BlackRock Capital Investment Corporation Reports Financial Results for the Quarter Ended December 31, 2022, Declares Quarterly Cash Dividend of $0.10 per Share

BlackRock Capital Investment Corporation (NASDAQ:BKCC) ("BCIC" or the "Company," "we," "us" or "our") announced today that its Board of Directors declared a quarterly dividend of $0.10 per share, payable on April 6, 2023 to stockholders of record at the close of business on March 16, 2023.

"Our NII continued its upward trajectory this quarter, demonstrating the strength of our increasingly diversified portfolio and our commitment to delivering solid risk-adjusted returns," said James E. Keenan, Chairman and Interim CEO of the Company. "We are very pleased that our NII covered our $0.10 dividend by 112% this quarter. Higher base rates and an improved pricing environment on new originations contributed to a 6% increase in NII from the prior quarter. Our relatively modest leverage ratio of 0.77x allows us the flexibility to selectively grow our portfolio and further increase its earnings power."

"The fourth quarter witnessed reduced origination activity across the market as corporate mergers and acquisitions, the need for growth financings as well as refinancing activity slowed down owing to a rising interest rate environment. Even during this slower environment, we added 8 new portfolio companies during the quarter, drawing upon the power of the BlackRock platform. We ended the year with a well-diversified portfolio of 116 companies, more than doubling the number of portfolio companies we had at the end of 2020. We deployed $36 million in the fourth quarter on a gross basis ? almost entirely in first lien loans. At the end of the year, 79% of our portfolio consisted of first lien investments, up from 74% at the end of 2021 and 50% at the end of 2020, representing significant progress in our effort to lower the risk profile of the portfolio over that time frame. Subsequent to the fourth quarter, we exited and realized our non-core legacy investments in Advanced Lighting (previously a non-accrual asset) and Kemmerer Operations, reducing our non-core exposure to less than 1% of the portfolio on a pro forma basis," Mr. Keenan continued.

"Against the macroeconomic backdrop of continued inflation, higher interest rates, and softening consumer demand, we remain highly selective in underwriting new investments and vigilant in monitoring our existing portfolio. We believe that our portfolio is well positioned to withstand the impact of a deteriorating economic environment. Our credit quality remains solid as there were no new non-accrual investments in the fourth quarter, demonstrating our focus on prudent underwriting and maintaining a strong credit culture." Mr. Keenan concluded.

Financial Highlights

Business Updates

• Reduced Exposure in Non-Core Legacy Portfolio: During the fourth quarter, the Company received $1.0 million of proceeds from a partial repayment of our first lien term loan in Kemmerer Operations, LLC ("Kemmerer Operations"). The non-core portfolio stood at less than 2% of our entire portfolio, at fair value, as of December 31, 2022. Subsequent to December 31, 2022, the Company received $2.4 million in proceeds from the full sale of its first lien debt and equity positions in Kemmerer Operations, and $0.8 million in proceeds from the full sale of its non-accrual second lien secured note position in Advanced Lighting Technologies, LLC ("Advanced Lighting"), further reducing the Company's non-core legacy exposure.
• Other Junior Capital Exposure: As of December 31, 2022, the Company's other junior capital (including unsecured/subordinated debt and equity) exposure, excluding non-core assets, remained low at 4% of the portfolio, down from 6% at December 31, 2021, and down from 21% at December 31, 2020.
• Share Repurchase Program: During the fourth quarter, the Company repurchased 318,324 shares of its common stock for $1.2 million at an average price of $3.62 per share, including brokerage commissions. On October 28, 2022, the Company's Board of Directors authorized the Company to purchase up to a total of 8 million shares, commencing on November 7, 2022 and effective until the earlier of November 6, 2023 or such time that all of the authorized shares have been repurchased, subject to the terms of a share repurchase program, if in effect.

Fourth Quarter Financial Updates

• NII was $8.1 million, or approximately $0.11 per share, for the three months ended December 31, 2022, an increase of 6% from the prior quarter. Relative to our dividend declared of $0.10 per share, dividend coverage was 112%, up from 105% in the prior quarter.
• NAV decreased to $318.5 million at December 31, 2022, down 4.1% from $332.0 million at September 30, 2022; NAV per share decreased to $4.39 per share from $4.56 per share as of September 30, 2022. The NAV decrease was primarily driven by $13.2 million of net unrealized losses due to credit spread widening across the broader market and other portfolio valuation declines.
• Tax characteristics of all 2022 dividends were reported to stockholders on Form 1099 after the end of the calendar year. Our 2022 aggregate dividends of $0.40 per share included a $0.02 per share return of capital. At our discretion, we may carry forward taxable income in excess of calendar year dividends and pay a 4% excise tax on this income. We will accrue excise tax on estimated undistributed taxable income as required. There was no undistributed taxable income carried forward from 2022, and therefore no excise tax payable at December 31, 2022.

