Financial Data and Key Metrics Changes - In Q2 2025, the company generated net investment income of $0.62 per share and adjusted net investment income of $0.60 per share, compared to public guidance of approximately $0.64 and $0.62 per share respectively [9] - The net asset value (NAV) per share declined by 6.2% from $23.37 to $21.93 during the quarter [9] - Total investment income was $398 million for the second quarter, a decrease of $2 million compared to the first quarter [25] - Total expenses increased to $225 million during the second quarter, up by $12 million compared to the first quarter [26] Business Line Data and Key Metrics Changes - The company originated $3.4 billion of investments in 2025, with $1.4 billion originated in Q2 [10] - Approximately 72% of new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships [21] - New investments consisted of approximately 83% in first lien loans, 5% in subordinated debt, and 12% in asset-based finance investments [21] Market Data and Key Metrics Changes - Global M&A volume is down close to 10% year over year, but the company evaluated more opportunities in Q2 than in any of the previous eight quarters [13] - The company estimates that direct tariff exposure has declined to the low to mid-single digit range [14] Company Strategy and Development Direction - The company continues to focus on upper middle market companies with EBITDA in the $50 million to $150 million range across diverse industries [21] - The distribution strategy for 2025 is designed to provide shareholders with additional distributions from accumulated spillover income, with a total expected distribution of $2.80 per share [11] - The company plans to provide additional details regarding its 2026 dividend strategy in the third quarter earnings call [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant work needed regarding four companies that were placed on non-accrual status [31] - There is cautious optimism for an increase in M&A activity later this year and into next year [13] - The company remains focused on maintaining strong liquidity to support funding needs, ending the quarter with $3.1 billion of availability [11] Other Important Information - Non-accruals represented 5.3% of the portfolio on a cost basis and 3% on a fair value basis as of the end of Q2 [22] - The weighted average yield on accruing debt investments was 10.6% as of June 30, a decrease of 20 basis points compared to the previous quarter [25] Q&A Session Summary Question: What are you seeing in terms of originations in the second half? - Management noted that there has been increased activity and deal count, with more deals evaluated in Q2 than in the prior eight quarters [34][35] Question: Are there any other companies on your watch list? - Management indicated that approximately 7% of the portfolio is in risk ratings that are concerning, with some names showing positive momentum [39] Question: Can you provide insight into the joint venture's earnings situation? - The anticipated dividend from the joint venture for Q3 is lower due to timing issues with certain dividends [44][45] Question: What is the company's view on buybacks? - Management stated that buybacks will be balanced with market opportunities and target leverage ratios [49] Question: How many troubled assets are currently being monitored? - Management confirmed that the workout team is actively engaged with companies on the watch list, with a focus on maximizing outcomes [56] Question: What is the outlook for the dividend policy? - Management indicated that the dividend policy will be tied to net investment income and will consider market conditions [76][95]

Core Viewpoint - Small-cap stocks are experiencing significant growth, with the Russell 2000 Index rising nearly 9% in July 2025, outperforming larger indices like the S&P 500 and Nasdaq Composite [1] Group 1: Market Dynamics - Renewed expectations for Federal Reserve rate cuts due to cooling inflation and a slowing job market are driving small-cap stock performance, as lower rates reduce borrowing costs for these companies [3] - Small-cap stocks are trading at a substantial discount of approximately 55% compared to large-cap stocks based on P/E ratios, prompting institutional investors to shift their focus towards under-owned small-cap areas [4] - A rebound is observed in small-cap companies within the financials, industrials, and consumer discretionary sectors, which collectively represent over 50% of the Russell 2000, particularly benefiting regional banks and manufacturing stocks [5] Group 2: M&A Activity and Investor Sentiment - Increased M&A