Ellington Credit Company (NYSE:EARN) Q3 2025 Earnings Call November 20, 2025 11:00 AM ET Company ParticipantsAlaael-Deen Shilleh - Associate General CounselGreg Borenstein - Portfolio ManagerLarry Penn - CEOChris Smernoff - CFOConference Call ParticipantsEric Hagen - Specialty Finance AnalystDoug Harter - Equity Research AnalystCrispin Love - AnalystOperatorGood morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ellington Credit Company's second fiscal quarter-ended, September 30th, 20 ...

Financial Data and Key Metrics Changes - For Q3 2025, the company reported GAAP net income of $0.11 per share and net investment income of $0.23 per share, with a weighted average GAAP yield of 15.5% on the CLO portfolio [9][11][12] - The NAV as of September 30 was $5.99 per share, with cash and cash equivalents totaling $20.1 million, and a NAV-based total return for the quarter of 9.6% annualized [12][21] Business Line Data and Key Metrics Changes - The CLO portfolio increased by 20% to $380 million, with new purchases totaling $116 million, of which 62% was in CLO debt and 38% in CLO equity [11][12] - CLO equity represented 51% of total CLO holdings, down from 53% at the beginning of the quarter [11] Market Data and Key Metrics Changes - The credit markets rallied in Q3, supported by a dovish shift from the Federal Reserve, leading to tightened corporate credit and CLO spreads [4][5] - In the US leveraged loan market, lower quality CCC-rated loans fell amid default concerns, while single B-rated loans advanced due to sustained CLO demand [10] Company Strategy and Development Direction - The company is focusing on increasing its allocation to mezzanine debt due to attractive yields and downside protection, while reducing exposure to new issue equity [6][7] - The strategy emphasizes active trading to capitalize on mispricings and manage risk effectively, with a preference for secondary market acquisitions [6][17] Management's Comments on Operating Environment and Future Outlook - Management noted that volatility and credit dispersion are defining features of the corporate credit markets, with concerns about idiosyncratic credit issues impacting performance [20][21] - The company expects elevated repricing activity and ongoing credit dispersion to create opportunities for outperformance through active portfolio management [25] Other Important Information - The company has increased its credit hedging portfolio to approximately $90 million, equating to about 40% of NAV, to provide downside protection [21][22] - Following the quarter end, the synthetic short position in credit hedges reached over $150 million as of October 31 [22] Q&A Session Summary Question: What drove the increase in credit hedges from the end of September to the end of October? - The increase was primarily due to the growth in portfolio size and leverage, ensuring liquidity during market downturns [28][29] Question: Is there a more cautious view on credits reflected in the decrease of the CLO portfolio? - The decrease was attributed to quarterly payment distributions and markdowns in CLO equity prices, not necessarily a more cautious view [35][36] Question: Can you discuss the appetite for leverage and potential unsecured debt issuance? - The company is close to being fully invested and could increase leverage to around $400 million, constrained by regulatory restrictions [39][40] Question: What are the predictions for CLO supply next year? - Predictions are uncertain, but there may be more reset and refinancing activities rather than new issues, depending on market conditions [42][43] Question: How does AI impact the CLO market and credit flow? - AI may create winners and losers in the loan market, affecting CLO equity returns and increasing concerns about credit dispersion [45][46]

Pearl Diver Credit Company (NYSE:PDCC) Q3 2025 Earnings Call November 18, 2025 11:00 AM ET Speaker0Morning, and welcome to the Pearl Diver Credit Company Third Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Emma Little, Investor Relations.Thank you. You may begin.Speaker1Good day, ladie ...

