Eagle Point Income Company Inc Aktie

Greetings, and welcome to the Eagle Point Income Company First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may now begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the first quarter of 2026. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections.

For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the SEC. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our first quarter 2026 financial statements and investor presentation with the Securities and Exchange Commission. These are also available in the Investor Relations section of the company's website, eaglepointincome.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company, Tom?

Thank you, Darren, and good morning, everyone. We're glad you're joining us today for Eagle Point Income Company's quarterly earnings call. Despite facing some broader market challenges, EIC had a strong first quarter. During the quarter, we had an increase in our net investment income from the prior quarter, and our recurring cash flows covered our distributions and our total company expenses. The CLO market faced challenging conditions in much of the first quarter of 2026, and the company was not immune to these broader dynamics. While CLO fundamentals remained relatively stable, a decline in loan prices, especially in the software sector and a cautious tone across credit markets due to the ongoing war in Iran weighed on our NAV during the quarter.

The software sector was a particular area of focus during the quarter and investors continue to assess the potential impact of artificial intelligence on certain business models and revenue streams. Importantly, however, our exposure is principally through broadly syndicated loans, not middle market loans that are commonly found in BDCs. The loans in our CLOs are typically larger, more liquid, institutionally syndicated credits with observable market pricing. While this observable pricing can result in more immediate mark-to-market volatility during periods of volatility, it provides clarity to investors as to the valuation of the underlying investments. While that volatility impacted quarterly valuations of many CLOs, we believe it also created opportunities for CLO collateral managers to reinvest proceeds from sales and paydowns into discounted loans with attractive forward return potential.

While these factors led to a decline in CLO valuations during the quarter for many securities, we believe the market typically undervalues the reinvestment option embedded in CLOs during times of volatility. The ability to buy loans at material discounts to par has allowed CLO equity to deliver attractive intermediate and long-term returns many times in the past. In addition, we believe our floating rate CLO junior debt portfolio will benefit from higher income should we see an upward movement in short-term rates. With an increase in inflation, more and more of the outlook by many market participants, it seems the potential for a rise in short-term rates may be more on the table than we thought even just 3 months ago. During the quarter, we deployed $56 million into new investments across multiple credit asset classes with a weighted average effective yield of 16% as we took advantage of compelling relative value opportunities created by a particularly uncertain macro environment.

Throughout the quarter, we continued to actively manage our CLO portfolio by completing 4 resets and 2 refinancings of our CLO equity positions. This resulted in weighted average CLO debt cost savings of 48 basis points for those CLOs. In addition to lowering debt costs, the reset positions extended their reinvestment periods to 5 years. While CLO junior debt remains central to EIC's strategy, we opportunistically increased our exposure to other credit classes, including infrastructure credit, regulatory capital relief transactions, portfolio debt securities and other structured and private credit investments. Eagle Point's platform has a dedicated team with deep specialized expertise across all of these asset classes, and this is a meaningful platform advantage, enabling EIC to access originated investment opportunities, increase portfolio diversification and generate excess returns above traditional CLO securities.

NAV decreased to $11.99 per share as of March 31 from $13.31 per share at year-end. The decrease primarily reflects negative mark-to-market adjustments on the company's CLO debt portfolio driven by wider spreads and weaker risk appetite for CLO junior debt during the quarter. Our GAAP return on first equity was negative 7.2%. That said, we saw a meaningful rebound in April, and indeed, EIC's NAV increased to between $12.48 and $12.58 per share. This is a 4.5% increase at the midpoint of the range. Despite the decline in NAV during the first quarter, our net investment income increased quarter-over-quarter to $0.36 per share, and that's up from $0.35 per share in the fourth quarter of 2025. Both of these measures are in excess of the $0.33 per common share in distributions that we paid.

Turning to our capital structure. During the first quarter, we launched our 6% Series AA and Series AB convertible perpetual preferred stock offering. This provides the company with a source of low-cost, long-duration capital and increases our financial flexibility. We are unaware of any other publicly traded entity that invests primarily in CLO debt with perpetual financing and consider this to be a material competitive advantage for our company. Subsequent to quarter end, we completed the full redemption of our 8% Series C term preferred stock, which had been our highest cost debt financing. These actions reflect our continued focus on lowering our cost of capital, lengthening our maturity profile, all with the goal to enhancing our long-term earning power.

During the quarter, we repurchased almost 390,000 shares of our common stock at an average discount to NAV of 19.3%. This resulted in NAV accretion of $0.04 per share. And since June of 2025, when the Board initially announced the share repurchase authorization through March 31 of this year, we've repurchased a total of $50 million of common stock at an average discount of 13% of NAV, resulting in NAV accretion of $0.26 per share. We plan to selectively continue our common share buybacks as market opportunities present themselves. We believe the actions we've taken during the quarter, together with our current portfolio positioning, leave us well situated for the quarters ahead. I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a brief update on the loan and CLO markets. In the first quarter, the S&P UBS Leveraged Loan Index fell by 0.5%, but rebounded by 1.2% during the month of April. Despite this mixed performance in loan returns, underlying loan borrower fundamentals have remained stable as corporate revenue and EBITDA growth remained positive, supporting overall credit performance across the broadly syndicated loan market. The trailing 12-month default rate ended the period at 1.4%, modestly higher than year-end levels, but well below the long-term average of 2.5%. While lower loan prices have pressured CLO valuations in the near term, they are also creating a more attractive reinvestment environment. With many loans trading below par and repricing activity slowing in the first quarter, we saw a greater potential for par build, wider spreads on new investments and improved forward returns.

