CNL Strategic Capital LLC

11/06/2025 | Press release | Distributed by Public on 11/06/2025 14:40

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is based on the unaudited condensed consolidated financial statements as of September 30, 2025 and December 31, 2024, and for the quarter and nine months ended September 30, 2025 and 2024. Amounts as of December 31, 2024 included in the unaudited condensed consolidated statements of assets and liabilities have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, as well as the audited consolidated financial statements, notes and management's discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2024 (our "Form 10-K"). Capitalized terms used in this Item 2 have the same meaning as in the accompanying unaudited condensed financial statements unless otherwise defined herein.
Statement Regarding Forward-Looking Information
Certain statements in this quarterly report on Form 10-Q for the quarterly period ended September 30, 2025 (this "Quarterly Report") constitute "forward-looking statements." Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management's current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of our business and its performance, the economy and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as "believes," "expects," "anticipates," "intends," "estimates," "plans," "continues," "pro forma," "may," "will," "seeks," "should" and "could," and words and terms of similar substance, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:
•our future operating results;
•our business prospects and the prospects of our businesses and other assets;
•unanticipated costs, delays and other difficulties in executing our business strategy;
•performance of our businesses and other assets relative to our expectations and the impact on our actual return on invested equity, as well as the cash provided by these assets;
•our contractual arrangements and relationships with third parties;
•actual and potential conflicts of interest with the Manager, the Sub-Manager and their respective affiliates;
•the dependence of our future success on the general economy and its effect on the industries in which we target, including high interest rates, inflationary pressures, recessionary concerns or global supply chain issues;
•events or circumstances which undermine confidence in the financial markets or otherwise have a broad impact on financial markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, pandemics or threatened or actual armed conflicts;
•the use, adequacy and availability of proceeds from our current public offering ("Second Follow-On Public Offering"), financing sources, working capital or borrowed money to finance a portion of our business strategy and to service our outstanding indebtedness;
•the timing of cash flows, if any, from our businesses and other assets;
•the ability of the Manager and the Sub-Manager to locate suitable acquisition opportunities for us and to manage and operate our businesses and other assets;
•the ability of the Manager, the Sub-Manager and their respective affiliates to attract and retain highly talented professionals;
•the ability to operate our business efficiently, manage costs (including general and administrative expenses) effectively and generate cash flow;
•the lack of a public trading market for our shares;
•the ability to make and the amount and timing of anticipated future distributions;
•estimated net asset value per share of our shares;
•the loss of our exemption from the definition of an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act");
•fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;
•the degree and nature of our competition; or
•the effect of changes to government regulations, accounting rules or tax legislation.
Our forward-looking statements are not guarantees of our future performance and shareholders are cautioned not to place undue reliance on any forward-looking statements. While we believe our forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. Our forward-looking statements are based on our current expectations and a variety of risks, uncertainties and other factors, many of which are beyond our ability to control or accurately predict.
Important factors that could cause our actual results to vary materially from those expressed or implied in our forward-looking statements include, but are not limited to, the factors listed and described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the "Risk Factors" sections of the Company's documents filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, our Form 10-K and this Quarterly Report.
All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements. Forward-looking statements speak only as of the date on which they are made; we undertake no obligation to, and expressly disclaim any obligation to, update or revise forward-looking statements to reflect new information, changed assumptions, the occurrence of subsequent events, or changes to future operating results over time unless otherwise required by law.
Overview
CNL Strategic Capital, LLC is a limited liability company that primarily seeks to acquire and grow durable, middle-market U.S. businesses. We are externally managed by the Manager, CNL Strategic Capital Management, LLC, an entity that is registered as an investment adviser under the Advisers Act. The Manager is controlled by CNL Financial Group, LLC, a private investment management firm specializing in alternative investment products. We have engaged the Manager under the Management Agreement pursuant to which the Manager is responsible for the overall management of our activities and sub-managed by the Sub-Manager, Levine Leichtman Strategic Capital, LLC, a registered investment adviser, under the Sub-Management Agreement pursuant to which the Sub-Manager is responsible for the day-to-day management of our assets. The Sub-Manager is an affiliate of Levine Leichtman Capital Partners, LLC.
The Manager and the Sub-Manager are collectively responsible for sourcing potential acquisitions and debt financing opportunities, subject to approval by the Manager's management committee that such opportunity meets our investment objectives and final approval of such opportunity by our board of directors, and monitoring and managing the businesses we acquire and/or finance on an ongoing basis. The Sub-Manager is primarily responsible for analyzing and conducting due diligence on prospective acquisitions and debt financings, as well as the overall structuring of transactions.
Since we commenced operations on February 7, 2018, we have acquired equity and debt investments in 17 middle market businesses primarily in the United States. Our businesses generally have a track record of stable and predictable operating performance, are highly cash flow generative and have management teams who have a meaningful ownership stake in their respective company. As of September 30, 2025, we had eleven investments structured as controlling equity interests in combination with debt positions and six investments structured as minority equity interests in combination with debt positions. All of our debt investments were current as of September 30, 2025.
We were formed as a Delaware limited liability company on August 9, 2016 and we operate and intend to continue to operate our business in a manner that will permit us to avoid registration under the Investment Company Act. We are not a "blank check" company within the meaning of Rule 419 of the Securities Act. We commenced operations on February 7, 2018.
Our Common Shares Offerings
Public Offerings
On March 7, 2018, we commenced our Initial Public Offering of up to $1.1 billion of shares, which included up to $100.0 million of shares being offered through our distribution reinvestment plan, pursuant to the Initial Registration Statement. On November 1, 2021, we commenced the Follow-On Public Offering of up to $1.1 billion of shares, which included up to $100.0 million of shares being offered through our distribution reinvestment plan, pursuant to the Follow-On Registration Statement upon which the Initial Registration Statement was deemed terminated. On November 1, 2024, we commenced the Second Follow-On Public Offering of up to $1.1 billion of shares, which includes up to $100.0 million of shares being offered through our distribution reinvestment plan, pursuant to the Second Follow-On Registration Statement filed with the SEC. Upon commencement of the Second Follow-On Public Offering, the Follow-On Registration Statement was deemed terminated.
Through the Second Follow-On Public Offering, we are offering, in any combination, four classes of the Non-founder shares. There are differing selling fees and commissions for each share class. We also pay distribution and shareholder servicing fees, subject to certain limits, on the Class T and Class D shares sold in the Public Offerings (excluding sales pursuant to our distribution reinvestment plan).
Through September 30, 2025, we had received net proceeds from the Public Offerings of approximately $1.1 billion, including approximately $62.4 million received through our distribution reinvestment plan. As of September 30, 2025, the public offering price was $40.96 per Class A share, $39.23 per Class T share, $37.19 per Class D share and $37.98 per Class I share. See Note 7. "Capital Transactions" and Note 13. "Subsequent Events" in Item 1. "Financial Statements" for additional information regarding the Public Offerings.
Through September 30, 2025, we had incurred selling commissions and dealer manager fees of approximately $14.9 million from the sale of Class A shares and Class T shares in the Public Offerings. The Class D shares and Class I shares sold through September 30, 2025, were not subject to selling commissions and dealer manager fees. We also incurred obligations to reimburse the Manager and Sub-Manager for offering costs of approximately $13.3 million based on actual amounts raised through the Public Offerings through September 30, 2025. These offering costs related to the Public Offerings were advanced by the Manager and Sub-Manager, as described further in Note 5. "Related Party Transactions" of Item 1. "Financial Statements."
