Bain Capital Specialty Finance (NYSE:BCSF) has reported a strong performance for the first quarter ending March 31, 2024, with net investment income per share at $0.53 and a 12% return on book value. Earnings per share stood at $0.55, bolstered by improved credit quality and an increase in net asset value to $17.70. The company declared a total dividend of $0.45 per share for the quarter and saw a rise in new loan volumes, especially in the upper-middle market.
Key Takeaways
- Net investment income per share reached $0.53, with earnings per share at $0.55.
- Return on book value was reported at 12%.
- Net asset value per share increased to $17.70.
- A second quarter dividend of $0.42 per share was declared, plus a special dividend of $0.03 per share.
- Gross originations in Q1 grew by 31% year-over-year to $403 million.
- The investment portfolio at fair value stood at approximately $2.4 billion.
- Floating interest rates on 94% of debt investments position the company well in a rising rate environment.
- Positive credit migration was observed, with nonaccrual rates declining.
Company Outlook
- Stable pricing on the credit facility is expected.
- Continued increase in deal volume and origination activity into Q2.
- Healthy interest coverage despite a slight decrease.
Bearish Highlights
- Total investment income for Q1 decreased, primarily due to lower interest and dividend income.
- The median EBITDA decreased following the exit of companies that had experienced significant growth.
Bullish Highlights
- Positive credit quality trends with a decline in nonaccrual rates.
- The weighted average yield of the investment portfolio is strong at 12.9%.
Misses
- A slight decrease in portfolio interest coverage, now between 1.8 and 1.9 times.
Q&A Highlights
- Michael Ewald provided insights on the portfolio's interest coverage and leverage ratios.
- The current capital structures are seen as appropriately leveraged for the interest rate environment.
- The reduction in EBITDA is attributed to the sale of high-growth companies, not underlying negative trends.
Bain Capital Specialty Finance's first quarter results showed a resilient portfolio amidst a dynamic market environment. The company's strategic focus on core middle market companies with EBITDA between $25 million and $75 million has contributed to a solid increase in gross originations and a high weighted average yield. The decrease in total investment income was offset by a strong credit performance and a disciplined approach to leverage and interest rate management. The portfolio's median leverage improved, and the company remains well-positioned to navigate the higher interest rate landscape with the majority of its debt investments bearing floating rates. Bain Capital Specialty Finance's commitment to shareholder returns is evident in the declared dividends, and the company's outlook remains cautiously optimistic as it continues to capitalize on new investment opportunities and maintain healthy interest coverage ratios.
InvestingPro Insights
Bain Capital Specialty Finance's (BCSF) latest earnings report reflects a prudent financial strategy and a commitment to shareholder returns. To provide additional context to the company's performance and outlook, here are some key metrics and insights from InvestingPro:
InvestingPro Data:
- The company's market capitalization stands at a robust 1070.0 million USD, indicating its significant presence in the specialty finance sector.
- With a Price-to-Earnings (P/E) ratio of 8.22, BCSF presents itself as potentially undervalued compared to industry peers, suggesting room for growth.
- The revenue growth over the last twelve months as of Q4 2023 has been impressive at 35.64%, showcasing the company's expanding operations.
InvestingPro Tips:
- Analysts have recently revised their earnings estimates upwards for BCSF, signaling confidence in the company's future performance.
- BCSF is recognized for its significant dividend yield, which currently stands at 10.0%, highlighting its appeal to income-focused investors.
These metrics and insights, coupled with the company's reported earnings, paint a picture of a financially sound business with a strategic approach to growth and shareholder value. For readers interested in a deeper dive into BCSF, there are additional InvestingPro Tips available at https://www.investing.com/pro/BCSF. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of insights that could help inform your investment decisions.
Full transcript - Bain Capital Specialty Finance (BCSF) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Bain Capital Specialty Finance first quarter ended March 31, 2024 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to Katherine Schneider. Go ahead.
Katherine Schneider: Thanks, Constantin. Good morning, and welcome, everyone, to the Bain Capital Specialty Finance First Quarter ended March 31, 2024 conference call. Yesterday after market close, we issued our earnings press release and presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finance's Investor Relations website. Following our remarks today, we will hold a question-and-answer session for analysts and investors. This call is being webcast, and a replay will be available on our website. This call and the webcast are property of Bain Capital Specialty Finance and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance, and actual results may differ materially. These statements are based on current management expectations, which include risks and uncertainties, which are identified in the Risk Factors section of our Form 10-Q that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance assumes no obligation to update any forward-looking statements at this time unless required to do so by law. Lastly, past performance does not guarantee future results. So, with that, I'd like to turn the call over to our Chief Executive Officer, Michael Ewald.
