by exits, partial paydowns and proactive balance sheet management. Full exits and partial paydowns during the quarter totaled $135.3 million and included sizable payoffs of our investments in TEAM Services, James Perse, Cart.com and Eddie Bauer with average position size of more than $28 million.

Further, TEAM Services, our largest repayment during the period was a second lien position. In addition to generating attractive returns, these repayments helped to reduce leverage, enhanced diversification by lowering portfolio concentration and supported our continued focus on increasing the percentage of the portfolio allocated to senior positions in the capital structure. Since quarter end, we received more than $50 million of additional paydowns, including approximately $13 million from AutoAlert, which was previously restructured and recently sold to a strategic buyer.

While we still have equity in the combined company, we view this repayment as a positive outcome that meaningfully reduces our exposure while preserving potential upside. At the end of the quarter, our portfolio had a fair market value of $1.4 billion, invested across 139 companies in more than 20 industry sectors with an average position size of $10 million. 91.8% of the portfolio was invested in senior secured loans and 8.2% was in equity investments and 94.4% of our debt investments were floating rate.

Adjusted net investment income for the quarter was $0.21 per share compared to $0.25 last quarter, primarily reflecting a smaller portfolio as paydowns outpaced investments, lower investment income and higher expenses. Annualized net investment income ROE was 11.8%. PIK interest income for the quarter was 8.5% of total investment income, down from 10.9% last quarter and nearly 80% of PIK was from positions that contemplated PIK when the loans were underwritten.

NAV declined 4.9% to $6.72 per share at quarter end from $7.07 last quarter, reflecting $35 million of net portfolio markdowns during the quarter. Job&Talent, a staffing company, was the largest contributor to the markdowns at approximately $11 million or 32% of the total markdowns during the quarter. Weaker operating performance during the quarter, combined with lower industry-wide valuation multiples put pressure on the company's enterprise value. Our current exposure includes both the first lien term loan and preferred equity.

The preferred equity drove a meaningful portion of this quarter's mark-to-market movement given its greater sensitivity to changes in enterprise value. Separately, software-related investments also accounted for approximately $11 million or 32% of total markdowns in the period. These reductions were driven primarily by valuation multiple compression, revised growth expectations and AI-related disruption risk in certain subsectors. The balance of the NAV decline was attributable to unrealized losses across the portfolio related to wider market spreads and lower market multiples in addition to borrower-specific factors.

These markdowns were more spread out and hence, limited in size per borrower, the largest of which was $2.8 million. Now I want to provide some perspective on our software portfolio. As we mentioned on our last call, we don't view software as monolithic because some segments are fundamentally more resilient than others. We have considered the potential for AI disruption in our underwriting of potential software investments for some time now.

And as a result, we have pursued businesses where we believe AI is more likely to enhance a company's offering rather than displace it. As of March 31, software represented 30.5% of the portfolio at fair value and was spread across 47 companies with 95% in debt positions and the remaining 5% in equity. These companies had an LTV of approximately 26% at origination, providing a considerable equity cushion.

While public software companies have seen valuations reprice, we have not seen a corresponding decline in the operating performance of our private portfolio companies. That said, we will continue to closely monitor our software investments. Now I'll turn the call over to Jason to discuss our portfolio as well as our recent investment activity.

Thanks, Phil, and welcome, everyone. I'll begin with some additional details on our portfolio composition. As Phil mentioned, we made continued progress in diversifying our portfolio and reducing the average position size of our investments. At the end of the first quarter, our five largest investments accounted for 24.9% of our portfolio and investment income was broadly distributed with more than 70% of our portfolio companies each contributing less than 1% of the total.

New investments this quarter had an effective yield of approximately 8.3% versus 11.2% on those we exited, reflecting lower base rates and the impact of spread compression relative to when the repaid deals were booked. As a result, our average portfolio yield declined from 11.1% last quarter to 10.9% at March 31. During the first quarter, we invested approximately $22.5 million across six new and two existing portfolio companies.

