Financial Data and Key Metrics Changes - Total investment income increased sequentially, with net investment income (NII) growing more than 50% quarter-over-quarter to $0.31 per share, driven by higher cash income and stronger distributions from the CLO joint venture [10][26] - Net asset value (NAV) per share declined from $10.01 on September 30, 2025, to $8.07 on December 31, 2025, but pro forma NAV was higher at $8.23 per share due to the incentive fee waiver [10][27] - The asset coverage ratio was 158.1% on December 31, 2025, down from 168.2% as of September 30, 2025, but pro forma for the incentive fee waiver, it was 166% [27] Business Line Data and Key Metrics Changes - The portfolio ended the quarter with non-accruals at less than 1% of fair value, reflecting improved credit quality [30] - The company sold its entire allocation of senior secured DIP loans at an average price of 107% of par, and fully exited roll-up DIP loans at an average price of 45% of par, indicating a strategic repositioning of the portfolio [12][30] - Investments in corporate credit that fall under the software category comprise less than 4% of the portfolio, down from about 7% at the end of the previous year [16][32] Market Data and Key Metrics Changes - The CLO investments generated a positive return throughout 2025, outperforming the broader CLO equity market despite contributing to the NAV decline in the fourth quarter [14] - The company is underweight in software-based businesses compared to peers, with BDC exposure over 20% and U.S. loan market at 16% [15][34] Company Strategy and Development Direction - The company aims to strengthen oversight, protect shareholder value, and reinforce accountability across its platform, especially in a challenging credit environment [4][5] - The focus is on rigorous credit standards, transparency, and long-term shareholder value creation, positioning the company for durable performance [9] - The company is committed to deploying capital selectively in a market with attractive risk-adjusted opportunities while maintaining a strong liquidity position [8][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging credit and broader market environment but noted meaningful progress in improving the earnings profile of the company [10] - The company is positioned from a balance sheet strength perspective, with substantial liquidity and no near-term constraints, allowing for flexibility in capital deployment [8][30] - Management emphasized the importance of disciplined capital allocation and proactive portfolio management to navigate uncertainty and capitalize on opportunities [9][30] Other Important Information - The board approved a quarterly dividend of $0.30 per share for the first quarter of 2026, equating to a 19.2% annualized yield based on the closing price [28] - The company has repurchased approximately $18.7 million of its GECCO notes at or below par plus accrued interest, enhancing its capital structure [17] Q&A Session Summary Question: Is the portfolio repositioning completed, or are there more actions to undertake? - Management indicated that significant actions were taken to exit names with perceived downside risk and rotate into higher quality credits, with a clean corporate credit portfolio [32][33] Question: How does the company view its pipeline and risk-adjusted opportunities for new investments? - Management stated that they are evaluating private credit opportunities selectively, focusing on strong covenants and aligned incentives, while maintaining a robust liquidity position [34][35] Question: How does the company weigh stock buybacks against new investments? - Management actively monitors stock price and market opportunities, considering various factors in making decisions about stock buybacks versus new investments [37][38] Question: Will the contribution from CLO investments be more stable moving forward? - Management expects less variability in CLO contributions compared to previous years, although some variability is still anticipated [39]

Financial Data and Key Metrics Changes - In Q2 2026, the company reported $375 million in core revenue, reflecting a 17% year-over-year growth and exceeding guidance [26][30] - Non-GAAP operating margin was 18%, showing a sequential and year-over-year expansion [26][29] - AP/AR transaction revenue reached $128 million, up 14% year-over-year, with TPV per customer increasing modestly [27][28] Business Line Data and Key Metrics Changes - AP/AR core revenue grew 11% year-over-year, with approximately 4,000 net new customers added in Q2 [26][27] - Spend and expense revenue totaled $166 million, representing a 24% year-over-year growth, driven by card volume growth [28] - The number of businesses using both AP/AR and spend and expense solutions grew 28% year-over-year [9][19] Market Data and Key Metrics Changes - The company observed strong spend growth in manufacturing and a rebound in construction, reversing previous trends [27][55] - Card payment volume increased by 25% year-over-year, particularly in advertising, retail, and healthcare services [28] - The same-store sales growth for the AP/AR platform was 4%, an acceleration from the previous quarter [55] Company Strategy and Development Direction - The company aims to drive growth from its integrated platform, expand its addressable market, and innovate with AI to create value [19][25] - The Embed 2.0 strategy is designed to extend reach with SMBs and enhance distribution through partnerships [11][24] - The company is focused on optimizing pricing to align with the value delivered to customers, particularly in the AP/AR segment [22][63] Management's Comments on Operating Environment and Future Outlook - Management noted resilience among SMBs and the importance of innovation in creating stickiness with the platform [51][55] - The company expects to see continued growth in invoice financing, with a 50% year-over-year increase in customers [10][66] - Management expressed confidence in the company's unique position and the ability to leverage AI for future growth [41][62] Other Important Information - The company repurchased $133 million of stock during the quarter, maintaining a disciplined approach to share repurchases [29] - The company expects core revenue for fiscal 2026 to be in the range of $1.490 billion to $1.510 billion, reflecting 15%-16% growth year-over-year [31][32] Q&A Session Summary Question: How at risk is BILL from AI disruption? - Management believes the impact of AI is overplayed and emphasizes the company's unique expertise and data assets as competitive advantages [36][38] Question: What is the attribution for growth acceleration? - Management attributes growth to a strong platform, customer value delivery, and resilience in SMBs, alongside innovation [51][55] Question: What are the risks to pricing algorithms in the context of AI? - Management asserts that pricing is based on the value created for customers and sees AI as a tool to enhance efficiency and value [62][63] Question: What is the update on the strategic process review? - Management is focused on optimizing costs and enhancing efficiency, with a roadmap for opportunities identified [77][78] Question: How does the company view its ability to win in the move-up market? - Management believes in the unique value of its platform for larger businesses and is seeing positive signals in adoption and ARPU growth [80][82]

Core Viewpoint - Lloyds Bank is ending its small-business-focused invoice financing program, which is seen as detrimental to its smaller business clients, although the program was utilized by less than 1% of them [2]. Group 1: Program Closure - The factoring program will be closed by the end of the year, as reported by the Financial Times [2]. - The decision to shut down the service follows similar actions by other major banks [4]. Group 2: Impact on Small Businesses - The closure is perceived as a setback for smaller business clients, with some customers indicating that accessing the service had already become more difficult [2][4]. - Nathaniel Southworth, managing director of KAP Toys, noted that stricter revenue and profit criteria from lenders have excluded many small businesses from accessing factoring facilities [3]. Group 3: Industry Context - The factoring business is challenging to run profitably, particularly for small and medium-sized businesses (SMBs), which do not yield substantial profits for banks [5]. - SMBs are increasingly seeking alternative financing methods to compete with larger businesses, with a significant portion of retailers under $500 million in annual revenue prioritizing embedded finance innovations [6]. Group 4: Benefits of Embedded Finance - Embedded finance is seen as a leverage point for smaller retailers, with 68% of those using it reporting gains in operational efficiency [7]. - More than half of the retailers utilizing embedded finance believe it enhances customer journeys and reduces checkout friction, leading to higher conversion rates and improved access to customer data [7].