activity is noted among small and mid-sized firms in healthcare, biotech, and tech services, as large-cap companies seek growth through acquisitions, making small-caps attractive targets [6] - Retail investors are returning to small-cap stocks as recession fears diminish, with trading volumes in small-cap names and ETFs rising due to social media influence and AI-driven trading strategies [7] Group 3: Leading ETFs - Avantis U.S. Small Cap Equity ETF (AVSC) has increased by 10.1%, focusing on a diverse group of 1,287 small-cap stocks, with $1.7 billion in assets under management [9] - Invesco S&P SmallCap Value with Momentum ETF (XSVM) is up 9.5%, tracking high momentum value stocks with a focus on financials, holding 122 stocks and $574.1 million in assets [10] - JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) has risen by 9.4%, providing exposure to 749 small-cap stocks with $566.5 million in assets [11] - iShares US Small Cap Value Factor ETF (SVAL) is up 9%, focusing on 250 small-cap companies with a significant portion in financials, holding $140.8 million in assets [12] - WisdomTree U.S. SmallCap Fund (EES) has increased by 8.7%, targeting 901 small-cap companies with $606.9 million in assets [13]

Summary of PotlatchDeltic (PCH) 2025 Conference Call Company Overview - **Company**: PotlatchDeltic (PCH) - **Date**: June 04, 2025 - **Focus**: Timberland and real estate operations Key Points Industry Dynamics - **Demand and Supply**: An increase in demand or a reduction in supply, particularly from Canada, is expected to create price tension in the timber market. The lack of expansion among competitors is viewed positively for future pricing [1] - **M&A Activity**: The timberland M&A market has been muted, but high-quality transactions are achieving strong pricing. There is a disconnect between public market perceptions and private market valuations of timber [3][4] - **Timberland Valuation**: Strong pricing has been observed for timberland values, with the company focusing on acquisitions that exceed their cost of capital [5][6] Financial Strategies - **Capital Allocation**: The company has prioritized share repurchases over aggressive timberland acquisitions, indicating a strategic approach to capital allocation [5][9] - **Recent Transactions**: The company sold 34,000 acres for over $58 million, demonstrating the ability to capitalize on market disconnects [6][7] Natural Climate Solutions - **Solar Opportunities**: The company has 38,000 acres under solar option contracts, with a net present value of approximately $475 million. This represents a significant opportunity compared to traditional timberland operations [10][11] - **Growth Potential**: The company anticipates increasing solar option acreage to over 45,000 acres, with potential for up to 75,000 acres suitable for solar development [12] Regulatory Challenges - **Project Delays**: The primary challenge for solar project development is navigating regulatory processes and obtaining interconnection agreements with utilities [16] Lithium Extraction - **Lithium Deposits**: The company is exploring lithium extraction in Arkansas, specifically in the Smackover formation, which is known for its significant lithium deposits. The extraction will be conducted by independent parties, allowing the company to earn royalties while maintaining timberland management [17][18] - **Lease Agreements**: The company has signed its first lease agreement for lithium extraction and expects to sign additional leases in the future [19] Real Estate Market - **Chenal Valley Development**: The real estate segment in Chenal Valley is performing comparably to previous years, with healthy demand for lots. The market is experiencing a bifurcation, with higher-end lots moving faster than lower-end lots [29][30] - **Rural Land Demand**: There is a notable increase in demand for rural land, driven by various factors including investment diversification and recreational use. The company expects to exceed its guidance for rural land sales due to strong pricing [31][32] Additional Insights - **Market Trends**: The demand for energy, particularly solar, is expected to grow, aligning with national trends towards energy independence [14] - **Regulatory Environment**: The company is closely monitoring the regulatory landscape regarding renewable energy incentives, which could impact future projects [12][13] This summary encapsulates the key discussions and insights from the PotlatchDeltic conference call, highlighting the company's strategic focus on timberland management, renewable energy opportunities, and real estate development.