Each of the new investments leverage sourcing and underwriting capabilities across the broader BlackRock PFS platform. Originations were intentionally modest this quarter as we prioritize paydowns and exits to strengthen our balance sheet and reduce leverage while being highly selective on new commitments. All new investments were in senior secured loans and reflect our continued focus on building a diverse portfolio that mitigates industry and individual concentration risk while also being mindful of our goal to reduce leverage.

Turning to capital allocation. On May 7, 2026, our Board of Directors declared a second quarter dividend of $0.17 per share payable on June 30 to stockholders of record on June 16. We repurchased 505,433 shares of TCPC stock during the quarter at a weighted average share price of $4.51 and an additional 156,370 shares subsequent to quarter end at a weighted average share price of $3.78.

On April 29, 2026, our Board of Directors reapproved our stock repurchase plan to acquire up to $50 million in the aggregate of our common stock. Now I'll turn the call over to Erik to discuss our financial results, capital and liquidity positioning.

Thank you, Jason. I'll begin with a review of our financial results for the first quarter of 2026. 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 10-Q.

Total investment income for the first quarter was $42.6 million or $0.51 per share. This included recurring cash interest of $0.39, nonrecurring income of $0.03, recurring discount and fee amortization of $0.03, PIK income of $0.04 and dividend income of $0.02 per share. Operating expenses for the first quarter were $0.29 per share, including $0.19 per share of interest and other debt expenses. Net investment income was $0.22 per share and adjusted net investment income was $0.21 per share.

As of March 31, 2026, our cumulative total return did not exceed the total return hurdle, and therefore, no incentive compensation was accrued for the first quarter. Net realized losses for the quarter were $32.7 million or $0.39 per share, driven primarily by our sale of Fishbowl and restructuring of Alpine, 48forty, which together accounted for approximately $30 million. Net unrealized losses were $2.0 million or $0.02 per share.

This included $30.1 million in reversals of previously unrealized losses on Fishbowl and Alpine, 48forty, which moved from unrealized to realized losses as well as $32.1 million in net unrealized losses during the quarter, primarily due to the markdown on Job&Talent, along with smaller markdowns on positions in other legacy investments.

The net decrease in net assets for the quarter was $16.3 million or $0.19 per share. Now I'll discuss our balance sheet and liquidity, which remains solid, reflecting our progress in reducing leverage during the quarter. During the first quarter, we repaid all $325 million of our 2026 notes. As a result, we have no material debt maturities due in the near term.

Total liquidity at the end of the first quarter was $358.6 million, including $264.1 million in available borrowings under our revolvers and $93.3 million in cash. The combined weighted average interest rate on debt outstanding was 5.77% as of March 31, 2026. Unfunded loan commitments represented 8.7% of our $1.4 billion investment portfolio or $121 million, including $53.3 million in revolver commitments.

Net regulatory leverage was 1.29x at quarter end, down from 1.41x in the fourth quarter of 2025, resulting in a total debt-to-equity leverage ratio of 1.65x. Subsequent to quarter end, our net regulatory leverage ratio improved to 1.23x as a result of paydowns. We expect to reduce leverage further over time as we exit additional investments as part of our portfolio repositioning. We are well positioned to fund new investments with a diverse leverage program, which includes three low-cost credit facilities, an unsecured note issuance and an SBA program.

Now I will turn the call back to Phil for his closing remarks.

Thanks, Erik. Over the past year and again, in the first quarter, we continue to reposition our portfolio by reducing nonaccruals and deploying capital into new investments that align with our investment strategy. This repositioning is driving greater diversification with an emphasis on senior secured first lien loans with more granular position sizes and reduced concentration across individual credits and sectors.

We have also strengthened our balance sheet and reduced leverage, which improves our flexibility as we look ahead. While we have made meaningful progress, we recognize there is more work to do, and we remain focused on disciplined execution. As part of BlackRock's PFS platform, TCPC benefits from expanded sourcing and origination, broader investment expertise and resources and the ability to participate in larger transactions that many others don't see or don't have the capabilities to pursue.

We believe this positions TCPC for long-term success as the credit market continues to evolve. We appreciate your continued support. And now I'll turn the call back to the operator for questions.

[Operator Instructions]

Your first question comes from the line of Robert Dodd from Raymond James.