In October 2025, our board of directors approved new per share public offering prices for each share class in the Second Follow-On Public Offering. The new public offering prices are effective as of October 30, 2025. The following table provides the new public offering prices and applicable upfront selling commissions and dealer manager fees for each share class available in the Second Follow-On Public Offering:
Class A Class T Class D Class I
Effective October 30, 2025:
Public Offering Price, Per Share $ 40.99 $ 39.33 $ 37.24 $ 37.96
Selling Commissions, Per Share 2.46 1.18 - -
Dealer Manager Fees, Per Share 1.02 0.69 - -
Since we commenced operations on February 7, 2018, we have raised total net offering proceeds (including amounts raised from our private offerings and Public Offerings) of approximately $1.3 billion, including approximately $62.4 million received through our distribution reinvestment plan as of September 30, 2025.
Portfolio and Investment Activity
As of September 30, 2025, we had invested in 17 portfolio companies, consisting of equity investments and debt investments. The table below presents our portfolio company investments (in millions):
As of September 30, 2025
Equity Investments
Debt Investments(1)
Portfolio Company Initial Investment Date Ownership % Cost Basis Senior Secured Debt Interest Rate Maturity Date Cost Basis
Total Cost Basis(2)
Lawn Doctor 2/7/2018 61 % $ 27.6 Second Lien 16.0 % 2/7/2030 $ 15.0 $ 42.6
Lawn Doctor 6/30/2023 - - First Lien
(3)
8/6/2029 29.5 29.5
Polyform 2/7/2018 87 15.6 Secured 16.0 2/7/2028 15.7 31.3
Roundtables 8/1/2019 81 33.5 Second Lien 16.0 7/1/2028 12.1 45.6
Roundtables 11/13/2019 - - Secured 8.0 12/31/2028 2.0 2.0
Milton 11/21/2019 13 9.0 Second Lien 15.0 12/19/2030 3.4 12.4
Resolution Economics 1/2/2020 8 7.6 Second Lien 15.0 12/30/2027 2.8 10.4
Blue Ridge 3/24/2020 16 8.1 Second Lien 15.0 12/28/2029 2.6 10.7
HSH 7/16/2020 75 17.3 Secured 15.0 7/16/2027 24.4 41.7
ATA 4/1/2021 75 37.1
Secured
15.0 4/1/2027 37.0 74.1
Clarion 12/9/2021 95 70.3 First Lien 15.0 12/9/2028 22.5 92.8
Vektek 5/6/2022 84 56.9 Second Lien 15.0 11/6/2029 24.4 81.3
Vektek 6/30/2023 - - Secured
(3)
5/6/2029 24.4 24.4
TacMed 3/24/2023 95 76.7
Secured
16.0 3/24/2030 29.0 105.7
Sill 10/20/2023 93 90.6
Secured
14.0 10/20/2030 15.9 106.5
USAW 2/21/2024 5 8.6 Second Lien 16.0 8/20/2031 1.4 10.0
LBR 6/17/2024 8 75.0 PIK Note 12.0% PIK 5/17/2039 18.8 93.8
MAP 7/18/2024 58 61.5 First Lien 15.0 7/18/2031 15.0 76.5
IFPG 6/23/2025 91 90.5 Secured 15.0 6/23/2032 23.0 113.5
SDC 9/25/2025 3 6.8 Second Lien 16.0 1/24/2033 0.7 7.5
$ 692.7 $ 319.6 $ 1,012.3
FOOTNOTES:
(1) The note purchase agreements contain customary covenants and events of default. As of September 30, 2025, all of our portfolio companies were in compliance with their respective debt covenants.
(2) See the Schedule of Investments and Note 3. "Investments" of Item 1. "Financial Statements" for additional information related to our investments, including fair values as of September 30, 2025.
(3) As of September 30, 2025, the senior debt investments in Lawn Doctor and Vektek accrue interest at a per annum rate of SOFR + 4.60%. SOFR at September 30, 2025 was 4.31%.
The portfolio companies are required to make monthly interest payments on their debt, with the debt principal due upon maturity. Failure of any of these portfolio companies to pay contractual interest payments could have a material adverse effect on our results of operations and cash flows from operations, which would impact our ability to make distributions to shareholders. See our Form 10-K for the year ended December 31, 2024 for additional information regarding our portfolio companies and their related business activities.
Our Portfolio Companies
The below information regarding our portfolio companies contain a financial measure, Adjusted EBITDA, utilized by management to evaluate the operating performance and liquidity of our portfolio companies that is not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Adjusted EBITDA should not be considered in isolation from or as superior to or as a substitute for net income (loss), income (loss) from operations, or other financial measures determined in accordance with GAAP. We use this non-GAAP financial measure to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our portfolio companies. We present this non-GAAP measure quarterly for our portfolio companies in which we own a controlling equity interest and annually for all of our portfolio companies.
You are encouraged to evaluate the adjustments to Adjusted EBITDA, including the reasons we consider this measure appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future our portfolio companies may incur expenses that are the same as or similar to some of the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that the future results of our portfolio companies will be unaffected by unusual or non-recurring items.
We caution investors that amounts presented in accordance with our definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies, because not all companies calculate this non-GAAP measure in the same manner. Because of these limitations and additional limitations described below, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on the GAAP results and using Adjusted EBITDA only as a supplemental measure.
Additionally, we provide our proportionate share of each non-GAAP measure because our ownership percentage of each portfolio company varies. We urge investors to consider our ownership percentage of each portfolio company when evaluating the results of each of our portfolio companies.
Adjusted EBITDA
When evaluating the performance of our portfolio, we monitor Adjusted EBITDA to measure the financial and operational performance of our portfolio companies and their ability to pay contractually obligated debt payments to us. In connection with this evaluation, the Manager and Sub-Manager review monthly portfolio company operating performance versus budgeted expectations and conduct regular operational review calls with the management teams of the portfolio companies.
We present Adjusted EBITDA as a supplemental measure of the performance of our portfolio companies because we believe it assists investors in comparing the performance of such businesses across reporting periods on a consistent basis by excluding items that we do not believe are indicative of their core operating performance.
We define Adjusted EBITDA as net income (loss), plus (i) interest expense, net, and loan cost amortization, (ii) taxes and (iii) depreciation and amortization, as further adjusted for certain other non-recurring items that we do not consider indicative of the ongoing operating performance of our portfolio companies. These further adjustments are itemized below. Our proportionate share of Adjusted EBITDA is calculated based on our equity ownership percentage at period end.
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are: (i) Adjusted EBITDA does not reflect cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; (iii) Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on indebtedness; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we do not consider to be indicative of the ongoing operations of our portfolio companies; and (vi) other companies in similar industries as our portfolio companies may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.
Lawn Doctor
As of September 30, 2025 and December 31, 2024, Lawn Doctor, Inc. ("Lawn Doctor") had total assets of approximately $99.4 million and $98.7 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of Lawn Doctor for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 12,464 $ 11,410 $ 38,271 $ 34,635
Net income (GAAP) $ 1,024 $ 955 $ 3,027 $ 2,470
Interest and debt related expenses 1,465 1,491 4,269 4,439
Depreciation and amortization 645 646 1,951 1,918
Income tax expense 323 377 1,101 1,023
Adjusted EBITDA (non-GAAP) $ 3,457 $ 3,469 $ 10,348 $ 9,850
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 2,108 $ 2,100 $ 6,312 $ 5,963
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 61% of Lawn Doctor.
Polyform
As of September 30, 2025 and December 31, 2024, Polyform Products, Co. ("Polyform") had total assets of approximately $30.3 million and $31.7 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net loss of Polyform for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 4,115 $ 4,594 $ 13,776 $ 13,138
Net loss (GAAP) $ (134) $ (73) $ (392) $ (513)
Interest and debt related expenses 736 736 2,184 2,182
Depreciation and amortization 468 466 1,404 1,395
Income tax benefit (53) (15) (154) (189)
Adjusted EBITDA (non-GAAP) $ 1,017 $ 1,114 $ 3,042 $ 2,875
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 886 $ 971 $ 2,650 $ 2,505
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 87% of Polyform.