Financial Data and Key Metrics Changes - The company reported total portfolio investments of nearly $18 billion and total net assets of nearly $8 billion, with total outstanding debt of approximately $10 billion [16] - The first quarter NAV per share was $15.14, down $0.12 from the last quarter, primarily due to changes in credit spreads and write-downs on a small number of high-focus investments [16] - Adjusted net investment income was $0.39 per share, down $0.08 from the prior quarter, reflecting a reduction in one-time income [16][17] - The company declared a supplemental dividend of $0.01 and a base dividend of $0.37 for the second quarter, indicating a 106% dividend coverage [18][19] Business Line Data and Key Metrics Changes - New investment commitments totaled $1.2 billion, with fundings of $800 million, excluding joint venture and strategic equity activity [7] - Over 90% of first-quarter direct loan originations were first lien investments, increasing from 73% to 77% of the portfolio over the last year [8][9] - The median EBITDA of portfolio borrowers grew slightly to $120 million, while weighted average EBITDA increased to $215 million [9] - The non-accrual rate was 0.8% at fair value and 1.4% at cost, compared to 0.41% and 0.9% in the prior quarter [11] Market Data and Key Metrics Changes - The company noted a slowdown in M&A activity due to recent policy shifts and uncertainty around tariffs, impacting deal flow [7][32] - The public loan market experienced volatility, but private credit spreads remained stable, with some market participants noting a 25 to 50 basis points widening [34][81] - The company highlighted that the majority of deal flow in the first quarter came from existing borrowers, with more than half being add-ons and refinancings [93] Company Strategy and Development Direction - The company aims to capitalize on market volatility by providing support to borrowers and sponsors facing challenges in accessing financing [23] - The strategy remains focused on credit quality, with an emphasis on upper middle market companies and diversified portfolios [84] - The company is exploring opportunities to rationalize liabilities inherited from the merger to lower costs [50][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience and the ability to maintain dividend levels despite macroeconomic uncertainties [25] - The company is closely monitoring investments for potential tariff impacts but remains confident in its defensive positioning [13] - Management indicated that while macroeconomic uncertainty persists, the market anticipates a significant reduction in interest rates, which will impact earnings [24] Other Important Information - The company ended the quarter with over $3 billion in total cash and capacity on its facilities, providing ample liquidity to meet near-term funding needs [21] - The company has visibility into several large repayments expected in the near term, which will help optimize its capital structure [20] Q&A Session Summary Question: Perspective on macro developments and M&A activity - Management noted that the M&A environment remains muted due to uncertainty around tariffs, impacting deal flow and spreads [32][34] Question: Timeline for public listing of OTF - Management stated there is nothing specific to disclose regarding the public listing of OTF at this time [38][39] Question: Share repurchase strategy - Management confirmed that share repurchase programs are regularly evaluated, but recent volatility did not coincide with open windows for repurchases [44][46] Question: Opportunities in inherited liabilities - Management indicated that there are opportunities to rationalize inherited liabilities at lower costs, with steps already taken to reprice certain facilities [50][72] Question: Probability of near-term recession - Management acknowledged the need for caution in underwriting due to potential economic changes but noted that the portfolio companies are currently not showing signs of economic weakness [56][58] Question: Incremental thoughts on non-traditional lending strategies - Management expressed interest in increasing exposure to diversified lending strategies, aiming to grow this segment over time [62][66] Question: Spillover income and dividend sustainability - Management clarified that spillover income is intended to sustain dividends during periods of volatility but will not be used to cover long-term income shortfalls [88][89] Question: Pipeline mix of new versus incumbent borrowers - Management reported that more than half of the deal flow in the first quarter came from existing borrowers, with a consistent pipeline expected for the second quarter [93][95]