Look, without going through line by line of various portfolio companies, I just want to ask you a more general conceptual question on -- or one of my questions. The pace at which restructuring is occurring, the work is going through on dealing with troubled assets, et cetera. How would you -- obviously, you're doing it as fast as you can but how would you rank that in terms of how quick or hard or easier you thought it was going to be, say, 6 months ago in terms of dealing with these assets?

Robert, thank you for the question. I would say that we always expect restructuring and workouts to not take a linear pattern here. As you know, restructuring workouts, each deal has its own idiosyncratic issues, whether that's a company product, competitive landscape, liquidity management and so on.

Sometimes they are great businesses with weaker balance sheets that restructurings really benefit the company with. So I'd say that we didn't really go in with any specific expectation. However, we are doing everything we can to actively manage through these restructurings and monetizations and paydowns.

And as you saw in the results, we've made meaningful progress in the quarter, having exited out of 48forty and Suited Connector with respect to restructuring processes and then also exiting out of Fishbowl and AutoAlert in terms of sales of those assets, not exiting out of the entire position, but because we did roll some of the equity.

But we're doing what we can in terms of managing those processes.

Fair enough. Appreciate that. One -- another one, and it is a question about specific I'd say -- I mean, Job&Talent, which obviously marked down this quarter. I mean you said it was round numbers, 1/3 of the total markdowns. That's kind of not actually -- that business is positioned as kind of an AI-enabled Job&Talent search business.

So maybe AI enabling isn't the fix-all in one context. But on the other hand, it's like what were the drivers, if you can give any information on you said there was some softness in kind of the business and obviously, pressure on enterprise values, but it is an AI-enabled business.

So I mean, any context you can give us as kind of the interaction between how that business is valued while being AI-enabled versus how AI is or is not helping or impacting that business? I mean it's just trying to get a feel, right, because you do have a lot of other software businesses where the fear is AI, but then you've got a business that sort of is AI and it didn't seem to help.

Robert, it's Jason. What I would say is first and foremost, Job&Talent, it's a staffing and a recruitment business. And I think those businesses typically have a tech-enabled element to them and have an ability to leverage AI and other emerging technologies and approaches to sort of benefit their business.

So I think that in this quarter, 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. I'd say the relative performance of the business was more of a modest contributor as opposed to broader tech multiples, if you will.

Got it. Got it. And then on -- just one last one, if I can. On software, you said you had a 26% LTV at origination in your software book. I mean, maybe you don't want to put an exact number on that, but I presume that 26% has moved fairly significantly if we put in valuations today. So can you give us any relative scale, is that [ 26% ] doubled or up just kind of ballpark, how much have values moved on the assets that you have in the book?

Yes. So the purpose of including that metric was to indicate how much cushion we underwrote to in those deals, given that being cognizant of software and AI as a risk. And you're right, market multiples have come down meaningfully out there. And so the cushion has come down as well.

We don't have a number to disclose in terms of exactly how much, and it depends on the credit itself and what end market and what software functionality that they're offering in the market. So I would say that the cushion certainly has -- a bit, but we feel like at 26% LTV, we're still in reasonably good shape.

There are no further questions at this time. I will now turn the call back to Phil Tseng, Chairman, CEO and Co-CIO, for closing remarks.

Thank you, operator, and thank you all for joining our call today. I'd also like to thank our team for their continued hard work and dedication to TCPC. As always, please reach out with any questions. Thank you all.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, good afternoon. Welcome, everyone, to the BlackRock TCP Capital Corp. Fourth Quarter Earnings Call. Today's conference call is being recorded for replay purposes. [Operator Instructions] 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 go ahead.

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 the time of such statements and are not guarantees of future performance.

Forward-looking statements involve risks and uncertainties, and actual results could differ materially from those projected. For more information, please refer to the risk factors discussed in our most recently filed report on Form 10-K and the Form 8-K filed with the SEC today, along with the associated press release.

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 fourth quarter and full year ended December 31, 2025, and posted a supplemental earnings presentation on 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 10-K, which was filed with the SEC earlier today.