Roundtables
As of September 30, 2025 and December 31, 2024, Auriemma U.S. Roundtables ("Roundtables") had total assets of approximately $60.4 million and $59.5 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of Roundtables for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 5,028 $ 4,523 $ 14,637 $ 13,162
Net income (GAAP) $ 543 $ 362 $ 1,165 $ 364
Interest and debt related expenses 595 608 1,791 1,875
Depreciation and amortization 520 483 1,559 1,566
Income tax expense 168 109 356 110
Adjusted EBITDA (non-GAAP) $ 1,826 $ 1,562 $ 4,871 $ 3,915
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 1,475 $ 1,261 $ 3,934 $ 3,162
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 81% of Roundtables.
HSH
As of September 30, 2025 and December 31, 2024, Healthcare Safety Holdings, LLC ("HSH") had total assets of approximately $40.2 million and $42.4 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of HSH for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 10,004 $ 8,646 $ 27,816 $ 25,744
Net income (GAAP) $ 922 $ 394 $ 1,807 $ 1,574
Interest and debt related expenses 842 942 2,705 2,779
Depreciation and amortization 699 714 2,126 2,208
Income tax expense 315 153 602 568
Adjusted EBITDA (non-GAAP) $ 2,778 $ 2,203 $ 7,240 $ 7,129
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 2,070 $ 1,641 $ 5,395 $ 5,312
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 75% of HSH.
ATA
As of September 30, 2025 and December 31, 2024, ATA Holding Company, LLC ("ATA") had total assets of approximately $84.5 million and $86.7 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income (loss) of ATA for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 16,289 $ 14,174 $ 42,247 $ 38,998
Net income (loss) (GAAP) $ 1,137 $ 51 $ (314) $ (1,595)
Interest and debt related expenses 1,477 1,472 4,405 4,407
Depreciation and amortization 1,050 1,069 3,152 3,254
Adjusted EBITDA (non-GAAP) $ 3,664 $ 2,592 $ 7,243 $ 6,066
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 2,748 $ 1,944 $ 5,432 $ 4,550
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 75% of ATA.
Douglas
On August 1, 2025, we, through our wholly-owned subsidiary, DM Strategic Capital EquityCo, LLC, sold its approximately 90% indirect equity ownership interest in the capital stock of Douglas Machines Corp. ("Douglas") to an unaffiliated third-party buyer for aggregate consideration of approximately $37.6 million, subject to certain customary escrow related hold-backs and post-closing adjustments. In connection with this sale, our debt investment of approximately $15.0 million in Douglas in the form of senior secured notes was repaid in full.
Clarion
As of September 30, 2025 and December 31, 2024, Clarion had total assets of approximately $97.3 million and $81.3 million, respectively. In February 2025, we made an additional equity investment in Clarion of approximately $13.5 million for Clarion's acquisition of McLoone Metal Graphics. Founded in 1954 and headquartered in La Crosse, WI, McLoone manufactures metal nameplates and ID plates and flexible labels utilized by Original Equipment Manufacturers and other suppliers in a variety of end markets. McLoone's products complement Clarion's products and services for its customers' industrial safety needs.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of Clarion for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 8,499 $ 4,063 $ 23,777 $ 12,620
Net income (GAAP) $ 1,204 $ 255 $ 2,502 $ 1,301
Interest and debt related expenses 800 834 2,419 2,511
Depreciation and amortization 527 256 1,257 769
Income tax expense 454 98 945 503
Adjusted EBITDA (non-GAAP) $ 2,985 $ 1,443 $ 7,123 $ 5,084
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 2,829 $ 1,390 $ 6,760 $ 4,896
FOOTNOTE:
Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 95% and 96%, respectively, of Clarion.
Vektek
As of September 30, 2025 and December 31, 2024, Vektek Holdings, LLC ("Vektek") had total assets of approximately $109.0 million and $110.1 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of Vektek for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 8,764 $ 9,232 $ 26,283 $ 27,051
Net income (GAAP) $ 467 $ 340 $ 1,180 $ 711
Interest and debt related expenses 1,514 1,590 4,499 4,709
Depreciation and amortization 912 898 2,735 2,728
Income tax expense 43 48 88 76
Adjusted EBITDA (non-GAAP) $ 2,936 $ 2,876 $ 8,502 $ 8,224
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 2,458 $ 2,408 $ 7,118 $ 6,885
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 84% of Vektek.
TacMed
As of September 30, 2025 and December 31, 2024, Tacmed Holdings, LLC ("TacMed") had total assets of approximately $112.0 million and $111.3 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net (loss) income of TacMed for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 11,912 $ 14,100 $ 32,554 $ 31,997
Net (loss) income (GAAP) $ (26) $ 538 $ (1,326) $ (3,027)
Interest and debt related expenses 1,191 1,183 3,535 3,529
Depreciation and amortization 1,345 1,315 4,000 4,105
Income tax expense (benefit) 126 130 (243) (523)
Transaction related expenses(1)
- - - 26
Adjusted EBITDA (non-GAAP) $ 2,636 $ 3,166 $ 5,966 $ 4,110
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)
$ 2,514 $ 3,024 $ 5,690 $ 3,925
FOOTNOTES:
(1)Initial buyer transaction costs paid by TacMed included in the purchase price. Transaction related expenses are non-recurring.
(2)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 95% of TacMed.
Sill
As of September 30, 2025 and December 31, 2024, Sill Holdings, LLC ("Sill") had total assets of approximately $118.1 million and $120.0 million, respectively.
The following table reconciles our proportionate share of Adjusted EBITDA from net income (loss) of Sill for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 8,031 $ 6,391 $ 29,876 $ 14,636
Net income (loss) (GAAP) $ 484 $ (1,173) $ 3,978 $ (1,917)
Interest and debt related expenses 572 621 1,743 1,759
Depreciation and amortization 881 821 2,631 1,922
Income tax (benefit) expense (375) 1,718 327 1,038
Adjusted EBITDA (non-GAAP) $ 1,562 $ 1,987 $ 8,679 $ 2,802
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 1,457 $ 1,860 $ 8,097 $ 2,623
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 93% and 94%, respectively, of Sill.
MAP
As of September 30, 2025 and December 31, 2024, MAP had total assets of approximately $131.5 million and $122.7 million, respectively. We made our initial investment in MAP in July 2024. In January 2025, we made an additional equity investment in MAP of $4.0 million to purchase the equity interests of a minority shareholder of the portfolio company. In January 2025, MAP acquired Retirement Service Group, a third-party administrator for retirement plans headquartered in Orange, CA.
The following table reconciles our proportionate share of Adjusted EBITDA from net income (loss) of MAP for the quarter and nine months ended September 30, 2025 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Revenues $ 12,370 $ 2,878 $ 31,293 $ 2,878
Net income (loss) (GAAP) $ 1,000 $ (546) $ (3,168) $ (546)
Interest and debt related expenses 662 297 2,003 297
Depreciation and amortization 1,050 419 5,244 419
Income tax expense 18 1,412 19 1,412
Adjusted EBITDA (non-GAAP) $ 2,730 $ 1,582 $ 4,098 $ 1,582
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(1)
$ 1,578 $ 797 $ 2,369 $ 797
FOOTNOTE:
(1)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025 and 2024, we owned approximately 58% and 50%, respectively, of MAP.
IFPG
As of September 30, 2025 IFPG had total assets of approximately $128.6 million.
The following table reconciles our proportionate share of Adjusted EBITDA from net income of IFPG for the quarter ended September 30, 2025 and for the period from June 23, 2025 to September 30, 2025 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025
2025(1)
Revenues $ 5,925 $ 6,278
Net income (GAAP) $ 106 $ 230
Interest and debt related expenses 960 1,044
Depreciation and amortization 1,181 1,181
Income tax expense 91 91
Adjusted EBITDA (non-GAAP) $ 2,338 $ 2,546
Our Proportionate Share of Adjusted EBITDA (non-GAAP)(2)
$ 2,132 $ 2,322
FOOTNOTE:
(1)Results are for the period from June 23, 2025 (the date we acquired our investment in IFPG) to September 30, 2025.