Michael Ewald: Thanks, Katherine, and good morning to all of you, and thank you for joining us here today on our earnings call. I'm also joined by Mike Boyle, our President and our Chief Financial Officer, Amit Joshi. In terms of the agenda for the call, I'll start with an overview of our first quarter ended March 31, 2024 results. and then provide some thoughts on our performance, the overall market environment and our positioning. Thereafter, Mike and Amit will discuss our investment portfolio and financial results in greater detail. And as usual, we'll also leave some time for questions at the end. So yesterday after market close, we delivered strong first quarter results. Q1 net investment income per share was $0.53 as we continue to benefit from high base interest rates as well as higher spreads across our portfolio. Our net investment income return represented an annualized yield of 12% on book value and covered our regular dividend by 126%. Q1 earnings per share were $0.55, driven by improved credit quality across our portfolio investments during the quarter. Our net income produced an annualized return on book value of 12.5%. These results then led to another consecutive quarter of growth in our net asset value to $17.70, reflecting a 0.6% increase from our 17.60 -- sorry, $17.60 now as of December 31. Subsequent to quarter end, our Board declared a second quarter dividend equal to $0.42 per share and payable to record date holders as of June 28, 2024. The Board has also declared an additional dividend of $0.03 per share for shareholders as of June 28, as we previously announced back in February. So, this brings total dividends for the second quarter to $0.45 per share. which we believe represents an attractive yield for our shareholders at a 10.2% annualized rate on ending book value as of March 31. Turning now to the market environment. We saw an increase in new loan volumes across both private and public credit markets, largely driven by refinancing activity. As the Fed has tapered its expectations for future rate hikes and as broad to the subject of rate cuts later on in 2024, we have seen market sentiment gain confidence against a positive economic outlook. This drove a recently awakening within the broadly syndicated loan market during the first quarter, and we saw a reversal of the growth in private credit takeouts from the BSL market that we had witnessed over the course of 2022 and 2023, when large direct lending players filled the temporary void in the credit markets. In our view, this recent strengthening of the BSL market will cause increased and continued competition to large, upper-middle market private credit players but notably, this refinancing activity was very much limited to the upper-middle market segment during the first quarter and not observed at all in the core middle market segment where BCSF plays. However, Bain Capital Credit's private credit group platform also benefited from the increased activity levels witnessed during the first quarter as with the risk of an impending recession seemingly receding with a more constructive economic and rate environment outlook prevailing our private equity sponsor partners picked up their investment activity. Our gross originations during Q1 were $403 million, up 31% year-over-year from Q1 2023 volumes and up 95% sequentially from Q4 2023 volumes. As mentioned, we continue to favor core middle market sized companies with EBITDA between $25 million and $75 million. The median portfolio company EBITDA of our new direct originations in Q1 was $37 million. Not only is this segment of the market less susceptible to the refinancing risk-taking place in the large-cap upper middle market, but many of the core tenants that we value for direct lending activity are much more attainable in this segment of the market and RVO. For example, we favor attributes such as higher spread premiums and strong lender controls through credit agreement documentation containing our financial covenants. And we also seek out investments where we can and have control positions by being the majority holder within a small lender group. Turning to credit quality. Our portfolio companies continued to perform well and have proven to be resilient thus far in light of the higher interest rate environment as demonstrated by improving credit quality trends across our portfolio. We saw a modest decline in our nonaccrual rates across the portfolio quarter-over-quarter. Investments on nonaccrual represent 1.7% and 1.0% of the total portfolio at amortized cost and fair value, respectively as of March 31. Portfolio company fundamentals exhibited positive trends with a median net leverage across our portfolio declined to 4.7 times at quarter end down from 4.8 times as of the prior quarter and 4.9 times year-over-year. Lastly, credit risk rating trends also showed positive momentum with 97% of our investment portfolio at fair value performing in line or better than expectations relative to our initial underwriting of modestly from 95% as of the prior quarter end. Notwithstanding these solid portfolio metrics, our team remains vigilant and monitors our portfolio companies very closely. Finally, we ended the first quarter at a net leverage ratio of 1.09 times, near the middle of our target net leverage ratio of between 1.0 times and 1.25 times providing us with ample dry powder to capitalize on new investments in the current environment. Thus far into 2024, we've been pleased with the higher activity levels compared to the lower overall transaction volumes seen in 2023. Pin Capital's global and long-standing presence in the middle market positions us well to source new investment opportunities from our broad and deep set of relationships while still remaining highly selective as we conduct our in-depth diligence work. Furthermore, our platform incumbency advantage provides us with a sourcing, underwriting and execution advantage as supporting existing portfolio companies can be a fertile source of new investment. I will now turn the call over to Mike Boyle, our President, to walk through our investment portfolio in greater detail. Mike?
