Financial Data and Key Metrics Changes - In 2025, the company generated a GAAP return on equity of negative 0.7% and a total return on common stock of negative 15.2%, with cash distributions of $1.98 per share, representing 15% of the average stock price during the year [5][9] - The fourth quarter net investment income was $0.03 per share, down from $0.39 per share in the prior quarter, primarily due to a decline in SOFR and continued tightening in loan spreads [8][19] - The company's NAV decreased to $13.31 per share as of December 31, down from $14.21 per share at the end of September [9][21] Business Line Data and Key Metrics Changes - Paydowns within the CLO debt portfolio totaled $147 million during 2025, with early repayments contributing to realized capital gains of $0.12 per share [6][7] - The company participated in 10 resets and 6 refinancings across its CLO equity portfolio, resulting in average CLO debt cost savings of 46 basis points [7] - Recurring cash flows for the fourth quarter totaled $19 million, or $0.79 per share, representing an 18% increase quarter-over-quarter [9] Market Data and Key Metrics Changes - The S&P UBS Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025, with the trailing twelve-month default rate decreasing from 1.5% to 1.2% [15][16] - CLO new issuance rose to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the previous year's record [16] - The company's portfolio's default exposure was 32 basis points as of December 31 [15] Company Strategy and Development Direction - The company actively managed its portfolio to seek opportunities across CLO debt and equity, as well as other asset classes beyond CLOs, reflecting a flexible investment strategy [4][10] - The company plans to continue repurchasing shares when trading at material discounts to NAV, viewing this as an attractive use of capital [12][23] - The management believes the current market environment presents compelling opportunities for patient, well-capitalized investors [23] Management's Comments on Operating Environment and Future Outlook - Management noted that the CLO market faced challenging conditions in 2025, with factors such as reduced SOFR levels and loan spread compression impacting performance [4] - Looking ahead, management expressed confidence in healthy underlying borrower fundamentals and a disciplined approach to capital allocation [5][23] - The company anticipates a robust pipeline of refinancings and resets, which could help lower liability costs in the CLO equity portfolio [23] Other Important Information - The company completed the full redemption of its 7.75% Series B Term Preferred Stock and announced plans to redeem the 8% Series C Term Preferred Stock [11] - As of January month-end, the company had $85 million of cash and revolver capacity available for investment [22] Q&A Session Summary Question: Follow-up on realized losses due to underperforming managers - Management indicated that underperforming managers had credit issues and loan spread compression, leading to a rotation into better-performing CLOs and other asset classes [26][27] Question: Source of funds for redeeming Series C Term Preferred Stock - Management confirmed that the redemption would be funded through a combination of the new revolver and cash on hand, along with proceeds from CLO debt repayments [29] Question: Expectation of balance sheet investment portfolio shrinkage - Management clarified that while redeeming preferred stock, they would continue to opportunistically buy back stock and maintain a leverage ratio within the target range [35] Question: Focus on alternative credit assets - Management stated that investments in non-CLO asset classes are being made across the Eagle Point platform, with dedicated teams focusing on these opportunities [37]

Core Insights - The company faced challenging market conditions in 2025, with a GAAP return on common equity of negative 14.6%, slightly better than the market average of negative 15% [5][2] - The company's NAV decreased from $7.00 per share on September 30 to $5.70 per share by year-end [5] - The company actively managed its CLO equity portfolio, completing 34 resets and 27 refinancings throughout 2025, which helped mitigate some of the negative impacts from market conditions [7][10] Financial Performance - The company recorded a net investment income (NII) of $0.23 per share, offset by realized losses of $0.49 per share, resulting in a total NII less realized losses of negative $0.26 per share for 2025 [17] - Total cash distributions amounted to $1.68 per common share during 2025, with a new monthly distribution rate set at $0.06 per share for 2026 [6][15] - The company reported a comprehensive loss attributable to common stock of $110 million, or $0.84 per share, for the fourth quarter [18] CLO Market Dynamics - The loan market saw strong demand, with total loan