(2)Amounts based on our ownership percentage as of the end of the periods presented. As of September 30, 2025, we owned approximately 91% of IFPG.
Other Portfolio Companies
As of September 30, 2025, we held minority equity and debt positions in six portfolio companies.
In April 2025, we made an additional investment in LBR of approximately $25.8 million to partially finance the merger of LBR and ALM. ALM was founded in 1979 and is headquartered in New York, New York. Through its leading Law.com platform, ALM offers a global legal newsroom for professionals utilizing proprietary data intelligence, expert analysis and industry insights serving both the practice and business of law. ALM, in combination with LBR, creates a newly formed group uniquely positioned to serve clients globally by combining ALM's deep U.S. market penetration with LBR's strong U.K. and global presence.
In June 2025, we made an additional equity investment in Milton of approximately $2.3 million.
In September 2025, we, through our wholly-owned subsidiaries, SDC Strategic Capital EquityCo, LLC and SDC Strategic Capital DebtCo, LLC, made an approximately $7.5 million co-investment alongside other vehicles managed by affiliates of the Sub-Manager in SDC, which owns a controlling equity interest in Shipley Do-Nuts. In July 2025, LLCP VII, an affiliate of the Sub-Manager, acquired a controlling equity interest in Shipley Do-Nuts through SDC. Our co-investment is comprised of a combination of an indirect minority common share equity position of approximately $6.8 million and $0.7 million through a participation interest in the second lien secured debt of Shipley Do-Nuts. Our equity investment represents less than 3% of the total equity ownership of Shipley Do-Nuts. Our investment in Shipley Do-Nuts was acquired from LLCP VII at the same price and on substantially similar terms and conditions as LLCP VII's initial investment in July 2025. The terms of the transaction were approved by our board of directors, including all of the independent directors of our board of directors, as fair and reasonable to us and at a price to us no greater than the cost of the asset to LLCP VII.
Factors Impacting Our Operating Results
We expect that the results of our operations will be affected by a number of factors. Many of the factors that will affect our operating results are beyond our control. We will be dependent upon the earnings of and cash flow from the businesses that we acquire to meet our operating and management fee expenses and to make distributions. These earnings and cash flows, net of any minority interests in these businesses, will be available:
•first, to meet our management fees and corporate overhead expenses; and
•second, to fund business operations and to make distributions to our shareholders.
Size of assets
If we are unable to raise substantial funds, we will be limited in the number and type of acquisitions we may make. The size of our assets will be a key revenue driver. Generally, as the size of our assets grows, the amount of income we receive will increase. In addition, our assets may grow at an uneven pace as opportunities to acquire assets may be irregularly timed, and the timing and extent of the Manager's and the Sub-Manager's success in identifying such opportunities, and our success in making acquisitions, cannot be predicted.
Market conditions
From time to time, the global capital markets may experience periods of disruption and instability, as we have seen and continue to see with the recent public health crises, natural disasters and geopolitical events, which could materially and adversely impact the broader financial and credit markets and reduce the availability of debt and equity capital. Furthermore, economic growth remains affected by inflationary pressure, tariff policies and supply chain related disruptions and could be slowed or halted by significant external events. Some of our portfolio companies have experienced supply chain related disruptions from time to time. In some instances, strategic decisions to hold more inventory have been made as a result of ongoing supply chain related disruptions. Significant changes or volatility in the capital markets have and may continue to have a negative effect on the valuations of our businesses and other assets. While all of our assets are likely to not be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our assets are sold in a principal market to market participants (even if we plan on holding an asset long term or through its maturity) and impairments of the market values or fair market values of our assets, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. Significant changes in the capital markets may also affect the pace of our activity and the potential for liquidity events involving our assets. Thus, the illiquidity of our assets may make it difficult for us to sell such assets to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our assets if we were required to sell them for liquidity purposes.
Liquidity and Capital Resources
General
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments, fund and maintain our assets and operations, repay borrowings, make distributions to our shareholders and other general business needs. We will use significant cash to fund acquisitions, make additional investments in our portfolio companies, make distributions to our shareholders and fund our operations. Additionally, to the extent we have available cash we may make investments in short-term U.S. Treasury bills. Our primary sources of cash will generally consist of:
•the net proceeds from the Public Offerings;
•distributions and interest earned from our assets; and
•proceeds from sales of assets and principal repayments from our assets.
We expect we will have sufficient cash from current sources to meet our liquidity needs for the next twelve months. However, we may opt to supplement our equity capital and increase potential returns to our shareholders through the use of prudent levels of borrowings. We may use debt when the available terms and conditions are favorable to long-term investing and well-aligned with our business strategy. In light of the current economic environment, impacted by fluctuating interest rates, record inflationary pressures due to global supply chain issues, a rise in energy prices, and the impact of the recent public health crises, natural disasters and geopolitical events on the global economy, we are closely monitoring overall liquidity levels and changes in the business performance of our portfolio companies to be in a position to enact changes to ensure adequate liquidity going forward.
While we generally intend to hold our assets for the long term, certain assets may be sold in order to manage our liquidity needs, meet other operating objectives and adapt to market conditions. The timing and impact of future sales of our assets, if any, cannot be predicted with any certainty.
As of September 30, 2025 and December 31, 2024, we had cash and cash equivalents of approximately $79.4 million and $146.3 million, respectively.
Sources of Liquidity and Capital Resources
Offerings. We received approximately $102.5 million and $170.5 million in net proceeds during the nine months ended September 30, 2025 and 2024, respectively, from the Follow-On Public Offering and the Second Follow-On Public Offering, which excludes approximately $16.0 million and $13.1 million raised through our distribution reinvestment plan, respectively. As of September 30, 2025, we had approximately 807.4 million authorized common shares remaining for sale.
Investments. We received a return of capital from portfolio company investments of approximately $2.3 million and $2.4 million during the nine months ended September 30, 2025 and 2024, respectively.
Borrowings. We borrowed and repaid $30.0 million during the nine months ended September 30, 2025. We did not borrow any amounts during the nine months ended September 30, 2024. See Note 8. "Borrowings" of Item 1. "Financial Statements" for additional information regarding our 2024 Line of Credit.
Uses of Liquidity and Capital Resources
Investments. We used approximately $166.6 million and $122.7 million of cash to purchase portfolio company investments during the nine months ended September 30, 2025 and 2024, respectively.
Operating Activities. We generated operating cash flows (excluding amounts related to investment activity) of approximately $8.9 million and $16.9 million during the nine months ended September 30, 2025 and 2024, respectively.
Distributions. We paid distributions to our shareholders of approximately $15.7 million and $14.6 million (which excludes distributions reinvested of approximately $16.0 million and $13.1 million, respectively) during the nine months ended September 30, 2025 and 2024, respectively. See "Distributions Declared" below for additional information.
Share Repurchases. We paid approximately $48.9 million and $34.8 million during the nine months ended September 30, 2025 and 2024, respectively, to repurchase shares in accordance with our Share Repurchase Program.
Deferred Financing Costs.We paid approximately $0.1 million and $0.2 million in deferred financing costs during the nine months ended September 30, 2025 and 2024, respectively.
Reimbursement of Expense Support. During the nine months ended September 30, 2024, we reimbursed the Manager and Sub-Manager approximately $0.6 million for Expense Support received in previous years accrued as of December 31, 2023. Expense Support is received or Expense Support reimbursement is paid annually. No expense support was reimbursed to the Manager and Sub-Manager during the nine months ended September 30, 2025.
As of September 30, 2025, there is approximately less than $0.1 million unreimbursed Expense Support under the terms of the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements will automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement. See Note 5. "Related Party Transactions" of Item 1. "Financial Statements" for additional information.