Now I will turn the call over to our Chairman, CEO and Co-CIO, Phil Tseng.

Thank you, Alex, and thank you to our investors and analysts for joining us today. I'll begin with an overview of our fourth quarter and full year 2025 performance. Our President, Jason Mehring, will then provide details on our portfolio and investment activity, and Erik Cuellar, our CFO, will review our financial results. Then I'll provide closing comments before we open the call up for your questions.

We are also joined today by Dan Worrell, our Co-CIO, who will be available to answer questions. Since we preannounced our preliminary fourth quarter results on January 23, I will focus my remarks on providing more detail on the results and the key factors behind our performance. I'll begin with an overview of our financial results. Full year 2025 adjusted NII was $1.22 per share compared to $1.52 in 2024.

Annualized NII ROE for the year was 12.3% compared to 14.5% in 2024. Adjusted NII was $0.25 per share in the fourth quarter compared to $0.30 per share last quarter and $0.36 per share for the fourth quarter of 2024. The decline in NII primarily reflects the impact of portfolio markdowns and nonaccruals as well as lower base rates and tighter spreads year-over-year.

Fourth quarter NII includes the benefit of a voluntary waiver by our adviser of 1/3 of the base management fee, which added approximately $0.02 per share. As of December 31, 2025, nonaccrual debt investments represented 4% of the portfolio at fair market value and 9.7% at cost compared to 5.6% at fair market value and 14.4% at cost for the fourth quarter of 2024.

NAV declined 19% to $7.07 per share as of December 31, 2025, from $8.71 as of September 30, in line with the midpoint of the range we previously provided on January 23. The portfolio markdowns for the quarter largely reflect issuer-specific developments during the period. Six portfolio companies contributed approximately 67% or $1.11 per share of the NAV decline.

Now I'll provide details on these 6 investments. Our investment in Edmentum, an educational technology business is comprised entirely of preferred and common equity, making it inherently sensitive to changes in enterprise value. Edmentum's valuation declined as a result of overall underperformance in the fourth quarter and lower anticipated future growth. This markdown accounted for 23% or $0.38 per share of the NAV decline for the quarter.

Razor and SellerX are Amazon aggregators that have been restructured previously and continued to underperform during the quarter, resulting in further reduction to their outlooks. Razor contributed $0.24 per share or 15% of the NAV decline, and we have now fully written our position down to 0. SellerX contributed $0.22 per share or 13% of the NAV decline. On Renovo, as discussed on our last earnings call, we moved forward with writing down our investment in the fourth quarter.

This negatively impacted NAV by $0.15 per share, in line with the expectations we communicated previously. Next is Hylan, a provider of telecom and wireless engineering and construction services, which was also previously restructured. Due to ongoing underperformance in this quarter as well as liquidity concerns, we marked down this position, which includes both debt and equity. This resulted in a $0.06 per share impact to NAV.

And last, we marked down our position in InMobi, a digital advertising company. Our remaining exposure consisted solely of warrants for equity that we retained after the company fully repaid its term loan. Based on InMobi's underperformance in the fourth quarter and an associated impact on the company's outlook, we reduced the valuation of this position, resulting in a $0.06 per share impact to NAV.

Looking at the reduction in NAV for the quarter more broadly, approximately 91% was from investments that we underwrote in 2021 or earlier. Certain of the companies, including Amazon aggregators and e-learning platforms benefited from high levels of pandemic era demand but have since seen results soften. All of these positions were underwritten in a significantly lower base rate environment and have faced challenges adjusting to sustained higher interest rates.

Regarding our challenged investments, we continue to work diligently with our borrowers, their sponsors and creditors to optimize recovery values, including pursuing restructurings and other transaction-driven outcomes when appropriate.

Now I'll share an update on capital allocation, starting with our dividend. Our Board declared a first quarter dividend of $0.17 per share payable on March 31, 2026, to shareholders of record on March 17, 2026. As we have said before, our goal is to maintain a dividend that is both sustainable and covered by NII. As part of our commitment to supporting our shareholders, we repurchased 515,869 shares of TCPC stock during the fourth quarter at a weighted average price of $5.84 per share. We also purchased an additional 233,541 shares after quarter end at a weighted average share price of $5.50 per share.

