Financial Data and Key Metrics Changes - For Q4 2025, the company reported investment income of $5.9 million, an increase from $5.4 million in the prior quarter, with net investment income rising to $3.4 million, or $0.49 per share, up from $3 million, or $0.44 per share in Q3 [15][17] - The net loss for the quarter was $12.4 million, or $1.81 per share, with net unrealized losses on investments amounting to $15.7 million, or $2.3 per share [16][17] - Total assets as of December 31, 2025, were $141.3 million, with total net assets of $98.6 million, resulting in a net asset value per share of $14.42, down from $16.89 as of September 30 [17][22] Business Line Data and Key Metrics Changes - The company's portfolio generated strong recurring cash flows totaling $9.8 million, or $1.44 per share, exceeding distributions and expenses by $0.41 per share, an increase from $8.7 million, or $1.28 per share in the prior quarter [17] - The weighted average gap yield of the portfolio decreased slightly to 12.99% at quarter end, compared to 13.07% as of September 30 [11] Market Data and Key Metrics Changes - The CLO equity market faced challenges in Q4 2025 due to tight spreads, with industry returns estimated at -10% for the year [9] - The U.S. loan market experienced substantial spread tightening of approximately 34 basis points, impacting CLO equity performance [9] Company Strategy and Development Direction - The company remains optimistic about CLOs, viewing them as attractive investment opportunities compared to other asset classes, with a focus on disciplined portfolio management and opportunistic investments [6][20] - The strategy includes managing exposure to individual credits and sectoral weaknesses, with nearly the entire portfolio composed of CLOs with reinvestment period end dates of 2026 and later [7][14] Management's Comments on Operating Environment and Future Outlook - Management highlighted a resilient macro environment with inflation reducing to central bank targets and a low leveraged loan default rate, indicating potential opportunities for CLO equity investing [6] - The company expects refinancing activity to deliver less spread compression in 2026, with improved new loan issuance activity supporting wider CLO equity spreads [10][11] Other Important Information - The company executed share issuances through its at-the-market equity issuance program, issuing 30,680 shares for net proceeds of approximately $0.5 million during the quarter [18] - Dividends of $0.22 per common share were distributed in October, November, December, and January, with plans for the same in February, March, April, and May [19] Q&A Session Summary Question: Can you comment on the investment environment in the primary versus secondary market? - Management noted opportunities in both markets but indicated a current overweight in the secondary market [24][25] Question: What are the refinancing and reset opportunities in your portfolio over the next few quarters? - Management mentioned multiple positions exiting their non-call periods, expecting upside from tightening CLO liability spreads [26] Question: Can you comment on the supply of new loans expected in 2026? - Management expressed cautious optimism for improving M&A activity and new loan issuance from specific sectors, while monitoring central bank rate cutting impacts [27][28] Question: Is the slowing loan repricing momentum specific to your portfolio or a larger market dynamic? - Management indicated it is both a larger market dynamic and observable in their portfolio, with a gradual slowing in loan pricing [31][32] Question: How does the company view the ATM share issuance relative to current stock trading? - Management stated they continue to utilize the ATM when trading at a premium, noting the stock was trading at NAV [33][34]
PEARL DIVER CREDIT COMPANY INC.(PDCC) - 2025 Q4 - Earnings Call Transcript