For junior CLO debt securities, we believe this rate environment is constructive. With intermediate and long-term rates increasing, we expect short-term rates, including SOFR, which CLO debt floats off of to follow. Indeed, the market is pricing in potential Fed rate hikes in the next year. With the potential for higher short-term rates, junior CLO debt investments continue to offer attractive floating rate income potential, which we would expect to support higher income on the portfolio in the future. In addition, periods of market volatility can create opportunities to purchase CLO debt at discounts, providing the potential for pull to par as markets normalize.

We believe that the combination of income generation, structural protection and potential convexity makes junior CLO debt particularly compelling in the current environment. In terms of CLO new issuance, we saw $47 billion of volume during the quarter, down slightly from $55 billion in the fourth quarter of 2025. Reset activity for the first quarter was $32 billion, down from $54 billion last quarter, while refinancing activity was $24 billion, up from $20 billion last quarter. With the broader markets normalizing into the second quarter, we expect CLO volumes to remain robust going forward. With that, I'll hand it over to our advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. During the first quarter, the company generated net investment income or NII of $0.36 per share and NII less realized losses of $0.34 per share. This compares to NII less realized losses of $0.03 per share last quarter and NII and realized gains of $0.44 per share for the first quarter of 2025. Including unrealized portfolio losses, GAAP net loss was $22 million or $0.95 per share for the first quarter of 2026. This compares to GAAP net loss of $0.60 per share last quarter and a GAAP net loss of $0.46 per share for the first quarter of 2025. Recurring cash flows from the company's investment portfolio totaled $14 million or $0.62 per share during the quarter and exceeded the company's common stock distributions and expenses.

During the quarter, we paid 3 monthly common stock distributions of $0.11 per share. And last week, we declared 3 monthly common stock distributions of $0.11 per share for the third quarter of 2026. As of March month end, the company had outstanding preferred equity securities equal to 34% of total assets less current liabilities, which is within our target range of 25% to 35%, where we expect to operate the company under normal market conditions. Looking at our portfolio activity during the month of April, the company received recurring cash flows on its investment portfolio of $11 million.

Note that some of the company's investments are still expected to make payments later in the quarter. As of April month end, net of pending investment transactions and settlements, the company had $15 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of April month end was between $12.48 and $12.58 per share. At the midpoint, this was an increase of 4.5% from March month end. I will now turn the call back over to Tom to provide closing remarks before we take your questions.

Thanks, Lena. In our view, the combination of lower loan prices, reduced loan repricing activity and the potential for higher short-term rates is improving the outlook for our earnings power. Combined with our disciplined capital allocation and access to the full Eagle Point origination platform, we believe we are well positioned to translate this environment into stronger results for shareholders over time. We appreciate your continued support, and thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Erik Zwick with Lucid Capital Markets.

I wanted to start with a question on software. You mentioned it in your comments, and it's obviously been very topical of late in the leveraged loan market. And looking at your -- I think it's Slide 22, maybe, where you kind of showed a concentration of different industries in the portfolio technology and software is -- I guess, kind of double at least the next largest one is 12%, 12.5%. So curious what the last thing kind of -- I guess, maybe, Thomas, this is a bigger picture question. Just think of the impact could be. Is it likely to result in changes to volume in the leveraged loan issuance as potentially fewer IPOs in software? Or do you think it leads to increased defaults and credit quality issues? And maybe more importantly, how are you thinking about this and your desired kind of target for exposure to software in the portfolio?

So a lot of questions packed into one there. But overall, indeed, you can see it is software and services is the largest category by a factor of more than 2 compared to the second place. I guess one of the first things we think about broadly is not all software companies are created equally. At a high level, there are statistics that 70% of Fortune 500 companies still use mainframes, forget about blades or SaaS or things like that. The risks are more pronounced in some sectors of software than others.

An example, like an airline reservation system would be something so critical not to be SaaS'ed away anytime soon. At Eagle Point, our internal books and records, like the official custodian records, it's a long time away before we see that. At the same time, how we track vacation time and things like that, I'm sure we subscribe for some silly thing that we could probably just make and do it less expensive. So broadly, the criticality of a tool is an important factor in its SaaS vulnerability, first off.

And then two, I'll make an analogy back to e-commerce and amazon.com's IPO, which I think was back in 1997, give or take. One of the things we talked about then, you could probably find Bloomberg articles and other mass media articles, the end of retail as we know it. And indeed, Amazon has significantly changed retail. We're going on 29 years ago that, that IPO happened, and there's still plenty of stores. And one stat I saw recently actually said retail was the -- had the highest occupancy rate of any category in CMBS in the CMBS market, the lowest vacancy. So while the predictions of doom are always great in the credit market, in my opinion and experience, they are often overstated. That said, there are snakes lurking in the grass and risks are out there. And there are software loans in the syndicated market that are trading in the 50s, perhaps some even lower at this point. That's the exception, that's not the majority, but it is certainly greater than 0.

When we look at our portfolios, we're not buying or selling specific loans in any CLOs. The collateral managers are the ones doing that. That said, the software industry is an area of significant focus for us, both in our monitoring and ongoing diligence of existing investments in the ground, including the decisions potentially to sell investments as well as an important part of our decision when we're selecting a new security to invest in. So we don't sit here and say we have a target software exposure. All else equal, I would seek to lower it. That said, due to activity in the underlying portfolios, it's possible it goes the other way as well.

Overall, I suspect that trend is going to be in the downward direction. But I do -- I highlight and I really underscore the pace of transition, while it's probably faster this time than it was with e-commerce 29 years ago, we're not in an immediate situation. There are a small number of watch names -- that said, I think many companies have a fair bit of runway to go. So it's something we're actively watching. We're in active dialogue with our collateral managers, and it is impacting our investment decisions, but it's by no means the only factor we consider when we decide to buy, sell or make the decision to hold the security.