Core Insights - Volta Finance Limited reported a net performance of +0.3% for September 2025, bringing the year-to-date performance to +3.5% [4] - The performance of Volta Finance is lower compared to US High Yield and Euro High Yield, which returned +7.1% and +4.6% respectively [4] - The company's NAV as of the end of September 2025 was €272.6 million, equating to €7.45 per share [8] Market Overview - Global markets demonstrated resilience, with US equities benefiting from investments in artificial intelligence and anticipated interest rate cuts by the Federal Reserve [5] - Fixed income yields increased, with long-term rates in France and Germany reaching multi-year highs, while UK gilts advanced ahead of the Autumn Budget [5] - The Federal Reserve executed its first rate cut in nine months, while the ECB and Bank of England maintained a cautious approach [5] Portfolio Activity - Volta Finance reinvested approximately €10 million into five different US and European BB and B CLO debts, reducing its cash position from 18% to 16% [7] - The company experienced stable interest and coupon generation over the past six months, amounting to about €28 million equivalent, or approximately 21% of September NAV on an annualized basis [7] - Volta's CLO Equity tranches returned +0.3%, while CLO Debt tranches returned +1.2% during the month [8] Investment Strategy - Volta Finance aims to preserve capital across the credit cycle and provide a stable income stream to shareholders through quarterly dividends [13] - The company primarily seeks exposure to CLOs and similar asset classes, with a potential for a more diversified investment strategy across structured finance assets [13]

Core Insights - Volta Finance reported a net performance of -0.8% for August 2025, with a year-to-date performance of +3.2%, underperforming compared to US High Yield and Euro High Yield returns of +6.3% and +4.0% respectively [4][5] Performance and Economic Context - Economic indicators showed a mixed picture in August, with weak labor market signals and high valuations in the tech sector raising concerns about economic momentum [5] - Inflation data remained elevated but aligned with expectations, leading to speculation about potential Federal Reserve rate cuts [5] - The Bank of England surprised markets with a rate cut to 4%, the lowest in over two years, amid ongoing inflation and political uncertainty [5] - Credit markets remained stable, with minor changes in spreads for Itraxx Xover and CDX indices [5] Loan and CLO Market Activity - The loan market saw significant repricing, with 28% of the market repriced year-to-date, resulting in approximately 20 basis points of spread compression [6] - Volta received an early redemption of approximately €7 million from a European CLO Equity position and reinvested €5.7 million into a Euro CLO debt tranche [7] Portfolio Performance - Volta's CLO Equity tranches returned -1.1%, while CLO Debt tranches returned +1.2% [8] - The EUR/USD exchange rate shift impacted long dollar exposure, contributing to a performance decline of -0.34% [8] Financial Position - As of the end of August 2025, Volta's Net Asset Value (NAV) was €271.8 million, equating to €7.43 per share [9] - Cash flow generation remained stable at €28 million equivalent in interest and coupons over the last six months, representing nearly 21% of August NAV on an annualized basis [7]