Mike Boyle: Thanks, Mike and good morning everyone. Our investments made during the first quarter and then provide an update on our portfolio. Investment made during the first quarter totaled $403 million into 83 companies, including $238 million into seven new companies. Sales and repayment activity totaled approximately $296 million, resulting in net investment funding of $107 million quarter-over-quarter. Investment funding’s to new portfolio companies represented nearly 60% of our gross originations in the quarter as new transaction volumes were healthy. We also continue to remain active supporting our existing portfolio of companies with new fundings into existing companies totaling $127 million in Q1. I -- for the new investments made during the first quarter, we were the majority or lead lender driving terms and structure as we leveraged our sourcing relationships and Bain Capital's in-house industry expertise. As Mike highlighted earlier in the call, we remain focused on investing in the core middle market, a segment of the market that we have been investing in for the past 25 years and one where we can drive favorable terms, structures and pricing. The weighted average spread on our new directly originated portfolio companies this quarter was approximately 695 basis points over SOFR across our first lien debt investment and a weighted average net debt-to-EBITDA leverage ratio on these new loans was approximately 4.75 times, reflecting conservative capital structures in the current market environment. The first quarter was also an active quarter of sales and repayment activity across our portfolio. Our largest repayment in Q1 was driven by an exit on our first lien and equity investment in direct travel as the company conducted the successful process. This is a 2017 vintage investment that was restructure back in 2020 during COVID. Bain Capital credit was heavily involved in the restructuring as one of the large lenders, and we were pleased to drive a positive outcome for our shareholders given our deep restructuring capabilities and expertise. The gross IRR and multiple of money for our investment in direct travel since inception were 13% and 1.8 times money on money. Turning to the investment portfolio. At the end of the first quarter, the size of our investment portfolio at fair value was approximately $2.4 billion across a highly diversified set of 153 companies operating across 32 different industries. Our portfolio primarily consists of investments in first lien senior secured loans, given our focus on downsize protection and investing in the top of capital structures. As of March 31, 67% of the investment portfolio at fair value was invested in first lien debt, 2% in second lien debt, 2% in subordinated debt, 4% in preferred equity, 9% in equity and other interests as well as 16% across our joint ventures, including 11% in the international senior loan program and 5% in the senior loan program. The underlying investments within both of our joint venture structures, our first lien loans. As of March 31, 2024, the weighted average yield of the portfolio amortized costs in fair value were 12.9% and 13.0%, respectively as compare to 13.0% and 13.1% respectively as of December 31, 2023. 94% of our debt investments bear interest at a floating rate positioning the company favourably higher interest rate environment. Moving over portfolio credit quality trends, fundamentals remained healthy and we have observed positive credit migration across our portfolio. As Mike highlighted earlier, the median leverage at the attachment point declined to 4.7 times as of March 31 as compared to 4.8 times as of December 31. Within our internal risk rating scale, we continue to see improvements within our risk rating one and two investments, which indicate companies are performing in line or better than expectations relative to our initial underwriting. As of March 31, these risk rating 1 and 2 investments comprise 97% of our portfolio at fair value, up from 95% as of year-end. Risk rating three and four investments comprised 3% of our portfolio at fair value and contributing to this decline from quarter-over-quarter was an upgrade of one of our riskier rated portfolio companies that had migrated to a higher tier based upon improving underlying business fundamentals. Investments on nonaccrual remained low across our portfolio and represented 1.7% and 1.0% of the total investment portfolio at amortized cost and fair value as of March 31, down from 1.9% and 1.2%, respectively, as of December 31. Amit will now provide a more detailed financial review.