Distributions Declared
The Company's board of directors declared distributions on a monthly basis during the nine months ended September 30, 2025 and 2024 (nine record dates). The following table reflects the total distributions declared during the nine months ended September 30, 2025 and 2024 (in thousands except per share data):
Nine Months Ended September 30,
2025 2024
Distribution Period
Distributions Declared(1)
Distributions Reinvested(2)
Cash Distributions Net of Distributions Reinvested (2)
Distributions Declared(1)(2)
Distributions Reinvested (2)
Cash Distributions Net of Distributions Reinvested (2)
First Quarter $ 10,372 $ 5,175 $ 5,197 $ 8,807 $ 4,056 $ 4,751
Second Quarter 10,547 5,335 5,212 9,214 4,344 4,870
Third Quarter 10,813 5,519 5,294 9,676 4,693 4,983
$ 31,732 $ 16,029 $ 15,703 $ 27,697 $ 13,093 $ 14,604
FOOTNOTES:
(1) Monthly distributions declared per share for each share class were as follows:
Record Date Period Class FA Class A Class T Class D Class I Class S
January 1, 2025 - September 30, 2025
$ 0.104167 $ 0.104167 $ 0.083333 $ 0.093750 $ 0.104167 $ 0.104167
January 1, 2024 - September 30, 2024
0.104167 0.104167 0.083333 0.093750 0.104167 0.104167
(2) Amounts based on distribution record date.
Cash distributions declared net of distributions reinvested were funded from the following sources noted below (in thousands):
Nine Months Ended September 30,
2025 2024
Amount
Percentage(1)
Amount
Percentage(1)
Net investment income before Expense Support (reimbursement) $ 13,453 85.7 % $ 17,618 120.6 %
Expense Support (reimbursement) 1,017 6.5 - -
Net investment income $ 14,470 92.2 % $ 17,618 120.6 %
Net realized gains 1,432 9.1 - -
Cash distributions declared, net of distributions reinvested(2)
$ 15,703 100.0 % $ 14,604 100.0 %
FOOTNOTES:
(1) Represents percentage of cash distributions declared, net of distribution reinvested for the period presented.
(2) Excludes $16,029 and $13,093 of distributions reinvested pursuant to our distribution reinvestment plan during the nine months ended September 30, 2025 and 2024, respectively.
Distribution amounts and sources of distributions declared vary among share classes. We calculate each shareholder's specific distribution amount for the period using record and declaration dates. Distributions are declared on all classes of our shares at the same time. Amounts distributed to each class are allocated among the holders of our shares in such class in proportion to their shares. Distributions on the Non-founder shares may be lower than distributions on Founder shares because we are required to pay higher management and total return incentive fees to the Manager and the Sub-Manager with respect to the Non-founder shares. Additionally, distributions on Class T and Class D shares are lower than distributions on Class FA, Class A, Class I and Class S shares because we are required to pay ongoing distribution and shareholder servicing fees with respect to Class T and Class D shares. There is no assurance that we will pay distributions in any particular amount, if at all.
See Note 6. "Distributions" in Item 1. "Financial Statements" for additional disclosures regarding distributions.
Distribution Reinvestment Plan
We have adopted a distribution reinvestment plan pursuant to which shareholders who purchase shares in the Public Offerings have their cash distributions automatically reinvested in additional shares having the same class designation as the class of shares to which such distributions are attributable, unless such shareholders elect to receive distributions in cash, are residents of Opt-In States, or are clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan. Opt-In States include Alabama, Arkansas, California, Idaho, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Tennessee, Vermont and Washington. Shareholders who are residents of Opt-In States, holders of Class FA shares and clients of certain participating broker-dealers that do not permit automatic enrollment in our distribution reinvestment plan automatically receive their distributions in cash unless they elect to have their cash distributions reinvested in additional shares. Cash distributions paid on Class FA shares are reinvested in additional Class A shares. Class S shares do not participate in the distribution reinvestment plan.
The purchase price for shares purchased under our distribution reinvestment plan is equal to the most recently determined and published net asset value per share of the applicable class of shares. Because the distribution and shareholder servicing fee is calculated based on net asset value, it reduces net asset value and/or distributions with respect to Class T shares and Class D shares, including shares issued under the distribution reinvestment plan with respect to such share classes. To the extent newly issued shares are purchased from us under the distribution reinvestment plan or shareholders elect to reinvest their cash distribution in our shares, we retain and/or receive additional funds for acquisitions and general purposes including the repurchase of shares under the Share Repurchase Program.
We do not pay selling commissions or dealer manager fees on shares sold pursuant to our distribution reinvestment plan. However, the amount of the distribution and shareholder servicing fee payable with respect to Class T or Class D shares, respectively, sold in the Public Offerings is allocated among all Class T or Class D shares, respectively, including those sold under our distribution reinvestment plan and those received as distributions.
Our shareholders will be taxed on their allocable share of income, even if their distributions are reinvested in additional shares of our common shares and even if no distributions are made.
Share Repurchase Program
We adopted the Share Repurchase Program effective March 2019, as amended, pursuant to which we conduct quarterly share repurchases to allow our shareholders to sell all or a portion of their shares (at least 5% of his or her shares) back to us at a price equal to the net asset value per share of the month immediately prior to the repurchase date. Beginning with our repurchase date on June 30, 2025 and thereafter, a shareholder's repurchase request must be received by the repurchase agent on or before the date which is (60) days prior to the date the Shares are redeemed. The repurchase date is generally the last business day of the month of a calendar quarter end. We are not obligated to repurchase shares under the Share Repurchase Program. If we determine to repurchase shares, the Share Repurchase Program also limits the total amount of aggregate repurchases of Class FA, Class A, Class T, Class D, Class I and Class S shares to up to 2.5% of our aggregate net asset value per calendar quarter (based on the aggregate net asset value as of the last date of the month immediately prior to the repurchase date) and up to 10% of our aggregate net asset value per year (based on the average aggregate net asset value as of the end of each of our trailing four quarters). The Share Repurchase Program also includes certain restrictions on the timing, amount and terms of our repurchases intended to ensure our ability to qualify as a partnership for U.S. federal income tax purposes.
Our board of directors has the right to amend or suspend the Share Repurchase Program to the extent it determines that it is in our best interest to do so, such as when repurchase requests would place an undue burden on our liquidity, adversely affect our operations, risk having an adverse impact on us that would outweigh the benefit of repurchasing our shares or risk our ability to qualify as a partnership for U.S. federal income tax purposes, upon 30 days' prior notice to our shareholders. Once the Share Repurchase Program is suspended, the Share Repurchase Program requires that we consider the recommencement of the plan at least quarterly. Continued suspension of the Share Repurchase Program would only be permitted under the plan if our board of directors determines that the continued suspension of the Share Repurchase Program is in our best interest and the best interest of our shareholders. Our board of directors must affirmatively authorize the recommencement of the plan before shareholder requests will be considered again. Our board of directors cannot terminate the Share Repurchase Program absent a liquidity event or where otherwise required by law. We may provide notice by including such information in a current report on Form 8-K or in our annual or quarterly reports, each of which are publicly filed with the SEC followed by a separate mailing to our investors. Moreover, the Share Repurchase Program will terminate, and we no longer will accept shares for repurchase, if and when our shares are listed on a national securities exchange, are included for quotation in a national securities market or, in the sole determination of our board of directors, a secondary trading market for the shares otherwise develops. All shares to be repurchased under the Share Repurchase Program must be (i) fully transferable and not be subject to any liens or other encumbrances and (ii) free from any restrictions on transfer. If we determine that a lien or other encumbrance or restriction exists against the shares requested to be repurchased, we will not repurchase any such shares.