I appreciate the insight on that topic. And last question for me, and then I'll step aside. Just given especially looking at the update for the April NAV that the stock continues to trade at a discount to NAV. So is it fair to say that the share repurchases still remain attractive from your viewpoint and likely to continue for the repurchasing for the near term?

We have continued to use the program, although I'll say it's not been as aggressive as we've used it in the past. If you listen to prior calls, I definitively used that word or a similar word. One of the things we balance is the potency of the buybacks in terms of NAV accretion. And I think we've built up about $0.24 of NAV through discounted buybacks.

The flip side, we also balance liquidity in the stock and the actual potency of our buying to the stock price. So it's something we continue to monitor and tweak. The program remains open and active, and we do have open capacity on it. I will say I balance -- we love buying our stock cheap. We love volume in our stock, and we like to use our powder when we can really move the stock price. So it's a collage of all of those 3 that make inform our decision every day. I would no longer say right now, we're aggressively buying back stock, but the program is open and active.

The next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

Dan -- actually for anyone. The 12-month default rate was 1.40, and part of my notes, is 1.20 last quarter. Was software the reason for that change?

Yes. Some of it was -- I mean, we haven't seen really the software names default significantly. It's more so it was not necessarily in this specific sector yet. I mean a lot of the software names, we're kind of seeing kind of them play out in terms of kind of whether they'll survive or not. We think that there's been a lot of baby thrown out with the bathwater for software names in that. About 75% of them still trade above H. And so there's actually a pretty decent kind of [indiscernible] building opportunities there. I mean a lot of the CLO collateral managers were selling software last year in 2025 because they were kind of getting ahead of this AI disruption risk.

So this is not anything that's new to the CLO market. And with kind of the lower concentrations than kind of private credit and the ability to trade loans, there is an ability to kind of make those relative value swaps. And so maybe there certainly will be defaults kind of in some of the software names that could lead to kind of higher defaults in the future, but kind of getting ahead of it, trading it around allows us to -- at least the BSL market seems to keep the default rate still relatively low.

So you're not really seeing higher nonaccruals or anything like that per se, just necessarily a bank, not a performer.

Correct.

Okay. On a follow-up, some of the BDCs I cover, believe it or not, have started seeing increased credit stress in health care. Have you guys seen anything like that?

Not significantly unless it's, I guess, somehow related to AI, if it's like some sort of software company that's really categorized within health care and has a risk of being disrupted by AI. But otherwise, no, we haven't seen that.

There are no further questions at this time. And I'd like to turn the call back over to Thomas Majewski for closing remarks.

Great. Thank you very much, everyone, for joining today. Lena, Dan and I appreciate your interest in Eagle Point Income Company. If you have any further questions, we'll be in the office later today and I'd be happy to speak. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Ladies and gentlemen, thank you for standing by. We will begin in just a couple of moments. Once again, thank you for standing by. We'll begin in just a couple of minutes.

Greetings, and welcome to the Eagle Point Income Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the Fourth quarter and fiscal year 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's adviser, and Lena Anova, Chief Accounting Officer for the adviser.

Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the SEC.

Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our full year 2025 audited financial statements and fourth quarter investor presentation with the SEC. These are also available in the Investor Relations section of the company's website eaglepointincome.com.

A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom?

Thank you, Darren, and good morning, everyone. During 2025, the CLO market experienced challenging conditions and the company was not immune to these broad market dynamics. While default rates in the loan market remain below long-term historic averages, the company's financial performance and total return for shareholders last year were adversely impacted by a number of key factors. These factors included the effect of reduced SOFR levels on CLO debt investment income, ongoing loan spread compression impacting our CLO equity portfolio, and a broader negative general sentiment in the market towards credit.

Throughout the year, we actively managed our portfolio within our investment mandate as the market evolves, seeking opportunities across both CLO debt and equity as well as certain other asset classes beyond CLOs. We believe our long-term distribution track record reflects the durability of our strategy across different interest rate cycles and credit environments.

As we move into 2026, we believe healthy underlying borrower fundamentals and our disciplined approach will position us well. Looking at the company's results for the year, EIC generated a GAAP return on equity of negative 0.7% and a total return on our common stock of negative 15.2% assuming reinvestment of distributions. We paid $1.98 per share in cash distributions to our common shareholders or 15% of our average stock price during the year.

During 2025, the elevated level of CLO refinancings resets and calls contributed to early repayments across our CLO debt portfolio. paydowns within our CLO debt portfolio totaled $147 million during the year. Because many of these investments were purchased at discounts and were then repaid at par, the repayments did generate $0.12 of share of realized capital gains during the year.

During the course of 2025, we participated in 10 resets and 6 refinancings across our CLO equity portfolio. Each reset extended the reinvestment period to 5 years and together with the refinancings resulted in average CLO debt cost savings of 46 basis points for those CLOs.

Looking at the fourth quarter results from last year, the company generated net investment income less realized losses of $0.03 per share, which was comprised of $0.35 of net investment income and offset by $0.32 of realized losses. The realized losses were primarily attributable to portfolio repositioning, including rotating out of certain positions from underperforming CLO collateral managers.

The fourth quarter net investment income of $0.35 per share compares to $0.39 of net investment income per share recognized in the prior quarter. The decline in net investment income was driven primarily by 2 factors; first, SOFR declined during the quarter, reflecting the continuation of Fed rate cuts in the second half of 2025. This directly impacted our CLO debt portfolio as the coupons on our CLO debt positions generally have a floating rate based on SOFR. Second, continued tightening and broadly syndicated loan spreads, which has outpaced the decline in CLO liability costs also reduced earnings from our CLO equity portfolio. We refer to this market dynamic as spread compression.