repayments reaching $294 billion, representing approximately 19% of the market in 2025 [22] - The trailing twelve-month default rate decreased from 1.5% in September to 1.2% by year-end, remaining below the long-term average of 2.6% [23] - CLO new issuance volumes rose to $209 billion for 2025, surpassing the previous year's record [24] Portfolio Management - The company selectively increased its exposure to credit assets beyond CLO equity, with non-CLO investments making up approximately 26% of the total investment portfolio by year-end [8][10] - The company achieved an average of 42 basis points in CLO debt cost savings across its portfolio due to its active reset and refinancing activities [7] - The weighted average remaining reinvestment period (WARP) of the portfolio remained stable at 3.3 years, reflecting the company's strategic investment decisions [7] Strategic Initiatives - The company launched a joint venture focused on regulatory capital relief transactions and invested over $40 million in its U.S. CLO collateral management platform [11][12] - The company plans to continue optimizing its capital structure, including the redemption of high-cost preferred stock and the issuance of lower-cost perpetual preferred stock [13][14] - The board is supportive of gradually increasing the allocation away from CLO equity as attractive opportunities arise in other credit asset classes [39][40]

Financial Data and Key Metrics Changes - The company reported an adjusted net investment income (NII) of $0.21 per share, with total assets increasing to approximately $1.2 billion, up about $92 million from the previous quarter [6][20] - Total investment income for the third quarter was $25.1 million, slightly down from $25.3 million in the prior quarter, primarily due to a decrease in dividend and success fee income [15][18] - The net investment loss for the quarter was $6.5 million compared to a net investment income of $4.3 million in the prior quarter [18] Business Line Data and Key Metrics Changes - The company has invested approximately $163 million in four new portfolio companies for fiscal 2026, compared to $221 million for all of fiscal year 2025 [7] - The portfolio currently consists of 29 operating companies, with a healthy pipeline for new acquisitions [6][7] - The weighted average yield of the portfolio decreased from 13.2% to 12.9%, in line with a decrease in SOFR [15][16] Market Data and Key Metrics Changes - The company noted good liquidity in the M&A market, creating a competitive environment for new acquisitions [8][9] - The company has been actively looking for add-on acquisitions to existing portfolio companies, which could lead to new buyout investments [10] Company Strategy and Development Direction - The company differentiates itself from traditional credit BDCs by providing both debt and equity in acquisitions, which supports its monthly distributions to shareholders [8][9] - The management emphasized the importance of maintaining a strong and liquid balance sheet to support portfolio growth [21][22] - The company is focused on managing supply chain disruptions and cost efficiencies to navigate the current economic environment [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the portfolio's performance despite challenges such as supply chain disruptions and tariff costs [12][13] - The outlook for the current portfolio is positive, with expectations of continued good earnings and distributions over the next year [13][24] - The company is actively working with three portfolio companies currently on non-accrual status, with a more positive outlook for their recovery [70][71] Other Important Information - The company maintained its monthly distribution to shareholders at $0.08 per share, with a total distributable income of $108.7 million as of the end of the quarter [24] - The company redeemed $74.8 million of its 8% notes and issued $60 million in 6.875% notes, reducing its interest burden [22][23] Q&A Session Summary Question: Can you discuss the operational or valuation changes that drove the appreciation for Schylling, Old World, and SFE-SFEG? - Management indicated that the appreciation was primarily due to EBITDA increases rather than multiple changes [30] Question: What differentiates Schylling and Old World in the current consumer sector? - Management attributed their success to unique products and strong management, allowing them to maintain demand despite economic headwinds [34] Question: How are current underwriting conditions affecting deal terms? - Management stated that they are maintaining their investment model and discipline despite competitive pressures [60] Question: What is the outlook for asset quality and non-accrual investments? - Management expressed a positive outlook for the three companies on non-accrual status, indicating improvements and potential exits [70][71]