Now I'll turn the call over to Jason to discuss our portfolio as well as our recent investment activity.

Thanks, Phil, and welcome, everyone. I'll begin with an overview of our portfolio composition. At year-end, our portfolio had a fair market value of $1.5 billion invested across 141 companies in more than 20 industry sectors with an average position size of $10.9 million. 92.4% of our portfolio was invested in senior secured loans, all of which were floating rate and 7.5% was in equity investments.

Our largest investment based on fair value represented 7.2% of our portfolio and our 5 largest investments accounted for 23.1%. Investment income was distributed broadly across our diverse portfolio with more than 75% of our portfolio companies each contributing less than 1%. During 2025, the average size of our investments in new portfolio companies was $5.8 million compared to an $11.7 million average position size at the end of last year, demonstrating our ongoing effort to reduce concentration risk.

All new portfolio company investments during 2025 were in first lien loans, bringing total portfolio exposure to first lien loans to 87.4% on a fair value basis, up from 83.6% last year. At the end of the fourth quarter, the weighted average effective yield of our portfolio was 11.1% compared to 11.5% last quarter. Investments during the quarter had a weighted average yield of 9.7%, while those we exited had a weighted average yield of 11.1%.

Current yields reflect lower base rates and spread compression during the period. In the fourth quarter, in line with our strategy, we deployed $35 million into senior secured loans across 5 new and 3 existing portfolio companies. Our largest new investment was a $4.5 million first lien term loan to a highly scaled wealth management platform with a focus on high net worth individuals.

This financing was made in connection with the recapitalization where BlackRock Private Financing Solutions, or PFS, was the second largest lender in a $2 billion credit facility. The PFS platform has been a lender to this business since early 2024, and the opportunity was a natural fit for TCPC given our past success investing in the wealth management sector.

In addition to attractive industry fundamentals, we were drawn to the company's high client retention rate, strong management team and brand recognition. Our second largest investment was a $4 million first lien loan to Coalfire, a leading cybersecurity services and solutions provider. This investment was part of a $375 million first lien financing in which BlackRock PFS provided approximately 30% of the facility.

We believe Coalfire is well positioned to benefit from increasing cybersecurity regulation and complexity. Given our focus on direct origination and borrower relationships, incumbency continues to be an important competitive edge for TCPC. And during 2025, 65.4% of our deployments came from existing portfolio companies. We continue to find opportunities within our portfolio where our deep relationships and industry expertise help as we evaluate risk.

Paydowns this quarter were $80.7 million compared to $140 million in the prior quarter. Before I turn the call over to Erik, I want to briefly comment on the software sector, which has been the subject of considerable interest among investors in the press. While public equities in this sector are experiencing a valuation reset following a long upward run, we haven't seen that widely translate into lower operating results in our portfolio companies, although we will continue to monitor developments going forward.

In addition, we believe software is not monolithic as some segments are fundamentally more resilient than others. For some time, we have considered the potential for AI disruption in our underwriting of potential software investments, and we have sought to continue to actively pursue businesses where we believe AI is more likely to positively augment the company's offering rather than displace it.

Now I'll turn the call over to Erik, who will discuss our financial results, capital and liquidity positioning.

Thank you, Jason. I will begin with a review of our financial results for the fourth quarter and year ended December 31, 2025. 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 10-K. Gross investment income for the fourth quarter was $0.52 per share. This included recurring cash interest of $0.41, nonrecurring income of $0.01, recurring discount and fee amortization of $0.02, PIK income of $0.06 and dividend income of $0.02 per share.

PIK interest income for the quarter was 10.9% of total investment income, up from 9.5% last quarter and included no new names. Operating expenses for the fourth quarter were $0.25 per share, including $0.18 per share of interest and other debt expenses. As of December 31, 2025, our cumulative total return did not exceed the total return hurdle, and therefore, no incentive compensation was accrued for the fourth quarter.