Despite the decrease in net investment income, portfolio cash flows remain robust. Recurring cash flows for the fourth quarter totaled $19 million or $0.79 per share and that compares to the prior quarter's $17 million or $0.67 per share, representing an approximate 18% increase quarter-over-quarter. The increase reflects the quality and diversification of the company's investment portfolio and notably, fourth quarter recurring cash flows exceeded our regular common distributions and total expenses by about $0.15 per share.

NAV decreased to $13.31 per share as of December 31, which is down from $14.21 per share at the end of September. This was largely driven by continued loan spread compression, which has caused CLO equity valuations to decline. Our GAAP return on equity for the fourth quarter was negative 4.2%. Our investment strategy allows us to deploy capital across CLO debt, CLO equity and other credit asset classes. in both the primary and secondary markets. This flexibility enhances our ability to allocate capital where we find the most compelling relative value.

During the fourth quarter, we deployed about $45 million into new investments. Of that amount, $26 million was invested in other credit asset classes, such as infrastructure credit, asset-backed securities, portfolio debt securities and regulatory capital relief transactions with a weighted average effective yield of 21.6%. Importantly, our adviser has expertise in these other credit strategies and has been invested in them for some time for other funds and accounts that our adviser manages.

We've also continued to actively optimize our capital structure, seeking to reduce financing costs. During the fourth quarter, we completed the full redemption of our 7.75% Series B term preferred stock. We also entered into a new revolving credit facility with an attractive cost of capital and a 3-year maturity. And then earlier today, we announced our intention to fully redeem the company's 8% Series C term preferred stock which at present represents our highest cost of capital.

During the quarter, we also repurchased $19 million of common stock at an average discount to NAV of 18.2%, resulting in a NAV accretion of approximately $0.14 per share. In November 2025, we announced that our Board of Directors had increased our common share repurchase authorization to $60 million. These actions reflect our ongoing commitment to enhancing shareholder value, and we expect to opportunistically continue buying back shares when they are trading at material discounts to NAV. We believe our shares remain undervalued and repurchasing them represents a very attractive use of the company's capital.

Last week, we declared 3 monthly distributions of $0.11 per share for the second quarter of 2026, which is in line with the distributions we declared for the first quarter. We believe the current monthly distribution level of $0.11 per share aligns with the company's near-term earnings potential in today's lower interest rate environment.

As a reminder, when setting the monthly distribution level, the company's Board of Directors considers numerous factors, including the cash flow generated from the company's investment portfolio, our GAAP earnings in the company's requirement to distribute substantially all of its taxable income. CLO debt is a floating rate asset, so it is expected that our earnings power will generally move in line with benchmark rates.

That said, we continue to believe CLO junior debt offers compelling risk-adjusted returns compared to many other broader credit market opportunities. We believe the company's portfolio is well positioned to drive returns in any economic environment and rate cycle. The scale and experience of our adviser at Eagle Point remain key advantages as we seek to capitalize on opportunities in a dynamic market environment.

I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the fourth quarter. Loan market fundamentals remained largely stable through the year despite occasional bouts of volatility due to headlines concerning tariffs, interest rates and global acute political factors. Loan issuers continue to have positive growth in their revenues and EBITDA throughout the year, contributing to a relatively healthy credit market.

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. The trailing 12-month default rate decreased from 1.5% at the end of September to 1.2% as of December 31, still considerably below the long-term average of 2.6%. As of December 31, our portfolio's default exposure was 32 basis points, continued rate declines should support a lower default rate environment as issuers save on interest costs.

The loan new issuance rose slightly to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the 2024 record of $202 billion, Fourth quarter resets and refinancings were $54 billion and $20 billion, respectively. Combined full year CLO issuance, including resets and refinancings, hit $546 billion for 2025, exceeding last year's total volume of $511 million.

Tight loan spreads and increased supply of new issue CLOs were headwinds to CLO equity returns causing some pressure on our results. At the same time, new issue loan activity is picking up with several large loan deals recently announced. This increase in supply could cause loan spreads to widen as the market absorbs higher loan volumes leading to potentially higher equity cash flows in the future and creating a potential tailwind for CLO equity.

CLO debt spreads have remained resilient despite the modest volatility that we observed in the fourth quarter. our CLO BB positions, which are focused on the higher quality portion of the market benefit from attractive yields and our subordination. As of December 31, we had $52 million of cash and undrawn revolver capacity available. providing ample liquidity to deploy into attractive investment opportunities or opportunistically repurchase our stock and deliver long-term value for our shareholders.

With that, I'll hand the call over to our advisers Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. During the fourth quarter, the company recorded net investment income or NII less realized losses from investments of $0.7 million or $0.03 per share. This compares to NII less realized losses of $0.26 per share in the prior quarter and NII and realized gains of $0.54 per share in the fourth quarter of the last year. including unrealized investment portfolio losses, GAAP net loss was $15 million or $0.60 per share for the fourth quarter.

This compares to GAAP net income of $0.42 per share for the third quarter. The company's fourth quarter net loss was comprised of investment income of $15 million, offset by net unrealized losses of investments of $16 million net realized losses of $8 million and financing and operating expenses of $6 million. In addition, the company recorded an other comprehensive loss attributable to changes in the mark-to-market of the company's liabilities recorded at fair value of $1 million for the fourth quarter.

We paid 3 monthly distributions of $0.13 per share during the fourth quarter of 2025 and last week, we declared market distributions of $0.11 per share for the second quarter of 2026, in line with the distributions for the first quarter of 2026. As of December month end, the company had outstanding preferred securities, which totaled 31% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions.