Financial Data and Key Metrics Changes - For the quarter ended June 30, 2025, the company reported investment income of $5.5 million or $0.81 per share, down from $6 million in the prior quarter due to decreased yield on CLO equity investments caused by market-wide loan spread compression [15] - Total expenses for the quarter were $2.4 million or $0.35 per share, resulting in net investment income of $3.1 million or $0.46 per share [15] - The net income for the quarter was $3.5 million or $0.52 per share, with recurring cash flows totaling $8 million or $1.18 per share, exceeding distributions and expenses by $0.16 per share [15][16] - As of June 30, 2025, total assets were $166.1 million and total net assets were $123.6 million, leading to a net asset value (NAV) per share of $18.19, which increased to $18.48 by July 31, 2025 [16] Business Line Data and Key Metrics Changes - The company recorded an unrealized gain on investments of $500,000 and a modest net realized loss of $70,000 during the quarter [15] - The weighted average GAAP yield on the portfolio decreased to 12.75% as of June 30, down from 15.57% as of March 31, primarily due to market-wide loan spread compression [7][8] Market Data and Key Metrics Changes - The CLO market remained resilient during a period of macro uncertainty and has since rebounded, with loan fundamentals remaining strong [6] - The trailing twelve-month payment default rate rose to approximately 1.1% as of June 30, 2025, up from 0.91% as of December 2024, but still below the post-pandemic peak of 1.75% [39] Company Strategy and Development Direction - The company emphasizes a data-driven investment approach utilizing machine learning technology and proprietary algorithms to maintain agility and seek relative value in the CLO space [8][9] - The portfolio is diversified across 52 unique CLO positions managed by 31 distinct CLO manager platforms, with no significant concentration in any single CLO [11][12] - The company plans to continue leveraging its unique infrastructure to identify mispricings and attractive investment opportunities [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term resilience of the CLO asset class despite macro uncertainties, highlighting the efficient access to senior secured corporate loans [19] - The company anticipates continued refinancing and reset activity into 2025, with five minority positions already successfully reset or refinanced in Q3 [34] Other Important Information - The company distributed dividends of $0.22 per common share in April, May, June, and July, with plans for similar distributions in the following months, representing an annualized dividend yield of approximately 14.7% [17] Q&A Session Summary Question: Inquiry about recurring cash flow for comparative purposes - Management confirmed that recurring cash flow for Q1 was $7.7 million [21][24] Question: Thoughts on increasing leverage - Management stated that leverage levels will vary over time and will be utilized opportunistically based on investment opportunities and cost of leverage [22][24] Question: Composition of current pipeline regarding primary vs secondary opportunities and U.S. vs European CLO positions - Management indicated that the primary market currently presents interesting opportunities, while the secondary market has provided better relative value recently [25][29] Question: Quantification of opportunities for resets and refinancings within the portfolio - Management expects refinancing and reset activity to continue, with five minority positions already reset or refinanced in Q3 [33][34] Question: NAV reaction to the credit environment after the sell-off in April - Management noted that NAV increased post-sell-off due to strong loan fundamentals and significant refinancing activity [38][39]

Financial Data and Key Metrics Changes - For Q2 2025, the company reported investment income of $5.5 million or $0.81 per share, down from $6 million in the prior quarter due to decreased yield on CLO equity investments caused by market-wide loan spread compression [15] - Total expenses for the quarter were $2.4 million or $0.35 per share, resulting in net investment income of $3.1 million or $0.46 per share [15] - The net income for the quarter was $3.5 million or $0.52 per share, with recurring cash flows totaling $8 million or $1.18 per share, exceeding distributions and expenses by $0.16 per share [16][18] - As of June 30, total assets were $166.1 million and total net assets were $123.6 million, leading to a net asset value (NAV) per share of $18.19, which increased to $18.48 by July 31 [17] Business Line Data and Key Metrics Changes - The weighted average GAAP yield on the portfolio decreased to 12.75% as of June 30 from 15.57% as of March 31, primarily due to market-wide loan spread compression [7][8] - The company maintained a diversified portfolio with 52 unique CLO positions managed by 31 distinct CLO manager platforms, consisting of approximately 1,800 unique loans across over 30 industry sectors [12][13] Market Data and Key Metrics Changes - The CLO market showed resilience during macroeconomic uncertainty, with loan fundamentals remaining strong and managers adapting quickly to market conditions [6] - The trailing twelve-month payment default rate rose to approximately 1.1% as of June, up from 0.91% as of December 2024, but still below the post-pandemic peak of 1.75% [40] Company Strategy and Development Direction - The company emphasized its data-driven investment approach, utilizing machine learning and proprietary algorithms to maintain a competitive edge in the CLO market [9][10] - The management plans to continue leveraging its unique infrastructure to identify mispricings and attractive investment opportunities, with a focus on both primary and secondary market opportunities [10][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term resilience of the CLO asset class despite macro uncertainties, highlighting the efficient access to senior secured corporate loans [20] - The company anticipates continued refinancing and reset activity into 2025, with five minority positions successfully reset or refinanced in Q3 [35] Other Important Information - The company distributed dividends of $0.22 per common share in April, May, June, and July, with plans to continue this distribution in August, September, and October, representing an annualized dividend yield of approximately 14.7% [18] Q&A Session Summary Question: Recurring cash flow comparison with the prior quarter - Management confirmed that recurring cash flow for Q1 was $7.7 million, similar to the current quarter's level [22][24] Question: Thoughts on increasing leverage - Management stated that leverage levels will vary over time, and they evaluate investment opportunities daily, considering the cost of leverage compared to expected returns [23][24] Question: Composition of current pipeline in terms of primary vs secondary opportunities and U.S. vs European CLO positions - Management indicated that the relative value of opportunities drives their decisions, noting interesting opportunities in the primary market while the secondary market has provided better relative value recently [25][28] Question: Quantifying opportunities for resets and refinancings - Management expects refinancing and reset activity to continue, with five minority positions successfully reset or refinanced in Q3 [35] Question: NAV reaction to the credit environment post-sell off - Management noted that NAV increased post-sell off due to strong loan technicals and significant refinancing activity, with credit fundamentals remaining stable [39]

