Crescent Capital BDC, Inc. (CCAP) Earnings

Management highlights

- Financial Results * Net investment income (NII) was $0.36 per share, down from $0.38 per share in Q1 2026 (excluding a Q1 one-time $0.04 per share incentive fee waiver). NII exceeded the $0.34 per share base dividend. * Net asset value (NAV) per share was $17.82, down from $18.27 in the prior quarter, driven primarily by unrealized losses on actively managed non-accrual investments. * A 3 cent per share special dividend was paid during the quarter, as previously announced. - Strategic and Operational Priorities * Near-term top priorities are rotating watch list investments and deleveraging the portfolio to within the target leverage range. * Reduced management and incentive fees, along with a revised dividend framework, went into effect April 1, creating a competitive fee structure aligned with shareholder interests. Parent company Sun Life holds ~6% of outstanding shares and has committed over $1.5 billion to Crescent strategies since 2021, demonstrating long-term confidence. * The base dividend was set at a conservative level relative to current earnings to account for potential market volatility. - Market and Origination * Sponsor-backed M&A activity remains below historical averages, but reduced competition from non-traded retail BDCs has improved lending terms across core and lower middle market segments, where CCAP primarily invests. Over the last 12 months, the broader Crescent platform committed over $8.7 billion across private credit transactions, giving CCAP access to a strong pipeline of high-quality opportunities. * Gross investment deployment in Q2 was $57 million: $28 million across three new platform investments at a 550 basis point weighted average spread, and $29 million in follow-on investments. Total exits, sales and repayments were $36 million, resulting in $21 million net deployment. - Credit Portfolio Management * 85% of investments are rated 1 or 2, weighted average interest coverage remains stable at 2.2x, and most portfolio companies demonstrate resilient operating performance and year-over-year EBITDA growth. Most credit pressure is concentrated in a small set of challenged credits, particularly the legacy First Eagle portfolio and companies exposed to deferable consumer spending. * The watch list increased modestly to 15% of the portfolio from 14% quarter-over-quarter. Three restructurings were completed during the quarter, with minimal net impact to NAV, as realized losses were offset by reversals of prior unrealized losses. - Balance Sheet and Liquidity * Debt-to-equity ratio was 1.42x (1.37x net of cash), above the long-term target range as of quarter-end. Total available liquidity was ~$200 million in borrowing capacity plus $36 million in cash on hand. * $162 million in maturing debt was repaid during the quarter, and liquidity was enhanced by upsizing two existing credit facilities, adding $125 million in total capacity, and drawing a previously committed $50 million unsecured notes tranche. The unsecured debt maturity profile has been extended to 2028 and beyond.

Guidance

- Management expects near-term portfolio realizations will bring net leverage down to the target range during the second half of 2026. - The third quarter 2026 regular dividend of $0.34 per share was declared, alongside the second previously announced 3 cent per share special dividend (no supplemental dividend will be paid per the existing framework). - Near-term new investments will be sized smaller than the current 0.5% average position to increase portfolio diversification while deleveraging is completed. - Management expects continued realizations of legacy acquired assets as portfolio quality rotation progresses.

Segment performance

CCAP is a single-segment business development company focused on private credit investing. As of June 30, 2026, total investment portfolio fair value was ~$1.6 billion, with total net assets of $656 million. 91% of the portfolio is invested in senior first lien loans, spread across 192 portfolio companies with an average investment size of ~0.5% of total portfolio value. ~85% of investments hold a 1 or 2 risk rating, with a weighted average portfolio risk rating of 2.1. Non-accrual investments represented 4.8% of debt investments at cost, down from 5.7% in the prior quarter. The legacy First Eagle acquired portfolio now represents 7% of CCAP's portfolio at fair value, down from over 70 investments at acquisition to 27 investments as of quarter-end.

Risks & headwinds

- Consecutive quarterly NAV declines driven by ongoing operating pressure on a subset of non-accrual and watch list investments, particularly legacy First Eagle assets acquired in a prior transaction. - Leverage is currently above the firm's long-term target range, requiring active deleveraging through portfolio realizations. - Persistently below-average sponsor-backed M&A activity reduces prepayment fee and accelerated amortization income, dragging down total investment income. - Watch list exposure is concentrated in companies tied to deferable consumer discretionary spending, which remains sensitive to economic volatility. - Private credit market conditions remain volatile, with 2021-2022 vintage investments facing pressure from higher capital costs today.

Analyst Q&A

• Q: With 8 consecutive quarters of declining NAV, when can investors expect NAV to bottom out, and are current marks properly reflecting expected outcomes for challenged assets? /

  A: Management notes that challenged watch list and workout investments take multiple years to resolve, and the firm prioritizes maximizing long-term recovery value over fast exits. Quarterly marks are updated to reflect the latest operating performance and outlook for each asset, which naturally leads to more volatility for challenged assets versus stable performing holdings. The watch list has only increased modestly to 15% (just 1.5pp above the 3-year average) due to proactive designation, so the scope of challenge is well reflected in current disclosures.

• Q: Once leverage reaches the target range and legacy asset rotation progresses, will CCAP shift to smaller average position sizes, and how will origination strategy change? /

  A: Near-term origination will intentionally use smaller position sizes (below the current 0.5% average) to continue increasing portfolio diversification while deleveraging is completed. Once leverage hits target, the firm will continue accessing the broad origination pipeline from the larger Crescent platform, maintaining disciplined sizing aligned with de-risking goals.

• Q: Is M&A growth still a priority for CCAP, and will parent Sun Life provide additional capital to support growth? /

  A: CCAP is a core permanent capital vehicle for the Crescent platform, and management has a fiduciary obligation to evaluate attractive M&A opportunities. However, cleaning up the current portfolio of challenged legacy assets and reducing non-accruals is the immediate top priority, not growth through M&A. Sun Life has been a consistent long-term supporter of CCAP and the broader Crescent platform, and is expected to remain so.

• Q: Are the underperforming assets concentrated only in the CCAP portfolio, or have all Crescent franchise segments faced broad headwinds? /

  A: Most underperformance stems from valuation normalization for 2021-2022 vintage investments, which were originated in an environment of low base rates and more aggressive credit structures, and now face a higher cost capital environment. There is broad overlap in co-investing between CCAP and Crescent's institutional business, so headwinds have generally been felt across the platform. The only exception is the legacy First Eagle acquired assets, which are held exclusively in the CCAP portfolio and remain the largest concentrated source of pressure.