Amit Joshi: Thank you, Mike, and good morning, everyone. I'll start the review of our first quarter 2024 results with our income statement. Total investment income was $74.5 million for the three months ended March 31, 2024, as compared to $74.9 million for the three months ended December 31, 2023. The decrease in investment income was primarily driven by a decrease in interest and dividend income, partially offset by increase in other income. The decrease in interest and dividend income was primarily driven by a onetime dividend income from ISLP during the prior quarter and modestly lower investment income across our portfolio as our average net leverage was slightly lower in Q1 as many of our new origination funded later during the quarter. Our investment income continuous to benefit from high-quality sources of investment income largely driven by contractual cash income across its investment. Interest income and dividend income represented 93% of our total investment income in Q1. In [indiscernible] income represented approximately 7% of our total investment income this quarter, slightly down from 8% during the fourth quarter. Total expenses for the first quarter were $39.5 million as compared to $39 million in the fourth quarter. Net investment income for the fourth quarter was $34 million or $0.53 per share as compared to $34.9 million or $0.54 per share for the prior quarter. During the three months ended March 31, 2024, the company had a net realized and unrealized gain of $1.1 million. Net income for the three months ended March 31, 2024, was $35.1 million or $0.55 per share. Moving over to our balance sheet. As of March 31, our investment portfolio at fair value totaled $2.4 billion and total assets of $2.6 billion. Total net assets were $1.1 billion as of March 31. NAV per share was $17.7 up from $17.16 at the end of fourth quarter, representing a 0.6% increase quarter over quarter. The increase in our NAV was primarily driven by over-earning of our dividend. coupled with net gain across our portfolio. At the end of Q1, our debt-to-equity ratio was 1.19 times as compared to 1.11 times from the end of Q4. Our net leverage ratio, which represents principal debt outstanding less cash and unsettled trades was 1.09 times at the end of Q1 compared to 1.02 times at the end of Q4. As of March 31, approximately 56% of our outstanding debt was in floating-rate debt and 44% in fixed-rate debt. On debt, our debt funding continues to benefit from low fixed-rate debt structure. For the three months ended March 31, 2024, the weighted average interest rate on our debt outstanding was 5.2% as compared to 5.3% as of the prior quarter end. The weighted average maturity across our total debt commitment was approximately four years at March 31, 2024. This year, we have been focused on extending out our liability structures, particularly on our senior secure revolving credit facility, which currently matures in December, 2026. We look forward to providing an update in the near future liquidity at quarter and total $358 million, including $242 million of undrawn capacity on our revolving credit facility, $122 million of cash and cash equivalents, including $74 million of restricted cash and a negative $6 million of unsettled trade net of receivables and payables of investments. As Mike highlighted earlier, our Board declared a second quarter 2024 dividend equal to $0.42 per share and a special dividend, as previously announced, of $0.03 per share, bringing total Q2 dividend to $0.45 per share. Both dividends are payable on July 29, 2024, to stockholders of record on June 28, 2024. As a reminder, our Board declared a total of $0.12 per share additional dividend driven by our strong over-earning in 2023. We intend to pay these special dividend instalments of $0.03 per share each quarter throughout this year. We currently estimate that our spillover income totaled approximately $0.93 per share, representing over 2 times of our quarterly regular dividend. We will continue to monitor our undistributed earnings against prudent capital management considerations. With that, I'll turn the call back over to Mike Ewald for closing remarks.
Michael Ewald: Thanks, Amit. Again, in closing, we are pleased to start off the year with another strong quarter of earnings. We produced attractive levels of investment income across our portfolio and demonstrated strong credit performance across our middle-market borrowers. We believe we are well positioned in the middle market to capitalize on attractive growth opportunities going forward. We remain committed to delivering value for our shareholders, and thank you for the privilege of managing our shareholders' capital. At Constantine, please open the line for questions.
Operator: [Operator Instructions]. Your first question comes from the line of Finian Osha from Wells Fargo (NYSE:WFC). Please go ahead.
Finian O'Shea: Sorry, I was on mute. I wanted to ask about Sensor Tower, a new name that came with a pretty sizable spread and hold size according to what you've normally done in the past and kind of just seeing if you could give some more color there on how we should think about the why in those two elements.