As of December 31, the company's NAV was $312 million or $13.31 per share versus $14.21 per share as of September month end. During the fourth quarter, we repurchased over 1.6 million shares of our common stock for $19 million at an average discount to NAV of 18.2% per share. That resulted in NAV accretion of $0.14 per share. Looking at our portfolio activity during the month end of January, the company received recurring cash flows from its investment portfolio of $14 million. To note, some of the company's investments are still expected to make payments later in the quarter.

As of January month end, net of pending investment transactions and settlements, the company had $85 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of January month end was between $13.23 per share and $13.33 per share.

I will now turn the call back to Tom to provide closing remarks before we take your questions.

Thanks, Lena. Our fourth quarter reflected our continued focus on active portfolio management amid dynamic market conditions. Performance faced technical headwinds driven by spread compression in the leveraged loan market and the pace of repricing rather than deterioration in credit fundamentals.

Throughout this environment, we have focused on relative value and disciplined capital allocation across CLO debt and selectively CLO equity and other asset classes in the credit market beyond CLOs. We continue to actively execute on our share repurchase program as we view our stock as undervalued and believe repurchasing shares at a discount represents an attractive use of capital.

Looking ahead, we remain constructive on the CLO market fundamentals. We have a robust pipeline of refinancings and resets, which we believe will help lower the liability costs in our CLO equity portfolio. At the same time, increased new issue loan activity may help rebalance supply and demand in the loan market over time, which we also believe could be incrementally supportive for CLO equity.

Overall, we believe the current market environment represents a compelling opportunity for patient well-capitalized investors with a strong balance sheet, active portfolio management and a continued focus on relative value, we believe Eagle Point is well positioned to navigate the evolving market conditions and deliver solid risk-adjusted returns and long-term value for our shareholders.

Thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] Our first questions come from the line of Erik Zwick with Lucid Capital Markets.

Wanted to start with just a follow-up on some of your comments, Tom, about the realized losses in the quarter being driven by rotating out of some underperforming managers. I wonder if you could just add a little more color to that, what particular measures or metrics were they kind of falling short of expectations. Just kind of curious if you can add something there.

Eric, this is Dan. So I guess in terms of the underperforming collateral managers, these are some of the ones that had, I guess, more credit issues and kind of loan spread compression that we had kind of anticipated on the CLO equity side. Maybe there were a handful kind of on the COO BB side as well that have kind of underperformed our expectations on credit. And so we just thought that it was best to exit and kind of rotate into both other CLOs, but also some of the asset classes away from CLOs that you've seen kind of grow kind of within your portfolio, whether it's collateralized fund obligations, as securities and then some other portfolio debt securities, which are all kind of asset classes that Eagle Point and other funds -- within Eagle Point are investing and we just found kind of better relative value there.

And so I thought we would kind of enhance the yield of the portfolio as well as kind of a little bit of diversity within the portfolio through those.

That's great color. And then in terms of the announced redemption of the Series C term preferred stock, Curious about your source of funds for redeeming that? Is it kind of a combination of cash on hand and maybe utilization of the new revolver? Or how do you plan to fund that.

Yes, exactly -- There -- it's definitely the revolver, a new revolver that's in place. There's kind of cash on hand, but also just continues to be a a lot of refis and resets for our CLO debt that means that we're getting paid off kind of at par, stuff that we typically bought at a discount earlier. So we're achieving that convexity and then able to kind of get par back and use those proceeds to ultimately pay back the EICC.

Got it. And then last 1 for me. In the press release, There's an indication that the weighted average expected yield on the CLO portfolio was 12.5% at the end of the quarter, and that was up from 11.6% curious. the driver of that increase, was it kind of income related or more in the denominator just the change in the fair market value of the portfolio?

Well, I think it's more just so that we -- was a little bit, I guess, the denominator, but it was also just kind of being able to redeploy into kind of wider yielding assets versus CLO BBs and CLO equity. So it's really that kind of non-CLO bucket that was accreted.

Our next questions come from the line of Christopher Nolan with Ladenburg Thalmann.

Lena, were there any nonrecurring items in the earnings?

No, we're not, this quarter.

Okay. And then I guess a follow-up on Eric's question on the refi. Should we expect the balance sheet investment portfolio to shrink in the first quarter and possibly into the second quarter as well relative to year-end.

No. I mean I guess we're obviously redeeming kind of the EICC, and we have been kind of opportunistically buying back our stock. That being said, it typically over the long-term target at 25% to 35% leverage ratio. And we're -- I guess, with the EICC being redeemed, will be kind of on the lower end of that. So I guess we have that target of 25% to 35%. And I guess that's really kind of all I can say for now.

Okay. And then I guess for the indication is you're going to be focusing less on CLO more on alternative credit assets. Are these going to be assets which you have any sort of direct exposure directly underwriting, let's say, a company? Or is it you're going to be buying packaged securities as before?

Yes. So this is -- these are investments that are being made kind of across the Eagle Point platform and other funds or accounts that we manage. We have dedicated teams that are focusing on these investments. And then the EIC, based on kind of the merits of the investment based on kind of my decision as the portfolio manager can participate in these investments. And so relative to kind of the opportunities that we were seeing in CLOs, we found that these other non-CLO investments I guess -- provided a better relative value opportunity. So that could change tomorrow if we find kind of CLOs provide a better kind of relative value kind of attractive yield.

But during the fourth quarter, we found better relative value within these kind of non-CLO asset classes.

Thank you. We have reached the end of our question-and-answer session. I would now like to hand the call back over to Tom Majewski for any closing comments.