Portfolio and Investment Activity*

• We deployed $36.0 million during the quarter while exits and repayments totaled $27.9 million, resulting in an $8.1 million net increase in our portfolio.
  • Deployments consisted of investments/fundings into 8 new portfolio companies and primarily 7 existing portfolio companies, which are outlined as follows:
    
    New Portfolio Companies
    • $5.2 million SOFR ("S") + 6.50% first lien term loan and $5.2 million unfunded revolver to Integrity Marketing Acquisition, LLC, an independent marketer and distributor of life and health insurance products;
    • $5.2 million S + 6.50% first lien term loan, $1.3 million unfunded delayed draw term loan ("DDTL"), and $0.5 million unfunded revolver to Zendesk, Inc., a provider of customer support solutions to businesses;
    • $5.0 million S + 7.00% first lien term loan and $0.4 million unfunded revolver to Madison Logic Holdings, Inc., a business-to-business marketing services provider;
    • $2.6 million S + 8.25% first lien term loan to Money Transfer Acquisition Inc., a consumer financial services company;
    • $2.3 million S + 7.25% first lien term loan and $0.2 million unfunded revolver to Avalara, Inc., a provider of cloud-based solutions for transaction tax compliance;
    • $2.2 million S + 7.00% first lien term loan, $0.2 million unfunded DDTL, and $0.3 million unfunded revolver to Alcami Corporation, a contract drug development and manufacturing organization;
    • $2.2 million S + 6.25% first lien term loan to CommerceHub, Inc., a provider of cloud-based ecommerce solutions; and
    • $2.1 million S + 8.75% first lien term loan to Kong Inc., a software provider for managing, scaling and monitoring application processing interfaces.
      
      Incremental Investment /Funding Primarily in the Following Existing Portfolio Companies
    • $2.9 million S + 6.00% first lien DDTL funding to Wealth Enhancement Group, LLC;
    • $1.5 million S + 6.88% first lien DDTL funding to GTY Technology Holdings, Inc.;
    • $1.0 million S + 7.50% first lien DDTL funding to Elastic Path Software Inc.;
    • $0.9 million S + 7.25% first lien DDTL funding to Grey Orange Incorporated;
    • $0.7 million S + 5.75% first lien DDTL funding to AmeriLife Holdings, LLC;
    • $0.7 million 12.00% first lien term loan to Magenta Buyer, LLC (McAfee); and
    • $0.5 million LIBOR + 8.00% first lien revolver funding to Pluralsight, Inc.
  • Exits and repayments were primarily concentrated in three complete exits of portfolio company investments and two partial paydowns, with a total of $0.5 million in fee and other one-time income generated in excess of principal repaid on these transactions: 
    • $11.7 million full repayment at par of first lien term loan in Barri Financial Group, LLC;
    • $9.2 million of proceeds from the full repayment at par of first lien term loan, DDTL and revolver in Unanet, Inc.;
    • $4.3 million of proceeds from the full repayment at par of second lien term loan and DDTL in MetroNet Systems Holdings, LLC;
    • $1.0 million of proceeds from the partial repayment of first lien term loan in Kemmerer Operations, a non-core legacy position; and
    • $0.6 million of proceeds from the partial repayment of first lien term loan and revolver in Alpine Acquisition Corp II (48Forty).
• During the quarter ended December 31, 2022, there were no new non-accrual investments. As of December 31, 2022, there were three non-accrual investment positions, representing approximately 2.8% and 11.8% of total debt and preferred stock investments, at fair value and cost, respectively. Subsequent to December 31, 2022, the Company received $0.8 million in proceeds from the full sale of its non-accrual debt position in Advanced Lighting, further reducing its number of non-accrual investment positions to two.
• The weighted average internal investment rating of the portfolio at FMV declined slightly to 1.33 at December 31, 2022, as compared to 1.28 at September 30, 2022, and 1.21 at December 31, 2021.
• During the quarter ended December 31, 2022, net unrealized losses were $13.2 million, driven by credit spread widening across the broader market and other portfolio valuation declines. The largest contributors to the unrealized losses included Gordon Brothers Finance Company, Razor Group GmbH, Magenta Buyer, LLC, Stitch Holdings L.P. and MBS Parent, LLC. There were no realized gains or losses during the quarter.

Liquidity and Capital Resources

• At December 31, 2022, we had $9.5 million in cash and cash equivalents and $103.0 million of availability under our credit facility, subject to leverage restrictions, resulting in approximately $112.5 million of availability for deployment into portfolio company investments including current unfunded commitments, and for general use in the normal course of business.
• Net leverage, adjusted for available cash, receivables for investments sold, payables for investments purchased and unamortized debt issuance costs, was 0.77x at quarter-end, and our 225% asset coverage ratio provided the Company with additional debt capacity of $103.0 million under its asset coverage requirements, subject to borrowing capacity and borrowing base restrictions. Further, as of December 31, 2022, approximately 85% of our assets were invested in qualifying assets, exceeding the 70% requirement for a business development company under Section 55(a) of the Investment Company Act of 1940.
• For the fourth quarter of 2022, the Company declared a cash dividend of $0.10 per share, payable on April 6, 2023 to stockholders of record at the close of business on March 16, 2023.