Additionally, as Phil mentioned, we waived a portion of our base management fee again this quarter. Net realized losses for the quarter were $73.9 million or $0.87 per share, with Anacomp and Astra being the most significant portfolio company contributors. Net unrealized losses were $66.5 million or $0.78 per share, primarily due to the unrealized markdowns on the 6 investments Phil discussed earlier. The net decrease in net assets for the quarter was $118.3 million or $1.39 per share.

Now I'll discuss our balance sheet and liquidity positioning, which remains solid. Total liquidity at year-end was $570.2 million, including $482.8 million in available borrowings and $61.1 million of cash. The weighted average interest rate on debt outstanding at year-end was 4.9%, down from 5.0% at the end of the third quarter.

Unfunded loan commitments represented 8.4% of our $1.5 billion investment portfolio or $129.2 million, including $53.7 million in revolver commitments. Net regulatory leverage was 1.41x at year-end compared to 1.2x at the end of the third quarter, resulting in a total debt-to-equity leverage ratio of 1.74x.

Subsequent to year-end, our net regulatory leverage ratio has improved to 1.34x as a result of paydowns. We expect to reduce leverage further over time as we exit additional investments. On February 9, 2026, we paid down the entire $325 million principal amount of our 2026 unsecured notes, resulting in current liquidity of approximately $290.8 million. Our diverse leverage program now includes 3 low-cost credit facilities, an unsecured note issuance and an SBA program.

Now I will turn the call back to Phil for his closing remarks.

Thanks, Erik. While the write-downs in the fourth quarter were disappointing, we continue to actively manage our investment portfolio with the goal of seeking to maximize recoveries and reposition our portfolio to deliver attractive returns to our shareholders over time. Our highest near-term priority is to improve the credit quality of our investment portfolio by working diligently to resolve challenged credits. At the same time, we continue to implement the refined investment strategy we set forth last year.

This includes seeking to, one, deploy capital selectively into senior secured first lien loans where we are a lender of influence; two, build a well-diversified portfolio in terms of industry sectors and investment size to reduce concentration risk; and three, fully leverage the unparalleled resources of BlackRock's platform.

There is work to be done, but we're confident in our strategy. As Jason mentioned, in 2025, we increased first lien investments to 87.4% of the portfolio on a fair value basis, up from 83.6% last year. In addition, we improved our portfolio diversification by reducing the average size of new investments made in 2025 to $5.8 million each or 38 basis points compared to the $11.7 million average position size at the end of 2024.

We are proud to be part of BlackRock and believe the substantial resources of this industry-leading platform will support our efforts to reposition our portfolio and enhance our capabilities. We are already seeing the benefits of an expanded pipeline of investment opportunities that supports our objective of deploying capital very selectively into what we believe are high-quality investments that align with our investment strategy.

I want to thank our investors for your continued support as we reposition our portfolio. And now I'll turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Robert Dodd from Raymond James.

I appreciate all the color you gave about the individual businesses. And obviously, you've discussed kind of the new allocation efforts going forward. At what point -- and this is really a question for the Board rather than you, to be fair. But at what point does it make sense to take maybe more aggressive overall strategic adjustments to the BDC rather than continue in the current efforts.

I mean it shrunk -- leverage is up. If you buy back stock, leverage will go up even more unless you shrink the portfolio. There's a lot of issues that are going to take a -- with your best efforts, and I applaud them, and I think you put it in those best efforts, it's going to take a long time to turn this business around. At what point does it make sense to do something more aggressive on the strategic front?

Yes. Thanks, Robert. I appreciate the question. We continually evaluate ways to optimize returns for the shareholders. And at this time, we believe the best path forward is to continue to focus on improving the credit quality of the portfolio and executing on the investment strategy that we've been discussing. This includes an ongoing rotation of the portfolio into first lien loans, which we've made progress on. It's up to 87.4% now versus 83.6% a year ago and also increasing portfolio diversification, which, as you know, has been an area that's been suboptimal and causing some of the credit losses so far.

And we've made progress on that front as well, where the average size of new investments have decreased to about $5.8 million per position or about 38 basis points. And of course, we're working on continuing to leverage the broader resources that BlackRock's platform has to offer, which has been yielding some benefits, as you heard from the prepared remarks on a couple of the new investments that we put into the portfolio this past quarter.