Financial Data and Key Metrics Changes - The company reported Q1 2025 revenue of $1.6 billion, an increase of 8%, and cash EPS of $4.51, up 10% [8][24] - Organic revenue growth for the quarter was 9%, with vehicle payments growing 8% and corporate payments growing 19% [9][25] - Retention rate remained steady at 92%, with new bookings up 35% year-over-year [10][24] Business Line Data and Key Metrics Changes - Corporate Payments revenue increased 19% organically, driven by solid spend volumes [25] - Cross border sales grew 51% year-over-year, with revenue increasing 18% organically [25] - Vehicle payments revenue grew 8% organically, with significant growth in Brazil [29] Market Data and Key Metrics Changes - The company expects tariff impacts to be modest, with an estimated unfavorable impact of $10 million to $15 million on cross border revenue [28] - U.S. Vehicle payments revenue growth was down 3% organically, but improvements in customer application approvals and retention were noted [30][72] Company Strategy and Development Direction - The company is focused on expanding its corporate payments business through recent acquisitions, including a partnership with Mastercard and a minority investment in Avid [15][16] - The company aims to enhance its position in the corporate payments space and is exploring additional acquisition targets [18][19] - A major push into the institutional client segment for cross border services is underway [21] Management's Comments on Operating Environment and Future Outlook - The management maintains a full-year 2025 guidance of $4.42 billion in revenue and $21 in cash EPS, reflecting confidence in the business despite macro uncertainties [12][40] - The company is not seeing any meaningful change in customer behavior due to economic uncertainties as of April [40] - Management expressed optimism about the performance of the hedging business, benefiting from market volatility [95] Other Important Information - The company completed the acquisition of Gringo in March, which had an immaterial impact on revenue and adjusted EPS [24] - Operating expenses increased by 8% year-over-year, influenced by recent acquisitions and higher transaction volumes [33] Q&A Session Summary Question: Confidence in Mastercard partnership for incremental revenue growth - Management expressed confidence that the partnership with Mastercard will create significant opportunities, especially with Tier two and Tier three banks [44][46] Question: Nature of the Avid investment - The investment in Avid is strategic, aimed at enhancing corporate payments and payables, with a focus on profit acceleration [48][49] Question: Update on enterprise sales pipeline - Management confirmed that the enterprise sales initiative is live and progressing well, with potential for significant growth [57][58] Question: Impact of tariffs on vehicle payments - Management indicated that while tariffs do not directly impact the company, clients with goods-based businesses may experience indirect effects [63][66] Question: Performance of U.S. Vehicle payments - Management reported improved retention rates and anticipated a pivot in organic revenue growth for the U.S. Vehicle payments business [71][72] Question: Access to Avid's supplier network - Management confirmed that a prior commercial agreement with Avid has already begun to enhance supplier monetization, and further synergies are expected [113][114] Question: Potential noncore divestitures - Management mentioned plans to divest three noncore businesses, which could provide up to $2 billion in liquidity [17][116]

Financial Data and Key Metrics Changes - Normalized FFO increased by 67.4% year-over-year to $77,800,000, while normalized FAD rose by 66% to $80,800,000 [18] - On a per share basis, normalized FFO increased by $0.07 or 20% to $0.42, and normalized FAD increased by $0.06 or 16.2% to $0.43 [18] - Total cash rental revenues for the year are projected to be approximately $284,000,000, excluding amortization of lease intangibles [20] Business Line Data and Key Metrics Changes - In Q1, the company completed three new investments totaling over $47,000,000 at a yield of approximately 10% [12] - Year-to-date investment total reached approximately $82,000,000 at a yield of approximately 10% [13] - The investment pipeline is currently strong, sitting at approximately $500,000,000, primarily consisting of real estate acquisitions [14] Market Data and Key Metrics Changes - The acquisition of Care REIT will diversify the company's business in terms of operator concentration, geography, payer sources, and asset classes [9] - The deal is expected to bring U.S. Skilled Nursing concentration down to approximately 49% by property count and 63% by rental income [9] Company Strategy and Development Direction - The strategic acquisition of Care REIT marks the company's entry into the UK market and is the largest deal in its history [6] - The acquisition is expected to be accretive in year one and adds a new growth engine for the company [10] - The company is focused on ensuring that its U.S. growth engine remains robust while expanding into the UK [11] Management's Comments on Operating Environment and Future Outlook - Management is monitoring potential Medicaid cuts but sees bipartisan support for Medicaid and care for seniors in nursing homes [28] - The company is optimistic about the strength of its overall portfolio, with coverage ratios improving [78] - Management expressed confidence in the UK market's potential and is actively reviewing acquisition opportunities [15] Other Important Information - The company raised guidance for normalized FFO per share to $1.69 to $1.73 and for normalized FAD per share to $1.73 to $1.77 [19] - Liquidity remains strong, with a net debt to normalized EBITDA ratio of 0.5 times and a fixed charge coverage ratio of 15.2 times [22][23] Q&A Session Summary Question: Comments on macro expectations regarding policy and provider taxes - Management is monitoring the process regarding potential Medicaid cuts and sees bipartisan support for Medicaid [28] Question: Conditions for entering into a debt investment - The company prioritizes acquisitions but may consider debt investments if they build strategic relationships [30] Question: Changes to annualized earnings or FAD accretion from the Care REIT transaction - Management will provide answers regarding the Care REIT transaction in a week [35] Question: Reasonable volume or investment pipeline for the UK market - The UK pipeline will take time to mature, with a wider range of cap rates expected compared to the U.S. [37] Question: Update on the performance of properties over the last six to nine months - Management is waiting for financial disclosures but believes the coverage ratios are strong [42] Question: Trends regarding cash-paying tenants and overall portfolio strength - Management feels confident about the strength of the overall portfolio and is managing non-paying tenants [78] Question: Access to financing for operators - Management is not seeing challenges in access to financing for operators [86]

Financial Data and Key Metrics Changes - Piper Sandler reported adjusted net revenues of $383 million for Q1 2025, reflecting a 15% increase compared to Q1 2024, but a 23% decline from the previous quarter [21] - The operating margin was 17.9%, with adjusted EPS at $4.9, both showing improvements year over year [6][21] - Operating income grew by 23% year over year, indicating enhanced operational efficiency [22] Business Line Data and Key Metrics Changes - Corporate Investment Banking revenues reached $253 million, a 20% increase year over year, driven by advisory services which generated $217 million, up 38% [6][7] - Corporate financing revenues decreased by 32% year over year to $36 million, attributed to a weakened equity underwriting market [12] - Public finance revenues increased by 27% year over year to $26 million, outpacing market issuance growth [16] - Equity brokerage revenues rose by 10% year over year to $54 million, while fixed income revenues increased by 7% to $45 million [18][19] Market Data and Key Metrics Changes - The equity markets experienced heightened volatility, impacting investor sentiment and leading to a more cautious approach [5][12] - The health care fee pool for corporate financing decreased over 60%, reflecting significant market challenges [12] - The municipal financing market showed robust activity, although recent rate volatility has led to transaction postponements [16] Company Strategy and Development Direction - The company aims to leverage its diversified product offerings and sector expertise to navigate market uncertainties and enhance client engagement [5][8] - Piper Sandler is focused on expanding its capabilities in the infrastructure sector and enhancing its advisory services to capitalize on market opportunities [13][14] - The firm continues to rank as a top three investment bank in middle market deal activity, positioning itself for future growth [14] Management's Comments on Operating Environment and Future Outlook - Management noted that while the near-term outlook remains uncertain, there is potential for a rebound in M&A activity once market conditions stabilize [10][11] - The company anticipates a decline in advisory revenues in Q2 due to market volatility but expects certain sectors to remain active [10][60] - Management emphasized the importance of CEO confidence in driving M&A transactions, indicating that strategic clients are still interested in transacting [66] Other Important Information - The company repurchased approximately 266,000 shares for $81 million, maintaining a flat share count since 2021 [24] - A quarterly cash dividend of $0.65 per share was approved, to be paid on June 13 [25] Q&A Session Summary Question: M&A conditions and market stability - Management indicated that M&A activity is sector-dependent, with some processes stalled due to market uncertainty, particularly in consumer sectors [29][30] Question: Outlook for depositories - There is a more positive outlook for depositories, with recent transactions indicating potential for increased activity [34] Question: Advisory business countercyclicality - Management noted that debt capital markets and restructuring segments are growing faster than M&A, providing stability [44][46] Question: IPO pipeline and health care business - The IPO market is showing signs of improvement, but small-cap biotech remains challenged [75] Question: Fixed income trading activity - Volatility is creating uncertainty, leading to cautious behavior among clients, particularly in fixed income markets [77]