Michael Ewald: Sure. Thanks for the question, Fin. So, Sensor Tower was a new deal we originated in the first quarter in the software space, software is something that we have went to episodically in the past and a place that we often find interesting relative value. This was a situation where we were financing the acquisition of a new company from an existing company and it's backed by a sponsor that we know quite well. And so, as we did our in-depth diligence, we decided that a first lien loan made sense, priced at a spread of 750 over SOFR, which we think was a particularly attractive risk return in today's market environment. And this is a deal that we led and were able to structure and get the documents that -- and terms that we wanted. I will note this is part of a strategy that we have to often originate and lead an entire tranche of debt and then syndicate down to other partners over time, generating some skim income for our investors. And so, the hold size you see at the end of the quarter is something that's likely to come down over time as we syndicate that risk on to other players and collect some skim for our investors.
Finian O'Shea: That's very helpful. Can you remind us how often you're doing that, the syndication or sell-down? And just why not bring in other lenders in the beginning and not take that sort of risk if it's going to lead to risk of at least a concentrated position or whatnot?
Michael Ewald: Sure. So, you'll see in our other income over time that we do quite often generate this type of income based on origination fees, both for risk we hold and also risk that will sometimes pass on to other investors. The reason why sometimes we will take a larger risk position is really to deliver certainty to the sponsor to close the transaction, recognizing that we are being mindful of not taking too large of a position when we're underwriting any name. And so, it is something that is a key part of the value we do drive for our shareholders is for some time taking that risk on and then syndicating at some skim.
Amit Joshi: The other point I would add there, Fin, is that we do within the Private Credit Group have a handful of dedicated capital markets professionals so it is their job to ensure that we do have some back-end interest or situations where we do take skim, which again goes directly to the shareholders. This is not a situation where we kind of go in blind and figure out a couple of months later that we may want to sell down. This is something where we go into it with a pretty high level of confidence so we know there's going to be somebody on the other side of that trade.
Finian O'Shea: Sure. Helpful. Thank you. And just one more Direct Travel that looks like a pretty good outcome and appreciate that. Can you just touch on any -- I think you said your restructuring group worked on it like I guess, milestones you achieved or kind of what you are finally able to implement to make this salable. And if you could remind us how long ago that was taken -- I think you took the keys of that one in the past. Just like a brief recap of the time line and what you were able to do to recover value there? And that's all for me. Thanks.
Michael Ewald: Sure. So Direct Travel was the 2017 investment we made. It is an outsourced travel agency for small and midsized businesses. So as COVID shutdown, travel around the world, this was a business that went in negative revenue. So, we ended up taking the keys in 2020, but recognizing the fact that we did think that this company had the potential to recover at or above the original value and original revenues, we did not write off any debt, but instead took the keys, maintained our first lien debt position, but now also we're the owner of the business. As we thought forward to an exit and sale process and recovery, we wanted to make sure we had an incentivized management team. We wanted to make sure we had the right independent Board of Directors. And so, our operating group alongside some of the other lenders in the tranche, ensured that we did have a motivated management team to keep that business on track for a turnaround as the world reopened. And in recent history, we were able to go and have a successful sales process based on the strong recovery of that business. And so, I think that is a credit to the lender consensus across the handful of lenders that were in that debt tranche to drive the outcome, but also the strength of our restructuring expertise here at Bain Capital and the operating network that we do have to turn around businesses that may not go according to original budget.
Operator: [Operator Instructions]. Your next question comes from the line of Paul Johnson from KBW. Please go ahead.
Paul Johnson: Good morning. Thanks for taking my questions. Just how are you guys feeling about the pipeline and how has strong origination activity this quarter. Does that carry through in this second quarter? How do you feel that actually for the year?
Michael Ewald: Yes. Thanks, Paul. What I would say is we really started seeing a turnaround kind of post Powell's comments back in December that we were likely at a peak for rates and that there's some cuts to be expected in 2024. Clearly, inflation has still been pretty consistent here. So, we haven't seen any rate cuts yet, and there's some debate over how many -- especially over the rest of the year. But regardless, the fact that we have reached a peak, I think, started to give private equity sponsors, for example, a little bit more confidence that they weren't writing into a base case that had a recession associated with it. So that really started manifesting itself in the first quarter in terms of increased deal volume, more certainty around modeling cases and such. And so, buyers, private equity sponsors got more excited about transacting in the market. We certainly saw that in Q1, as we mentioned in our prepared remarks, that has continued here into Q2. Certainly, anecdotally, Mike and I have been spending a lot of time with the rest of the team evaluating new investment opportunities more so certainly than we would have been doing in Q4. And again, that's continuing today.