I appreciate that. Now going on to the portfolio assets. I mean, several of them, as you mentioned, have been previously restructured. This is not a theme just in your portfolio. We've seen several other assets and other BDCs this quarter and in more recent quarters that have been previously restructured and are back on nonaccrual or back getting marked down.

What -- how should we take that or how should investors take that in terms of when -- over the last few years, it looks like restructurings seem to stick less often than maybe was the case if we go back further, that's just a sense, right? So I mean what's your view on that -- on when you do the initial restructuring of an asset, do you need to be more aggressive on that, maybe equitize more of the debt or take -- if you can take the keys quicker? Or what is it? I mean, again, this is not just in your book, it's elsewhere, but obviously, you've had a fair number of them. So what's your thought on how restructurings need to be done going forward?

Yes. Restructurings, they can play out in several different ways. The road to recovery, as we've discussed on past calls, are not always linear. In fact, they're rarely linear. So it's hard to predict when they may recover. And these businesses oftentimes recover into -- from a capital structure standpoint with a loan and equity component. And equity investments, as you know, are more sensitive to enterprise value changes just given that they're at the bottom of the capital stack, whereas the debt is obviously more insulated from enterprise value changes.

We think, Robert, we have a robust process in place, certainly bringing to bear the resources of the broader BlackRock platform to actively manage these challenged investments. But I appreciate your concern around when we can call bottoms on some of these restructurings, but it's challenging.

Our next question comes from Finian O'Shea from Wells Fargo.

Just to piggyback on the first topic with Robert. So listening to the issuer-specific developments, and I appreciate those, but they just don't sound like that big of changes in the context of their outstanding underperformance. And in the history of BDCs, these NAV drawdowns do happen from time to time, but I can't remember another Friday night 8-K. So the question is, is there sort of more to the story, perhaps a change in personnel, a change in procedure on the valuation team that was brought to the Board and led them to rethink and push this out there?

Fin, it's Jason. Thanks for the question. There hasn't been any sort of change to our valuation policy. As I think we've talked about before, our end-of-quarter process includes a pretty granular review of each portfolio company, and that methodology does include, obviously, third-party valuation services and resources from within the BlackRock PFS platform. So I think that's all remained consistent.

I do think that when you look at the overall write-downs in the quarter, they were concentrated fairly heavily among those 6 names that we've outlined, which were about 2/3 of the drop in NAV. And I think that those names, generally speaking, had an equity orientation, which obviously, as everybody knows, is more volatile and is fundamentally more sensitive to changes in underlying performance. So we obviously didn't delineate specific performance level detail when we were outlining the businesses that we talked about. But it's safe to say that the inputs and just sort of the factors related to the business performance, industry outlook, et cetera, moved in a way that had on a cumulative basis, a more material impact on NAV for the quarter.

So I guess not a change in -- okay. So it sounds like go forward, we're not going to 8-K all the time when the equity market moves. It sounds like maybe less valuation, but more, yes, these 6 names had just straw that broke the camel's back kind of thing, idiosyncratic event that forced your hand to reassess the valuation and that's very one-off. This is like the one 8-K that will ever happen under those circumstances.

Yes. Listen, it's obviously difficult to predict the future, but I think there were a unique collection of factors that led to a more material markdown in the aggregate for the quarter, which is why we saw fit to release the 8-K when we did in January to make sure that the market was aware.

To your point, it's not something that we've seen on a regular basis. There were, again, idiosyncratic factors that happened to occur in unison, which drove a lot of that swing. Again, we've referenced those 6 names. But again, we're -- the process is the same, and we'll continue to consider the need to disclose things on an 8-K basis if and when they arise.

[Operator Instructions] We currently have no further questions, and I would like to hand back to Phil Tseng for any closing remarks.

Thanks, operator. In closing, I want to thank you all for joining our call today. I'd also like to thank our team for their continued hard work and dedication for TCPC. As always, please reach out with any questions. Thank you.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

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. [Operator Instructions] 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.