The aggregate amount of funds under the Share Repurchase Program is determined on a quarterly basis at the sole discretion of our board of directors. At the sole discretion of our board of directors, we may use sources, including, but not limited to, offering proceeds and borrowings to repurchase shares.
To the extent that the number of shares submitted to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis, from among the requests for repurchase received by us based upon the total number of shares for which repurchase was requested and the order of priority described in the Share Repurchase Program. We may repurchase shares including fractional shares, computed to three decimal places. We have had no unfulfilled share repurchase requests ("Unfulfilled Repurchase Requests") under the Share Repurchase Program since inception.
Under the Share Repurchase Program, our ability to make new acquisitions of businesses or increase the current distribution rate may become limited if, over any two-year period, we experience repurchase demand in excess of capacity. If, during any consecutive two year period, we do not have at least one quarter in which we fully satisfy 100% of properly submitted repurchase requests, we will not make any new acquisitions of businesses (excluding short-term cash management investments under 90 days in duration) and we will use all available investable assets (as defined below) to satisfy repurchase requests (subject to the limitations under the Share Repurchase Program) until all Unfulfilled Repurchase Requests have been satisfied. Additionally, during such time as there remains any Unfulfilled Repurchase Requests outstanding from such period, the Manager and the Sub-Manager will defer their total return incentive fee until all such Unfulfilled Repurchase Requests have been satisfied. "Investable assets" includes net proceeds from new subscription agreements, unrestricted cash, proceeds from marketable securities, proceeds from the distribution reinvestment plan, and net cash flows after any payment, accrual, allocation, or liquidity reserves or other business costs in the normal course of owning, operating or selling our acquired businesses, debt service, repayment of debt, debt financing costs, current or anticipated debt covenants, funding commitments related to our businesses, customary general and administrative expenses, customary organizational and offering costs, asset management and advisory fees, performance or actions under existing contracts, obligations under our organizational documents or those of our subsidiaries, obligations imposed by law, regulations, courts or arbitration, or distributions or establishment of an adequate liquidity reserve as determined by our board of directors.
During the nine months ended September 30, 2025 and 2024, we received requests for the repurchase of approximately $46.2 million and $38.3 million, respectively, of our common shares. Our board of directors approved the repurchase requests received.
The following tables summarizes the shares repurchased during the nine months ended September 30, 2025 and 2024 (in thousands except per share data):
Shares Repurchased Total Consideration Average Price Paid
per Share
Class FA shares 146 $ 5,891 $ 40.32
Class A shares 146 5,342 36.66
Class T shares 57 2,081 36.75
Class D shares 125 4,491 35.90
Class I shares 749 27,844 37.13
Class S shares 13 527 41.12
Nine Months Ended September 30, 2025
1,236 $ 46,176 $ 37.35
Class FA shares 139 $ 5,199 $ 37.19
Class A shares 114 3,890 34.01
Class T shares 134 4,505 33.86
Class D shares 61 2,051 33.70
Class I shares 627 21,675 34.53
Class S shares 27 1,003 38.03
Nine Months Ended September 30, 2024
1,102 $ 38,323 $ 34.77
Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.
Through September 30, 2025, we had acquired equity and debt investments in 17 portfolio companies. As of September 30, 2025 and 2024, the fair value of our portfolio company investments totaled approximately $1.4 billion and $1.1 billion, respectively. See "Portfolio and Investment Activity" above for discussion of the general terms and characteristics of our investments, and for information regarding our portfolio companies.
The following table summarizes our operating results for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Total investment income $ 25,480 $ 19,678 $ 60,603 $ 51,753
Total operating expenses (17,373) (11,679) (47,075) (34,125)
Expense support (reimbursement), net (2,875) (353) 1,017 -
Net investment income before taxes 5,232 7,646 14,545 17,628
Income tax expense (28) (15) (75) (10)
Net investment income 5,204 7,631 14,470 17,618
Total net realized gain on investments 1,432 - 1,432 -
Total net change in unrealized appreciation on investments, including unrealized foreign currency gain (loss) 28,173 15,545 83,378 50,747
Net increase in net assets resulting from operations $ 34,809 $ 23,176 $ 99,280 $ 68,365
Investment Income
Investment income consisted of the following for the quarter and nine months ended September 30, 2025 and 2024 (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
From portfolio company investments:
Interest income $ 11,014 $ 10,333 $ 31,785 $ 30,221
PIK interest income 549 - 913 -
Dividend income 11,880 6,634 20,820 15,675
PIK dividend income 1,700 1,490 4,888 1,490
From U.S. Treasury bills and cash accounts
Interest and dividend income 337 1,221 2,197 4,367
Total investment income $ 25,480 $ 19,678 $ 60,603 $ 51,753
Interest income from portfolio company investments is generated from our senior secured note investments, the majority of which had fixed rate interest as of September 30, 2025 and 2024. As of September 30, 2025 and 2024, our weighted average annual yield on our accruing debt investments was 13.9% and 14.2%, respectively, based on amortized cost as defined above in "Portfolio and Investment Activity." Interest income from our debt investments was approximately $11.0 million and $10.3 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $31.8 million and $30.2 million during the nine months ended September 30, 2025 and 2024, respectively. The increase in interest income from portfolio company investments during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, is primarily attributable new debt investments made during July 2024, December 2024 and June 2025.
Dividend income from portfolio company investments is recorded on the record date for privately issued securities, but excludes any portion of distributions that are treated as a return of capital. Dividend income was approximately $11.9 million and $6.6 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $20.8 million and $15.7 million during the nine months ended September 30, 2025 and 2024, respectively. During each of the nine months ended September 30, 2025 and 2024, we received dividend income from twelve of our portfolio companies.
PIK dividend income from portfolio company investments is computed at the contractual rate specified in each applicable agreement and is accrued and recorded as dividend income and added to the principal balance of the respective preferred equity. PIK dividend income was approximately $1.7 million and $1.5 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $4.9 million and $1.5 million for the nine months ended September 30, 2025 and 2024, respectively.
PIK interest income from portfolio company investments is computed at the contractual rate specified in each applicable agreement and is accrued and recorded as interest income and added to the principal balance of the respective PIK Note. PIK interest income was approximately $0.5 million and $0.9 million for the quarter and nine months ended September 30, 2025, respectively. No PIK interest income was recognized for the quarter and nine months ended September 30, 2024.
The decrease in interest income from cash and cash equivalents is a result of a modest decrease in the average investment yield and a decrease in the average investment balance driven by the net dollars raised in Public Offerings offset by higher deal volume during the second half of 2024 and the first half of 2025.
We do not believe that our interest income, dividend income and total investment income are representative of either our stabilized performance or our future performance. We expect investment income to increase in future periods as we increase our base of assets that we expect to acquire from existing cash, borrowings and an expected increase in capital available for investment using proceeds from the Public Offerings.
Operating Expenses
Our operating expenses for the quarter and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Total return incentive fees $ 8,423 $ 5,174 $ 21,890 $ 14,932
Base management fees 6,420 4,802 17,490 13,028
Offering expenses 494 338 1,644 879
Professional services 873 851 2,361 2,435
Pursuit costs 220 (159) 911 843
Distribution and shareholder servicing fees 495 334 1,483 971
Custodian and accounting fees 143 127 439 394
Insurance expense 56 56 166 159
Director fees and expenses 49 52 152 159
General and administrative expenses 26 44 209 176
Interest expense 174 60 330 149
Total operating expenses 17,373 11,679 47,075 34,125
Expense support 2,875 353 (1,017) -
Net expenses $ 20,248 $ 12,032 $ 46,058 $ 34,125
We consider the following expense categories to be relatively fixed in the near term: insurance expenses and director fees and expenses. Variable operating expenses include total return incentive fees, base management fees, offering expenses, professional services, distribution and shareholder servicing fees, custodian and accounting fees, general and administrative expenses, interest expense and pursuit costs. We expect these variable operating expenses to increase in connection with the growth in our asset base (base management fees, total return incentive fees, accounting fees and general and administrative expenses), the number of shareholders and open accounts (professional services, distribution and shareholder servicing fees and custodian and accounting fees), and/or the complexity of our investment processes and capital structure (professional services and interest expense).