Conference Call

BlackRock Capital Investment Corporation will host a webcast/teleconference at 10:00 a.m. (Eastern Time) on Thursday, March 2, 2023, to discuss its fourth quarter 2022 financial results. All interested parties are welcome to participate. You can access the teleconference by dialing, from the United States, (844) 394-5144 or from outside the United States, +1 (773) 305-6865, 10 minutes before 10:00 a.m. and referencing the BlackRock Capital Investment Corporation Conference Call (ID Number 9602125). A live, listen-only webcast will also be available via the Investor Relations section of www.blackrockbkcc.com. This teleconference can also be accessed using Microsoft Edge, Google Chrome, or Firefox via this link: BlackRock Capital Investment Corporation Fourth Quarter 2022 Earnings Call. Once clicked-on, please enter your information to be connected. Please note that the link becomes active fifteen minutes prior to the scheduled start time.

The teleconference and the webcast will be available for replay by 3:00 p.m. on Thursday, March 2, 2023 and ending at 3:00 p.m. on Thursday, March 16, 2023. The replay of the teleconference can be accessed via the following link: BlackRock Capital Investment Corporation Fourth Quarter 2022 Earnings Call Replay. To access the webcast, please visit the investor relations section of www.blackrockbkcc.com.

Prior to the webcast/teleconference, an investor presentation that complements the earnings conference call will be posted to BlackRock Capital Investment Corporation's website within the Presentations section of the Investors page.

About BlackRock Capital Investment Corporation

Formed in 2005, BlackRock Capital Investment Corporation is a business development company that provides debt and equity capital to middle-market companies.

The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in middle-market companies in the form of senior debt securities and loans, and our investment portfolio may include junior secured and unsecured debt securities and loans, each of which may include an equity component.

BlackRock Capital Investment Corporation
Consolidated Statements of Assets and Liabilities

BlackRock Capital Investment Corporation
Consolidated Statements of Operations

Supplemental Information

The Company reports its financial results on a generally accepted accounting principles ("GAAP") basis; however, management believes that evaluating the Company's ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and, for the reasons described below, considers them to be effective indicators, for both management and investors, of the Company's financial performance over time. The Company's management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

The Company records its liability for incentive fees based on capital gains (if any) by performing a hypothetical liquidation basis calculation at the end of each reporting period, as required by GAAP, which assumes that all unrealized capital appreciation and depreciation is realized as of the reporting date. It should be noted that incentive fees based on capital gains (if any) are not due and payable until the end of the annual measurement period, or every June 30. The incremental incentive fees disclosed for a given period are not necessarily indicative of actual full year results. Changes in the economic environment, financial markets, geopolitical conditions and other parameters could cause actual results to differ from estimates and such differences could be material. There can be no assurance that unrealized capital appreciation and depreciation will be realized in the future, or that any accrued capital gains incentive fee will become payable. Incentive fee amounts on capital gains actually paid by the Company will specifically exclude consideration of unrealized capital appreciation, consistent with requirements under the Investment Advisers Act of 1940 and the Company's investment management agreement. For a more detailed description of the Company's incentive fees, please refer to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, on file with the Securities and Exchange Commission ("SEC").

Computations for the periods below are derived from the Company's financial statements as follows:

Forward-looking statements

This press release, and other statements that BlackRock Capital Investment Corporation may make, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock Capital Investment Corporation's future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate," "current," "intention," "estimate," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions.

BlackRock Capital Investment Corporation cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which may change over time. Forward-looking statements speak only as of the date they are made, and BlackRock Capital Investment Corporation assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in BlackRock Capital Investment Corporation's SEC reports and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: (1) our future operating results; (2) our business prospects and the prospects of our portfolio companies; (3) the impact of investments that we expect to make; (4) our contractual arrangements and relationships with third parties; (5) the dependence of our future success on the general economy and its impact on the industries in which we invest; (6) the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives; (7) our expected financings and investments; (8) the adequacy of our cash resources and working capital, including our ability to obtain continued financing on favorable terms; (9) the timing of cash flows, if any, from the operations of our portfolio companies; (10) the impact of increased competition; (11) the ability of our investment advisor to locate suitable investments for us and to monitor and administer our investments; (12) potential conflicts of interest in the allocation of opportunities between us and other investment funds managed by our investment advisor or its affiliates; (13) the ability of our investment advisor to attract and retain highly talented professionals; (14) changes in law and policy accompanying the new administration and uncertainty pending any such changes; (15) increased geopolitical unrest, terrorist attacks or acts of war, which may adversely affect the general economy, domestic and local financial and capital markets, or the specific industries of our portfolio companies; (16) changes and volatility in political, economic or industry conditions, the interest rate environment, inflation, credit risk, foreign exchange rates or financial and capital markets; (17) the unfavorable resolution of legal proceedings; and (18) the impact of changes to tax legislation and, generally, our tax position.

BlackRock Capital Investment Corporation's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023, identifies additional factors that can affect forward-looking statements.

Available Information

BlackRock Capital Investment Corporation's filings with the SEC, press releases, earnings releases and other financial information are available on its website at www.blackrockbkcc.com. The information contained on our website is not a part of this press release.