Core Viewpoint - Volta Finance Limited reported a net performance of +2.48% for July 2025, contributing to a total net performance of +13.9% for the financial year from August 2024 to July 2025, outperforming US High Yield and Euro High Yield indices which returned +8.6% and +8.1% respectively [4][5][6]. Performance and Portfolio Activity - The company achieved a net performance of +2.48% in July, including a dividend payment of 15.5 cents per share [4]. - The financial year net performance from August 2024 to July 2025 stands at +13.9% [4]. - The US High Yield market returned +8.6% and Euro High Yield returned +8.1% during the same period [4]. - Economic indicators showed a mixed but generally positive outlook, with robust labor market conditions and strong corporate earnings, particularly in the technology sector [5][6]. - Inflationary pressures are evident, with the core Personal Consumption Expenditures (PCE) index rising 2.8% year-over-year [6]. - Volta's cash flow generation remained stable at €28 million equivalent in interest and coupons over the last six months, representing close to 21% of July's NAV on an annualized basis [8]. Market Conditions - July saw strong market performance driven by positive trade negotiations and resilient economic indicators, although caution remained due to ongoing tariff negotiations with China [5]. - Loan and CLO issuance remained active despite low M&A volumes, with US loan market indices recording a performance increase of +0.88% and European market indices increasing by +0.55% [7]. - Volta received early redemptions from CLO debts (approximately €5 million) and CLO equities (approximately €2 million equivalent) [8]. Portfolio Composition - As of the end of July 2025, Volta's NAV was €274.2 million, equating to €7.49 per share, an increase of 36 cents from July 2024 [10]. - CLO Equity tranches returned +5.2% while CLO Debt tranches returned +0.6% during the month [9]. - Cash stood at 17% at the end of July, providing the company with liquidity to capitalize on attractive entry points in the market [8].

Financial Data and Key Metrics Changes - The company reported GAAP net income of $0.27 per share and adjusted net investment income of $0.18 per share for calendar Q2 [10] - The annualized economic return was nearly 20% net, and NAV per share grew [4] - The NAV at quarter end was $6.12 per share, with a NAV-based total return of 19.7% annualized [17] Business Line Data and Key Metrics Changes - The CLO portfolio grew by 27% quarter over quarter to $317 million, with new purchases of $91 million [14] - Contributions to net investment income came from U.S. CLO debt ($0.12), European CLO debt ($0.02), U.S. CLO equity ($0.02), and a penny loss on European CLO equity [10][11] - The company disposed of all remaining mortgage positions shortly after the REIT conversion, with minimal NAV impact [14] Market Data and Key Metrics Changes - Credit spreads on U.S. corporate high yield and investment grade bonds tightened overall during the quarter, with May and June's recovery offsetting April's weakness [5] - In Europe, leveraged loan prices posted modest gains but lagged behind the U.S. [12] - The CLO market saw high issuance levels historically, but lower than recent quarters due to intra-quarter volatility [6] Company Strategy and Development Direction - The company is focusing on CLO investments, benefiting from the closed-end fund structure, which enhances tax efficiency and allows for a concentrated investment strategy [9] - There is an emphasis on increasing exposure to CLO mezzanine positions and shifting focus to the secondary market for better relative value [21][22] - Plans to issue long-term unsecured debt later this year to increase leverage and enhance earnings growth [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the market environment remains uncertain due to tariff policies, which could create winners and losers among sectors [42] - The company expects net investment income to cover its distribution rate starting in September, indicating confidence in future performance [8][26] - The management believes that the portfolio is well-balanced with core positions for stability and others offering upside potential [23] Other Important Information - The company maintained a cash and cash equivalents total of $36.6 million at quarter end [17] - The CLO portfolio is heavily weighted towards first lien floating rate leveraged loans, with no single sector exceeding 11% [15] Q&A Session Summary Question: Why haven't AAA spreads fully retraced while underlying loan spreads have? - Management indicated that there is less demand for AAA CLOs compared to earlier in the year, which has affected pricing [31][32] Question: Would the allocation remain similar to June, leaning more towards debt than equity? - Management suggested that if the market conditions remain challenging, the allocation would likely continue to favor debt over equity [35] Question: Will CLO issuance trends reverse by year-end? - Management noted that new issuance depends on the attractiveness of loan versus debt spreads, and it is uncertain if the market will see a significant increase in new issuance [40] Question: Is there an increased risk perception for equity tranches? - Management acknowledged that equity tranches carry more risk due to their first-loss position, especially in light of tariff uncertainties [42] Question: What is the updated quarter-to-date NAV estimate? - The company reported a NAV estimate around $6.16 as of July 31 [46]