Great. Thank you very much, everyone. We appreciate your time and interest in Eagle Point Income Company. Hopefully, we're giving some good color on the strategy for the portfolio as we move forward. Certainly, will remain in the foreseeable future to the focus on the core of a CLO BB portfolio but with the goal of enhancing the return where we can just as we've added CLO equity from time to time, similarly, introducing some other asset classes that we're investing in across Eagle Point's broader platform where we see opportunities on a relative basis to add incremental value.

So we're excited about the company. Our #1 job is to be delivering strong returns to shareholders through credit products. And we believe as we continue to evolve the strategy of the portfolio consistent with broader developments here at our firm. We're excited for the future prospects for EIC.

We appreciate your time and attention. Lena, Dan and I are around today if anyone has any follow-up questions. Thank you.

Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Greetings, and welcome to the Eagle Point Income Company Third Quarter 2025 Financial Results Call. [Operator Instructions]

It is now my pleasure to introduce your host, Darren Dougherty.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the third quarter of 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser.

Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission.

Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law.

Earlier today, we filed our third quarter 2025 financial statements and investor presentation with the Securities and Exchange Commission. These are also available in the Investor Relations section of the company's website, eaglepointincome.com. A replay of this call will also be made available later today.

I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom?

Thank you, Darren, and good morning, everyone. We're glad you're joining the call with us today. EIC had a positive third quarter. Our NAV increased and we covered our distribution from both net interest income as well as recurring cash flows. The scale and experience of the Eagle Point platform remain key advantages as we seek to capitalize on opportunities in a dynamic market environment for CLO investing.

For the quarter, the company generated net investment income less realized losses of $0.26 per share. This was made up of $0.39 per share of net investment income and offset by $0.13 of realized capital losses. Recurring cash flows totaled $17 million or $0.67 per share, and this is consistent with the prior quarter's $18 million or $0.67 per share. Recurring cash flows exceeded our regular common distribution and total expenses by $0.05 per share.

NAV rose to $14.21 per share as of September 30, and that's up from $14.08 per share at the end of June. The increase reflects our continued portfolio performance, net investment income coverage of our common distribution, improving market conditions and disciplined capital management. Our GAAP return on equity for the third quarter was 3%.

During the quarter, we deployed $60 million into new investments. The new CLO equity we purchased during the quarter had a weighted average effective yield of 16.6%. The company's ability to invest in both CLO debt and CLO equity in both the primary and secondary markets allows us to assess relative value opportunities wherever they present themselves. Backed by Eagle Point's deep expertise in the CLO market, we believe this approach positions us to deliver attractive returns and long-term value for shareholders.

We completed 3 resets and 4 refinancings of our CLO equity positions during the quarter. These actions lowered the debt costs in those CLOs, and in the case of the resets, extended the reinvestment periods, which continue to enhance our portfolio's weighted average remaining reinvestment period and long-term earnings power.

During the third quarter, we issued $35 million of preferred stock through our at-the-market program. In light of recent Fed rate cuts, earlier today, we announced the scheduled redemption of 100% of our 7.75% Series B term preferred stock. This redemption allows us to further optimize our capital structure and reduce financing costs, positioning the company to enhance earnings power for our common shareholders over time.

Also during the quarter, we repurchased $21 million of common stock at an average discount to NAV of 8.3%. This resulted in NAV accretion of $0.07 per share. Today, we announced that our Board has increased our common share repurchase authorization to $60 million from $50 million, which had been previously announced in June of this year.

Since June, through October 31, we've repurchased in total $33 million of common stock at an average discount of 8.8% to NAV, creating $0.11 per share of NAV accretion for our shareholders. These actions reflect our ongoing commitment to enhancing shareholder value while maintaining prudent leverage and balance sheet flexibility. We plan to continue to be aggressive in buying back shares when they are trading at a discount to NAV.

Since our last earnings call in August, the Fed has cut interest rates twice. Our CLO debt portfolio, which makes up the majority of our holdings, is directly indexed to short-term rates and will earn lower coupons as a result of the Fed rate cuts.

Earlier today, we declared 3 monthly distributions of $0.11 per share for the first quarter of 2026. This is a reduction from our previous monthly distribution of $0.13 per share and reflects largely the impact of the Fed rate cuts.

The company's Board considers numerous factors when setting the monthly distribution level, including cash flow generated from the company's investment portfolio, GAAP earnings and the company is required to distribute substantially all of its taxable income. We believe this new distribution level is aligned with the current interest rate environment and the company's near-term earnings potential.

CLO debt is a floating rate asset, so it is expected that our earning power will move around as benchmark rates move just as it increases when rates are rising. That said, we believe junior CLO debt continues to offer compelling risk-adjusted returns compared to comparably rated corporates given its low credit expense and premium yield.

I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the third quarter. The S&P UBS Leveraged Loan Index returned 1.6% for the quarter and continued to perform well through October, returning 0.3% for the month. There were 5 leveraged loan defaults during the quarter. And as of September 30, the trailing 12-month default rate stood at 1.5%, up from 1.1% as of June 30, but well below the long-term average of 2.6%.

The widely reported First Brands default caused most of the increase in the default rate, but had a minimal impact on the broader CLO market. First Brands accounts for only 25 basis points of our portfolio on a look-through basis and we do not view it as an indication of widespread credit weakness. Note that our CLO BBs benefit from par subordination, so the loss from First Brands was borne by the CLO equity.

The company's portfolio default exposure as of September 30 stood at 41 basis points, which is well below broader market levels. With rates expected to fall further, defaults should remain muted as loan issuers will have much lower interest costs. In addition, corporate fundamentals across the loan market remain resilient with issuers generally continuing to grow revenue and EBITDA despite the effects of inflation, tariffs and rates over the past year.

During the quarter, approximately 6.8% of leveraged loans or roughly 27% annualized were prepaid at par. In general, loan issuers continue to be proactive in tackling their near-term maturities and the maturity wall, as we have mentioned on prior calls, continues to be pushed out.