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 of such statements and 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 10-Q, which was filed with the SEC earlier today. Now I will turn the call over to our Chairman, CEO and Co-CIO, Phil Tseng.

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 Mehring, will then provide details on our portfolio and investment activity; and Erik 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 Worrell, our Co-CIO, who will be available to answer your 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. And importantly, nonaccruals 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 nonaccrual investment above our valuation estimate and placed 2 smaller previously restructured investments back on nonaccrual. 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 nonaccrual 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 3, 2025.

The position in Renovo represented approximately 0.7% of our total investments at fair value as of September 30. 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 a 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 and 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.

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 leveraged 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 2 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 3.5 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 1WorldSync, 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 the 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 Erik, who will walk through our financial results and capital and liquidity position.

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 10-Q. 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, nonrecurring income of $0.03, recurring discount and fee amortization of $0.02, PIK income of $0.06 and dividend income of $0.02 per share. PIK 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. And 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 interest between investors and management. Additionally, we waived a portion of our base management fee again this quarter, in line with our advisers' decision to waive 1/3 of our base management fee for the first 3 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, and the remaining amount was related to our dispositions of Conergy, 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, 9 portfolio companies were on nonaccrual status, representing 3.5% of the portfolio at fair value and 7.0% at cost. This is down from 3.7% and 10.4%, respectively, as of June 30, and 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 1.2x at quarter end compared to 1.28x at the end of the second quarter and in line with our target range of 0.9 to 1.2x. The decrease was primarily due to repayments during the quarter. Our diverse leverage program includes 3 low-cost credit facilities, 3 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.

Thank you, Erik. 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. And now I'll turn the call to the operator to open the call for questions.

[Operator Instructions] Our first question is from Robert Dodd at Raymond James.

First, if we can discuss the -- I think at the beginning, you said there were 2 previous restructurings that were returned to NILCO. And then obviously, Renovo was restructured and is now are going to be written off. Can you give us any color on any themes here? I mean that's 3 restructurings in relatively short order that sort of didn't stick, right? So, is there any commonality between what occurred there? Are any changes that you can make? Obviously, you might not 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 restructuring to be more aggressive the first time? Or just any thoughts there? I mean, 3 in short order is not great.

Yes. Thanks, Robert. We share your sentiments. We're obviously disappointed that deals that have been restructured do come back on. So, as you know, these are restructurings that get completed with respect to their capital structure. And then it takes time for the business itself to kind of go through its operational restructuring plan and execution. So, I think that's what we're seeing here. Credit issues or operational issues don't resolve themselves quickly, and it does take time and 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. So, we have a number of those cases that we can talk about as well. But I would say there's no common theme amongst these 3 that went back on.

Then just on the market environment and obviously, the expanded view, I mean, granularity down, like I think you said the new investments like 7.8 million positions. So that's good, right? More diversification in the portfolio. I mean, the comments that like most borrowers are still focused on lowering cost. I mean, I've heard elsewhere, right, like the M&A cycle is starting to pick up. So, I mean, are you still -- it 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, but that's a long time to project anything.

It is. So, 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, and we are seeing new platforms, sponsors coming in and bidding on assets and a lot of deals in the pipeline really picking up. So, I would say that's probably a leading indicator of hopefully higher volumes in the next several quarters. But 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. And on -- sorry on portfolio diversification is a good one. We've been -- since this management team really came in at the end of last year, we've really been focused on that portfolio diversification point so that we don't -- this portfolio doesn't fall victim to a lot of the concentration issues that it had previously. So, we've had 31 new investments this year at an average position size of $7 million to $8 million, and that's a stark contrast to how this portfolio was managed previously.

And then last one, I mean, are you seeing any -- and 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 don't have exposure to that in general. But are you seeing any areas of concern either in the portfolio, obviously, but also in like deals that are coming over the desk? Is there an increasing number of like any commonality between -- about why they're being rejected by or anything like that?

Yes. 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 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.

[Operator Instructions] At this time, we have no further questions on the call. So, I will hand back to management for closing comments.

Thank you, everyone, for dialing in and streaming on the webcast, and I'd 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.

Thank you. This concludes today's conference call, and you may now disconnect.