Paul Johnson: Have you found more of that interest and activity has been in that sort of core market where you guys have been exactly sort of versus the upper middle market?
Michael Ewald: Yes. It's certainly easier for us to comment on that core middle market since that's where we are. But having a -- or being affiliated with a large broadly syndicated loan business also gives us some insights into that upper middle market/large-cap corporate market. And we are seeing that there, it seems to be -- the activity seems to be driven mostly by refinancings. And again, as we mentioned, there's a lot of BSL takeouts of formerly private credit deals. I'd say from a new platform perspective, there's been some change there. But if you just think about the number of companies that are that big, it's just not that big of a universe. And so, I think that the volume there is always going to be somewhat spotty. I haven't seen a wholesale return to fresh LDO activity there, similar to what we've been seeing in the core middle market.
Paul Johnson: That’s helpful. On the facility, it sounds like that you're possibly in discussions and working on that. How is that going? Do you expect that to be pricing on that to be maintained or any changes there?
Michael Ewald: Sorry, Paul, you were saying on the -- on our financing?
Paul Johnson: Yes, the credit facility.
Michael Ewald: Yes. Sure. So, conversations are ongoing. We're not expecting any material change from existing structures as we look at that extension.
Operator: Your next question comes from the line of Derek Hewett from Bank of America (NYSE:BAC). Please go ahead.
Derek Hewett: Good morning, everyone. So, given elevated base rates, could you provide some color on the overall portfolio interest coverage for the first quarter versus, say, the end of the year? And then also what percentage of the portfolio has interest coverage below 1 time as of the first quarter?
Michael Ewald: Sure. So, I'll start with the -- your -- the last part of your question around what percent has interest coverage below 1 time. That really is aligned with our risk rating 3s and 4s so companies that are performing less below budget. So that's about 3% of the portfolio that has interest coverage below 1 time. In terms of interest coverage trend, we are -- it has -- with base rates remaining high, interest coverage has come down slightly, although we still view it to be at a healthy level. So, we were around 2 times interest coverage if I rewind about six months. We're now closer to between 1.8 times and 1.9 times interest coverage across the overall portfolio and we do run stress tests running forward our current base rates for the next 12 months, and we do not see a material further degradation in interest coverage from here. So, we are feeling quite good about the fact that our capital structures are appropriately levered for today's interest rate environment, and that does dovetail to the 4.7 times debt-to-EBITDA average across our portfolio, which we think is quite defensible in today's interest rate environment.
Derek Hewett: Okay. And then in terms of just looking at a lot of the credit trends seem to be positive, whether it's the net leverage or the improvement in nonaccruals or the positive movement in the risk rating. But when we look at the median EBITDA, it is down meaningfully if you look at it on a quarter-over-quarter basis or on a year-over-year basis. Could you -- are there lumpy types of underlying borrowers in that number? And so, the numbers skewed a little bit? And would we expect this kind of stabilize going forward?
Michael Ewald: Sure. So that really -- the reduction in EBITDA is really a function of many of the companies that we harvested in the first quarter were companies where EBITDA had grown meaningfully since inception. So, think of EBITDA between $90 million and $100 million for what we exited versus new loans where we -- the entry EBITDA was about $37 million on average. And so as is often the case in our segment of the market, we'll buy a company at, call it, $30 million of EBITDA, watch it grow to $90 million or $100 million of EBITDA as an exit. And so that's a trend that we saw in the first quarter, and that's the reason why our EBITDA trended down, you shouldn't view that as an indication of the negative trends in the underlying portfolio companies, but more a trend in the overall portfolio composition.
Operator: There are no further questions at this time. I would like to hand the call back to Michael Ewald for closing remarks.
Michael Ewald: Great. Thanks, Constantine, and thanks, everyone, for your time and attention today. Again, we really appreciate the support and the interest, and we look forward to bringing you more results in the future. Thanks very much. Cheers.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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