In terms of CLO new issuance, we saw $53 billion of volume during the quarter. This was up slightly from $51 billion in the second quarter. Reset and refinancing activity for the third quarter was $69 billion and $36 billion, respectively, both of which represented significant increases from the prior quarter.

CLO debt spreads remain resilient despite the many bouts of volatility that we have observed in the third quarter. Although lower base rates weigh on the earnings power of our CLO debt portfolio, we view the yield and low credit expense offered by CLO BBs as very attractive relative to comparably rated fixed income instruments.

Meanwhile, our CLO equity exposure provides a partial offset to lower rates as it is less rate sensitive. Returns are largely driven by spreads, not base rates. In many respects, lower rates can be constructive for the asset class, easing interest costs for loan issuers and supporting continued credit stability while also seeing increased LBO activity that contributes to new loan supply and wider loan spreads.

As of September 30, we had $52 million of cash and undrawn revolver capacity available for investment and common stock repurchases, providing ample liquidity to act on the best relative value opportunities and deliver long-term value for our shareholders.

With that, I'll hand it over to our Advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. For the third quarter, the company recorded net investment income less realized losses of $7 million or $0.26 per share. This compares to NII and realized gains of $0.39 per share for the last quarter and NII and realized gains of $0.57 per share for the third quarter of last year.

Including unrealized portfolio gains, GAAP net income was $11 million or $0.43 per share for the third quarter of 2025. The company's third quarter net income was comprised of investment income of $16 million and unrealized gains on investments of $5 million, partially offset by financing and operating expenses of $6 million, realized losses of $3 million and unrealized losses on certain liabilities recorded at fair value of $1 million.

Additionally, other comprehensive income was $1 million for the third quarter. We paid 3 monthly distributions of $0.13 per share during the quarter. And earlier today, we declared 3 monthly distributions of $0.11 per share for the first quarter of next year.

As of September month end, the company had outstanding preferred equity securities, which totaled 35% of total assets less current liabilities. This is at the top end of our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions.

The company's asset coverage ratio at quarter end for preferred stock calculated in accordance with Investment Company Act requirements was 285%. This is comfortably above the statutory requirements of 200%.

As of September month end, the company's NAV was $356 million or $14.21 per share, an increase versus $14.08 per share as of June month end. During the quarter, we repurchased over 1.5 million shares of our common stock for a total amount of $21 million at the average discount to NAV of 8.3% per share. This has resulted in NAV accretion of $0.07 per share. We would like to highlight that all repurchased shares were retired.

Looking at our portfolio activity during the month of October, the company received recurring cash flows on its investment portfolio of $17 million. I would like to highlight that some of the company's investments are still expected to make payments later in the quarter.

As of October month end, net of pending investment transactions and settlement, the company had $55 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of October month end was between $13.94 and $14.04 per share.

I will now turn the call back over to Tom, who will provide closing remarks before we take your questions.

Thanks, Lena. The third quarter demonstrated our focus on actively managing our portfolio and executing our strategy across shifting market conditions. We were selective in finding the best relative value opportunities between CLO debt and equity. We also remained active with our share repurchase program, aggressively buying back stock, which we believe is undervalued.

The Board increased the program, giving us more flexibility to keep buying our own stock at a discount. It's a great investment for the company. Periods like this often reward patient, well-capitalized investors. And we believe the company is well positioned to continue generating solid risk-adjusted returns and building long-term value for our shareholders. We appreciate your continued support. Thank you for your time and interest in Eagle Point Income Company.

Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Eric Zwick with Lucid Capital Markets LLC.

I wanted to start just looking at Slide 26, and it seems in the most recent data for revenue and EBITDA change for below investment-grade companies that we've seen a little bit of a pickup here. And then if we kind of take the Fed cuts and reductions and so forth that we've already seen and maybe extrapolate the futures curve a little bit, it seems like kind of profits for companies are trending in a positive direction. So just curious what that means for your expectations in terms of credit quality going forward. There certainly are some concerns in the market today and some unknowns with the macroeconomic, but wonder if you kind of put that together and kind of relay some thoughts on future credit quality.

Yes, very good question. And on this page, which is -- looks like Page 26 in the deck, you can see data going back over a decade going back to 2012. And generically, below investment-grade companies should be growing at a faster rate than the economy. That's just kind of the nature of the beast. They're levered, they're growth-oriented, in many cases, sponsor-backed.

If you look at the last few quarters, in general, you can see a positive revenue trend and a positive-ish EBITDA trend, not as good as the revenue trend. There's a little bit of a spread there. But overall, that's what we like to see. This goes through Q2, which does include some of the tariff-related behavior. Q3 data is still kind of being finalized right now. But overall, we view this as directionally credit positive.

These numbers, I don't want to say they can never be big enough. If they were both -- if the 6.3 and 4.3 were double, we wouldn't object for sure. If they were triple, we might wonder what's going on. But overall, the growth of these companies is very much moving back into the right direction. We certainly had a little bit of shock earlier in the year. But the takeaway here, if top line and bottom line are growing, those are credit positives broadly for the companies we deal with.

Yes. And if I might add, this is Dan Ko speaking. I mean as long as these kind of companies continue to grow revenue and EBITDA, we haven't seen defaults pick up materially. And if anything, as kind of maybe the growth rate increases, we'll likely see, I guess, defaults start to slow down, which we've seen in some of the kind of the research that we're seeing, the outlooks for next year kind of seeing default rates come down. We've seen the percentage of kind of LMEs relative to last year kind of come down. And so generally, with lower rates should lower the interest cost for a lot of these companies. So from a credit standpoint, should be at least some tailwinds going into next year.