Financial Data and Key Metrics Changes - Adjusted net investment income decreased to $39 million or $0.45 per share from $45 million or $0.54 per share in the previous quarter [5][22] - Net asset value declined to $16.75 per share from $17.63 in the prior quarter [5] - Investments on non-accrual status increased to 4.67% of fair market value and cost, compared to 3.95% in the first quarter [6] Business Line Data and Key Metrics Changes - The company committed $407 million of capital across 32 investments, compared to 13 investments totaling $198 million in the previous quarter [15] - The weighted average yield on new debt investments was 9.5%, slightly down from 9.6% in the prior quarter [16] - The median EBITDA of portfolio companies increased to approximately $158 million, a $16 million increase from the prior quarter [17] Market Data and Key Metrics Changes - The leverage in portfolio companies remained steady at 5.4 times, below overall middle market leverage levels [17] - The portfolio's weighted average interest coverage declined to 1.8 times from 2.1 times in the previous quarter [17] - The JVs generated attractive annualized ROEs of approximately 10.6% in aggregate [25] Company Strategy and Development Direction - The company is focusing on larger, more diversified businesses to mitigate risks in the current environment [16][28] - There is a heightened focus on underwriting and risk evaluation due to potential impacts from tariffs and inflation [28] - The company aims to capitalize on opportunities during market volatility, leveraging its experience in capital solutions [28] Management's Comments on Operating Environment and Future Outlook - The management noted significant uncertainty surrounding the trade environment and its impact on M&A activity [27][28] - There is an expectation of cautious capital deployment among lenders due to the health of existing portfolio companies [28] - The company believes it is well-positioned to navigate the current market environment and deliver attractive risk-adjusted returns [28] Other Important Information - The company successfully issued new unsecured bonds to refinance existing bonds and amended its senior secured revolving credit facility, reducing interest rates [9][24] - The company has ample liquidity of approximately $1.1 billion, including $98 million in cash and $1 billion in undrawn capacity on credit facilities [24] Q&A Session Summary Question: Did the company lean into any liquid markets, structured finance, or syndicated loans in April? - The company was somewhat active but remained cautious due to unresolved tariff situations [32][33] Question: How successfully has the company been focusing on larger and diversified businesses? - The market conditions have been challenging, but there is a return of larger borrowers into the direct lending market [36][39] Question: Is the current yield reflective of what the portfolio should generate going forward? - The current yield is influenced by reference rate declines and markdowns from non-accruals, but it is considered a decent run rate [58][59] Question: Will repayment activity slow down during this period of volatility? - There is an expectation that repayments may slow down due to market volatility, but significant repayments are still anticipated [52][53] Question: What is the expected ROE for the joint ventures over time? - The company aims to achieve an ROE in the 11% to 12% range, depending on the opportunity set [62]

Financial Data and Key Metrics Changes - The company reported first quarter revenues of $325 million, which is 1% below the same period last year, with adjusted pretax income of $56 million and adjusted EPS of $1.05, marking record Q1 adjusted net income and EPS [4][6][10] - Adjusted pretax margin improved to 17.3% from 16.8% year over year [10] - The effective tax rate for the first quarter was 16.5%, with expectations for the full year to remain around the same rate [10][12] Business Line Data and Key Metrics Changes - Revenues in Strategic Advisory increased modestly compared to the previous year, while revenues in Restructuring and PJT Park Hill decreased slightly year over year [6][14] - The company expects full year 2025 Strategic Advisory revenues to be significantly higher than 2024 levels, driven by anticipated closings of previously announced transactions [16][82] Market Data and Key Metrics Changes - The current environment is characterized by volatile capital markets, subdued M&A activity, and fragile business confidence, impacting overall market sentiment [5][19] - The number of announced M&A transactions declined by more than 15% compared to the previous year, despite a modest increase in the dollar value of global announced M&A [15][19] Company Strategy and Development Direction - The company remains committed to investing in its strategic advisory franchise to position itself for future opportunities, despite current market