Total Return Incentive Fee
The Manager and Sub-Manager are eligible to receive incentive fees based on the Total Return to Shareholders, as defined in the Management Agreement and Sub-Management Agreement, for each share class in any calendar year, payable annually in arrears. We accrue (but do not pay) the total return incentive fee on a monthly basis, to the extent that it is earned on an annual basis. We perform a final reconciliation of the total return incentive fee calculation at completion of each calendar year. The total return incentive fee is due and payable to the Manager and Sub-Manager no later than ninety (90) calendar days following the end of the applicable calendar year. The total return incentive fee may be reduced or deferred by the Manager and the Sub-Manager under the Management Agreement and the Expense Support and Conditional Reimbursement Agreement.
We recorded total return incentive fees of approximately $8.4 million and $5.2 million for the quarters ended September 30, 2025 and 2024, respectively and approximately $21.9 million and $14.9 million during the nine months ended September 30, 2025 and 2024, respectively. The increase in total return incentive fees during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, is primarily due to an increase of $32.6 million in the net change in unrealized appreciation on investments, including foreign currency gain (loss) offset by a decrease of $3.0 million in net investment income, taken over a larger Average Adjusted Capital during the quarter and nine months ended September 30, 2025, as compared to the quarter and nine months ended September 30, 2024.
Base Management Fee
Our base management fee is calculated for each share class at an annual rate of (i) for the Non-founder shares, 2% of the product of (x) our average gross assets and (y) the ratio of Non-founder share Average Adjusted Capital for a particular class to total Average Adjusted Capital and (ii) for the Founder shares, 1% of the product of (x) our average gross assets and (y) the ratio of outstanding Founder share Average Adjusted Capital to total Average Adjusted Capital, in each case excluding cash, and is payable monthly in arrears.
We incurred base management fees of approximately $6.4 million and $4.8 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $17.5 million and $13.0 million during the nine months ended September 30, 2025 and 2024, respectively. The increase in base management fees is primarily attributable to the increase in our average gross assets (excluding cash) which were approximately $1.3 billion and $948.2 million during the nine months ended September 30, 2025 and 2024, respectively.
Offering Expenses
Offering expenses, which consist of amounts incurred for items such as legal, accounting, regulatory and printing work incurred related to the Public Offerings, are capitalized on our condensed consolidated statements of assets and liabilities as deferred offering expenses and expensed to our condensed consolidated statements of operations over the lesser of the offering period or 12 months; however, the end of the deferral period will not exceed 12 months from the date the offering expense is incurred by the Manager and the Sub-Manager.
We expensed offering expenses of approximately $0.5 million and $0.3 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $1.6 million and $0.9 million during the nine months ended September 30, 2025 and 2024, respectively. The increase is due to higher incurred offering expenses by the Manager during the quarter and nine months ended September 30, 2025.
Pursuit Costs
Pursuit costs relate to transactional expenses incurred to identify, evaluate and negotiate acquisitions that ultimately were not consummated. We incurred pursuit costs of approximately $0.2 million and $(0.2) million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $0.9 million and $0.8 million during the nine months ended September 30, 2025 and 2024, respectively.
Distribution and Shareholder Servicing Fee
The Managing Dealer is eligible to receive a distribution and shareholder servicing fee, subject to certain limits, with respect to our Class T and Class D shares sold in the Public Offerings (excluding Class T shares and Class D shares sold through our distribution reinvestment plan and those received as share distributions) in an amount equal to 1.00% and 0.50%, respectively, of the current net asset value per share.
We incurred distribution and shareholder servicing fees of approximately $0.5 million and $0.3 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $1.5 million and $1.0 million during the nine months ended September 30, 2025 and 2024.
Other Operating Expenses
Other operating expenses (consisting of professional services, insurance expense, interest expense, custodian and accounting fees, director fees and expenses, and general and administrative expenses) were approximately $1.3 million and $1.2 million for the quarters ended September 30, 2025 and 2024, respectively, and approximately $3.7 million and $3.5 million during the nine months ended September 30, 2025 and 2024, respectively.
Expense Support (Reimbursement)
We have entered into an Expense Support and Conditional Reimbursement Agreement with the Manager and the Sub-Manager, pursuant to which each of the Manager and the Sub-Manager agrees to reduce the payment of base management fees, total return incentive fees and the reimbursements of reimbursable expenses due to the Manager and the Sub-Manager under the Management Agreement and the Sub-Management Agreement, as applicable, to the extent that our annual regular cash distributions exceed our annual net income (with certain adjustments). Expense Support is equal to the annual (calendar year) excess, if any, of (a) the distributions (as defined in the Expense Support and Conditional Reimbursement Agreement) declared and paid (net of our distribution reinvestment plan) to shareholders minus (b) the available operating funds (the "Expense Support"). The Expense Support amount is borne equally by the Manager and the Sub-Manager and is calculated as of the last business day of the calendar year. The Manager and Sub-Manager equally conditionally reduce the payment of fees and reimbursements of reimbursable expenses in an amount equal to the conditional waiver amount (as defined in and subject to limitations described in the Expense Support and Conditional Reimbursement Agreement). The term of the Expense Support and Conditional Reimbursement Agreement has the same initial term and renewal terms as the Management Agreement or the Sub-Management Agreement, as applicable to the Manager or the Sub-Manager.
If, on the last business day of the calendar year, the annual (calendar year) year-to-date available operating funds exceeds the sum of the annual (calendar year) year-to-date distributions paid per share class (the "Excess Operating Funds"), we will use such Excess Operating Funds to pay the Manager and the Sub-Manager all or a portion of the outstanding unreimbursed Expense Support amounts for each share class, as applicable, subject to the Conditional Reimbursements as described further in the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements shall automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement.
Since inception, we have received cumulative Expense Support of approximately $5.1 million. During the quarter and nine months ended September 30, 2024, we reimbursed the Manager and Sub-Manager approximately $0.6 million for Expense Support received in previous years accrued as of December 31, 2023. Expense Support is received or Expense Support reimbursement is paid annually. No expense support was reimbursed to the Manager and Sub-Manager during the quarter and nine months ended September 30, 2025.
As of September 30, 2025, there is approximately less than $0.1 million unreimbursed Expense Support under the terms of the Expense Support and Conditional Reimbursement Agreement. Our obligation to make Conditional Reimbursements will automatically terminate and be of no further effect three years following the date which the Expense Support amount was provided and to which such Conditional Reimbursement relates, as described further in the Expense Support and Conditional Reimbursement Agreement. See Note 5. "Related Party Transactions" of Item 1. "Financial Statements" for additional information.
Additionally, the Company accrued expense support due from the Manager and Sub-Manager of approximately $1.0 million, related to Class I shares, during the nine months ended September 30, 2025. The Company did not accrue any expense support due from the Manager and Sub-Manager during the nine months ended September 30, 2024. Although the Company covered 100% of cash distributions from net investment income and realized gains, the increase in expense support accrued during the nine months ended September 30, 2025, as compared to September 30, 2024, is primarily attributable to the increase of certain Class I class-specific expenses.
The actual amount of Expense Support or Expense Support Reimbursement is determined as of the last business day of each calendar year and is paid within 90 days after each year end per the terms of the Expense Support and Conditional Reimbursement Agreement described above. See Note 5. "Related Party Transactions" of Item 1. "Financial Statements" for additional information.
Other Expenses and Changes in Net Assets
Net Change in Unrealized Appreciation on Portfolio Company Investments
Unrealized appreciation on portfolio company investments is based on the current fair value of our investments as determined by our board of directors based on inputs from the Sub-Manager and our independent valuation firm and consistent with our valuation policy, which take into consideration, among other factors, actual results of our portfolio companies in comparison to budgeted results for the year, future growth prospects, and the valuations of publicly traded and private comparable companies as determined by our independent valuation firm.