Financial Data and Key Metrics Changes - GAAP net income for the quarter was $283.9 million, or $0.53 per diluted share, with a return on equity of 17% [18] - Earnings available for distribution were $291.1 million, or $0.54 per diluted share, reflecting an 18% return on equity [18] - Book value increased to $6.7 billion, or $12.71 per share, up from $12.39 in the prior quarter [19] - The company ended the quarter with a record cash and liquidity amount of $2.1 billion [19] Business Line Data and Key Metrics Changes - Genesis Capital achieved a record quarter of production, with origination more than doubling since its acquisition in 2022 [6][10] - NewRez, the mortgage company, reported a 38% increase in funded volume, reaching $16 billion [36] - The servicing portfolio for NewRez is now $864 billion, with a 19% return on equity for the quarter [36][25] - Rhythm Asset Management saw an increase of $3.5 billion in assets under management (AUM), totaling $36 billion [24] Market Data and Key Metrics Changes - The company noted a robust pipeline for mergers and acquisitions, focusing on scaling up credit and origination business lines [10] - The asset-based finance (ABF) market is highlighted as a key area of growth, with the company controlling both origination and servicing [7][8] Company Strategy and Development Direction - The company aims to grow its asset management platform and differentiate itself through performance and trust with investors [8][10] - There is a focus on opportunistic acquisitions and scaling up the credit business, with a desire to enter the insurance market [51][52] - The company is exploring the potential for a separate listing for NewRez but is currently focused on growing the business [45][46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment, anticipating one or two rate cuts this year [26] - There is a belief that policy uncertainty is declining, which could benefit investment products [27] - The company is cautious about credit markets but sees opportunities in the non-QM space and direct lending [90] Other Important Information - The company has paid out over $6 billion in dividends since inception, implying a stock price of about $25 based on historical payouts [12] - The company is focused on maintaining a balance between funding through its balance sheet and third-party capital [95][96] Q&A Session Summary Question: Any updated thoughts on Nuurez and unlocking value? - Management indicated that they are focused on growing Nuurez and enhancing earnings before considering a separate listing [45][46] Question: How will changes in the mortgage market impact NewRez's strategy? - Management noted significant growth in the non-QM business and plans to continue expanding origination channels [60][61] Question: What are the most logical ways to optimize Rhythm's corporate structure? - Management is evaluating the merits of a C Corp structure and the need for scale in the REIT business [66][67] Question: How does the partnership at Genesis support capital allocation? - Management stated that capital can be allocated flexibly across segments to generate the best returns for shareholders [73][74] Question: What type of insurance acquisitions are being considered? - Management is looking at broader insurance opportunities, including P&C and life insurance, to complement their asset management capabilities [88][89]