uncertainties [18] - The firm is experiencing elevated activity levels in liability management, with expectations to maintain performance consistent with last year's record results [13][81] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the firm's outlook for the year, stating it remains substantially unchanged despite current economic uncertainties [19][81] - The company anticipates a potential increase in restructuring and liability management activity if economic pressures persist [13][30] Other Important Information - The company ended the quarter with $227 million in cash and no funded debt outstanding [11] - A dividend of $0.25 per share was approved, to be paid on June 18, 2025 [12] Q&A Session Summary Question: Thoughts on Strategic Advisory and partner productivity in a normalized environment - Management indicated that in a normalized environment, there could be a meaningful increase in partner productivity due to better network effects and franchise value [21][23] Question: Growth algorithm for restructuring business amid economic uncertainty - Management affirmed their commitment to the restructuring business, noting that they do not view themselves as capacity constrained and expect continued elevated activity levels [25][28] Question: Discussions with private equity regarding M&A and IPOs - Management noted a slowing of activity in the private equity space, particularly in capital return and IPOs, but emphasized ongoing interest in high-quality assets [35][37] Question: Impact of high yield market stress on liability management assignments - Management acknowledged that both liability management and bankruptcies are likely to increase in a risk-off environment, with more opportunities for restructuring [49][50] Question: Regulatory posture on M&A deals under the new administration - Management described the regulatory environment as mixed, with some confidence in moving forward with deals, but noted that large transactions are still being scrutinized [65][67] Question: Recruiting environment and potential for increased hiring - Management indicated that while demand for talent remains strong, the ability to attract individuals may improve as market conditions evolve [68][70]

Financial Data and Key Metrics Changes - For the quarter ending December 31, 2024, the company reported net investment income of $0.8 million or $0.06 per share, down from $0.16 per share in the prior quarter [4] - The net asset value per share decreased by $0.16 to $5.39 compared to $5.55 as of September 30, 2024 [4] - The fair value of the portfolio was $191.6 million, an increase from $190.1 million at September 30 [17] - Net assets declined by $2.3 million from the prior quarter to $77.6 million [17] - The weighted average yield of the debt portfolio decreased slightly from 10.5% to 10.4% [17] Business Line Data and Key Metrics Changes - The median EBITDA of the portfolio remained flat at approximately $61.76 million, while the weighted average net leverage increased from 4.8 times to 5 times [9] - The percentage of covenant appeals increased from 70% to 77% [9] - The weighted average yield of debt investments made in the quarter was approximately 11.8% [11] Market Data and Key Metrics Changes - Approximately 30% of the portfolio may experience moderate effects from tariffs, with strategies in place to mitigate these risks [7] - The company is strategically targeting investments in critical sectors and defensive industries, including a recent investment in the data center sector [8] Company Strategy and Development Direction - The company remains focused on capital preservation and NAV stability, with a disciplined investment approach [22] - The management is adapting to market volatility and heightened competition among lenders, with a focus on quality assets [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties and delivering value to shareholders [6] - The potential impact of tariffs on the portfolio and M&A market is being closely monitored [36] Other Important Information - The company appointed Andrew Muns as Chief Operating Officer, enhancing the executive team [3] - The company declared a distribution of $0.12 per share for the quarter ending March 31, 2025, payable in cash [19] Q&A Session Summary Question: What was the cause for the drop in PIK income quarter-over-quarter? - The drop in PIK income was due to a reversal of non-accrual for one portfolio company in the previous quarter, which inflated PIK income [25] Question: What are the comments on the sustainability of the dividend given lower yields and higher leverage? - The company is constantly evaluating the sustainability of the dividend and will monitor the portfolio's performance [26][27] Question: Is the company changing to a calendar fiscal year? - Yes, the company has changed its fiscal year from June to December [28][30] Question: What is the trend for investment yield over the next quarter or two? - The investment yield is expected to remain similar, around 10.5% plus or minus, unless there is a significant economic shock [34][36]