During the quarter and nine months ended September 30, 2025, we recognized a net change in unrealized appreciation on our portfolio company investments of approximately $31.7 million and $91.9 million, respectively. The net change in unrealized appreciation on portfolio company investments included gross unrealized appreciation on eleven portfolio companies of approximately $106.4 million, offset partially by gross unrealized depreciation on four portfolio companies of approximately $11.0 million during the nine months ended September 30, 2025. Two portfolio company investments have remained flat due to the recency of their acquisitions. Gross unrealized appreciation was due to EBITDA growth, accretive add-on acquisitions, multiple expansion in certain of our portfolio companies and unrealized foreign currency gain.Gross unrealized depreciation was primarily driven by EBITDA declines and multiple compression. Additionally, deferred taxes on unrealized appreciation of portfolio company investments offset unrealized appreciation on portfolio company investments by approximately $3.5 million and $8.5 million during the quarter and nine months ended September 30, 2025, respectively.
During the quarter and nine months ended September 30, 2024, we recognized a net change in unrealized appreciation on portfolio company investments of approximately $16.8 million and $53.3 million, respectively. The net change in unrealized appreciation on portfolio company investments included gross unrealized appreciation on eleven portfolio companies of approximately $64.3 million, offset partially by gross unrealized depreciation on four portfolio companies of approximately $11.0 million during the nine months ended September 30, 2024. One portfolio company investment has remained flat. Gross unrealized appreciation was primarily due to EBITDA growth and accretive add-on acquisitions. Gross unrealized depreciation was primarily driven by EBITDA declines. Additionally, deferred taxes on unrealized appreciation of portfolio company investments offset unrealized appreciation on portfolio company investments by approximately $1.3 and $2.6 million during the quarter and nine months ended September 30, 2024, respectively.
Net Assets
During the quarter and nine months ended September 30, 2025 and 2024, the net increase in net assets consisted of the following (in thousands):
Quarter Ended
September 30, 		Nine Months Ended
September 30,
2025 2024 2025 2024
Operations $ 34,809 $ 23,176 $ 99,280 $ 68,365
Distributions to shareholders (10,813) (9,676) (31,732) (27,697)
Capital transactions 27,199 54,111 72,331 143,903
Net increase in net assets $ 51,195 $ 67,611 $ 139,879 $ 184,571
Operations increased by approximately $11.6 million and $30.9 million, during the quarter and nine months ended September 30, 2025, respectively, as compared to the quarter and nine months ended September 30, 2024. The increase in operations for the quarter and nine months ended September 30, 2025, as compared to the quarter and nine months ended September 30, 2024, is primarily due to an increase in the net change in unrealized appreciation on investments of approximately $14.1 million and $34.1 million, respectively, and offset by a decrease in net investment income of approximately $2.4 million and $3.1 million, respectively.
Distributions increased approximately $1.1 million and $4.0 million, during the quarter and nine months ended September 30, 2025, respectively, as compared to the quarter and nine months ended September 30, 2024, primarily as a result of an increase in shares outstanding.
Capital transactions decreased by approximately $26.9 million and $71.6 million, during the quarter and nine months ended September 30, 2025, respectively, as compared to the quarter and nine months ended September 30, 2024. The decrease in capital transactions for the quarter and nine months ended September 30, 2025, as compared to the quarter and nine months ended September 30, 2024, is primarily due to a decrease in net proceeds received through the Public Offerings (including proceeds received through our distribution reinvestment plan) of approximately $22.3 million and $63.7 million, respectively, and an increase in share repurchases of approximately $4.7 million and $7.9 million, respectively.
Total Returns
The following table illustrates year-to-date return ("YTD Return"), trailing 12 months return ("1-Year Return"), trailing 36 months return ("3-year Return"), trailing 60 months return ("5-Year Return") and Annualized Return Since Inception, and cumulative total returns through September 30, 2025 ("Cumulative Total Return"), with and without upfront sales load, as applicable:
YTD Return(1)
1-Year Return(2)
3-Year Return(3)
5-Year Return(4)
Annualized Return Since Inception(5)
Cumulative
Total Return(5)
Cumulative Total Return Period
Class FA (no sales load) 8.6 % 12.6 % 35.0 % 72.7 % 11.1 % 123.1 % Feb. 7, 2018 - Sep. 30, 2025
Class FA (with sales load) 1.5 % 5.3 % 26.3 % 61.4 % 10.1 % 108.6 % Feb. 7, 2018 - Sep. 30, 2025
Class A (no sales load) 7.9 % 11.7 % 31.2 % 62.9 % 10.0 % 104.4 % Apr. 10, 2018 - Sep. 30, 2025
Class A (with sales load) (1.3) % 2.2 % 20.0 % 49.0 % 8.7 % 87.0 % Apr. 10, 2018 - Sep. 30, 2025
Class I 7.8 % 11.4 % 30.8 % 62.8 % 10.1 % 106.0 % Apr. 10, 2018 - Sep. 30, 2025
Class T (no sales load) 7.1 % 10.6 % 28.1 % 56.7 % 9.1 % 89.7 % May 25, 2018 - Sep. 30, 2025
Class T (with sales load) 2.0 % 5.3 % 22.0 % 49.3 % 8.4 % 80.7 % May 25, 2018 - Sep. 30, 2025
Class D 7.6 % 11.3 % 30.3 % 61.7 % 9.5 % 93.5 % June 26, 2018 - Sep. 30, 2025
Class S (no sales load) 8.6 % 12.6 % 35.5 % 74.6 % 12.2 % 88.4 % Mar. 31, 2020 - Sep. 30, 2025
Class S (with sales load) 4.8 % 8.7 % 30.8 % 68.5 % 11.5 % 81.8 % Mar. 31, 2020 - Sep. 30, 2025
FOOTNOTES:
(1) For the period from January 1, 2025 to September 30, 2025.
(2) For the period from October 1, 2024 to September 30, 2025.
(3) For the period from October 1, 2022 to September 30, 2025.
(4) For the period from October 1, 2020 to September 30, 2025.
(5) For the period from the date the first share was issued for each respective share class through September 30, 2025. The Annualized Return Since Inception captures the average annual performance over the return period. It is calculated as a geometric average, meaning it captures the effects of compounding over time.
We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our investments, other than those described above and the risk factors identified in Item 1A in Part I of our Form 10-K for the year ended December 31, 2024 and this Quarterly Report, including the negative impacts from recent geopolitical events.
Our shares are illiquid investments for which there currently is no secondary market. Investors should not expect to be able to resell their shares regardless of how we perform. If investors are able to sell their shares, they will likely receive less than their purchase price. Our net asset value and total returns - which are based in part upon determinations of fair value of Level 3 investments by our board of directors, not active market quotations - are inherently uncertain. Past performance is not a guarantee of future results. Current performance may be higher or lower than the performance data reported above.
Hedging Activities
As of September 30, 2025, we had not entered into any derivatives or other financial instruments. With respect to any potential financings, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. We may seek to stabilize our financing costs as well as any potential decline in our assets by entering into derivatives, swaps or other financial products in an attempt to hedge our interest rate risk. In the event we pursue any assets outside of the United States we may have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We may in the future, enter into derivatives or other financial instruments in an attempt to hedge any such foreign currency exchange risk. It is difficult to predict the impact hedging activities may have on our results of operations.
Seasonality
We do not anticipate that seasonality will have a significant effect on our results of operations.
Critical Accounting Policies and Use of Estimates
See our Form 10-K for the year ended December 31, 2024 and Note 2. "Significant Accounting Policies" of Part I of this Quarterly Report for a summary of our critical accounting policies.
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