That's all great to hear. And then on the next slide, Slide 27, there's been a noticeable increase in annual trading volume really since 2020, maybe notwithstanding 2021. And it looks like '25 is on pace to be a record if I just extrapolate into fourth quarter from the first 3 quarters.

So one -- I guess, maybe a 2-part question. One, what has driven that increase over the past, call it, 5-plus years? And two, what does that has or what does it mean for your business in managing Eagle Point Income Company?

Sure. So in terms of kind of trading volumes, I think some of that has to do with the fact that there are just more eyes on CLOs. I think people have recognized just the premium yields that you can receive as well as the low credit expense for CLO debt relative to kind of other fixed income asset classes, rated fixed income asset classes that are out there.

So I think people have seen just the data on how well it's performed. And so we're seeing a lot more activity within the CLO space. There are more entrants kind of looking at buying CLO debt as well as equity, which has kind of increased the competitive landscape of being kind of the established player in the space certainly helps in that we're a top counterparty for nearly all the desks that are out there, both on our debt and equity standpoint.

And then for your second part of your question, some of that, I guess, the increase is really due to, I guess, the advent of ETFs that have come along kind of over the past couple of years or so. So a lot of the -- I think the investment-grade trading activity is probably related to ETFs, some of the non-investment-grade as well.

But ultimately, we think that the additional liquidity that we're seeing within the market, I think, is good. In that, it allows us to be able to take kind of views on certain investments to buy and sell. And the bid-ask typically for a lot of these tranches has kind of tightened. So just an easier way for us to kind of express views on our positions.

And last one for me, just making sure I'm following your thoughts correctly. With reducing the dividend going into 1Q of next year, safe to assume -- I think you mentioned it's primarily due to the Fed rate cuts that we've seen and maybe some more coming. Safe to kind of assume that you feel the earnings power of the portfolio is likely to trend down somewhat here from this level that you reported in the most recent quarter?

Yes. I mean it has something to do. Obviously, the rates is a driver of that for the CLO debt portfolio, but we are making some rotations within the CLO equity portfolio to kind of increase earnings and to offset some of that as well as some other higher-yielding investments.

So we do -- we changed the dividend rate to what we see as kind of the near-term kind of rate that can be supported. But obviously, many factors kind of go into determining that each quarter along with the Board. But at least for Q1, we think that that's kind of the appropriate level.

Our next question comes from the line of Timothy D'Agostino with B. Riley Securities.

Kind of piggybacking off that last question in terms of asset rotation. It seems quarter-over-quarter CLO debt decreased that kind of breaks the trend of the past 4 quarters of like more CLO debt assets. It also seems like you're holding a lot more cash. I was just kind of wondering if you could provide some color around that activity.

Yes, sure. So thanks, Tim, for your question. I mean there was a lot of refis and resets that have been happening in the CLO market as kind of the spreads for some of the older seasoned kind of positions were in the money for the equity to kind of refinance. And so we saw a lot of paydowns in those investments. So it's obviously sad to see kind of the higher yields go away, but it's also good to get par back a lot sooner than we had anticipated, certainly when we bought some of these at discounts.

And so we have seen a little bit of a build-up in cash. As we announced, some of that cash is going to be used to pay down the EICBs later this quarter. So that's kind of, I guess, why we have a little bit of -- a little more cash than usual. But also, it's kind of finding the right kind of relative value in investments.

CLO BBs are by no means kind of a sector that we're trying to exit, but trying to pick our spots given that most of the paper that we think that's interesting today is actually less new issue, but probably more refis and resets. But they do come with a little bit of kind of hair in the portfolio. They're not as squeaky clean as new issue is. But you can pick up 50 to 100 basis points potentially. So kind of picking our spots and then also kind of try to pick our spots for CLO equity as well as kind of other sort of higher-yielding investments.

Okay, great. And then just as a follow-up to that on the cash component. You mentioned paying down the Bs. Is that the primary focus to pay down the Bs with the cash or will you also be looking to buy back common shares? Just trying to understand like where we can see the cash go more towards? Is it going to be paying down the Bs 100% and taking -- buying back some common or will you really just be focused on paying down the Bs?

Yes. I mean it's really to focus on the Bs, and we haven't publicly announced any sort of share buyback. I'm sorry, I'm sorry. We have announced a share buyback. I apologize. Yes, I mean, so we'll be using it for both so that we'll pay back the Bs. And then I think we've said in the script that we'll aggressively -- look to buy back the common. So we'll be using it for -- ultimately for both.

Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

On Page 22, you have the largest industry concentration of software and technology. How much of that might be AI or data center-related, please?

Not a ton, to be honest. Most of this is kind of enterprise software, so kind of software that's really embedded in a lot of companies' operations. And so it's stickier credits. It's harder for companies to pull out kind of software that they're using on a daily basis because it's just the replacement -- or the cost of replacing, meaning both just the actual cost, but also just the time and effort that goes into replacing the software is very costly. So it's been generally one of the higher industry concentrations within the loan market and has generally performed well over the past several cycles.

Great. As a follow-up, just following up to the most recent question talking about investing in the BBs. When you're looking at deals to invest in, is there particular industries that you're looking to get more exposure on or does each CLO seem to have a broad-based industry composition?

Yes. I mean most CLOs have very similar industry concentrations to the loan market and that CLO managers are generally buying kind of what the market has put before them. You might see a little bit of tweaks here and there and maybe a certain manager decides not to buy any kind of oil and gas names because they've been burned in the past. But it's kind of hard to avoid some of the higher -- like technology and healthcare. Those are typically the 2 highest concentrations within the loan market. So -- but most people are not materially kind of off index, if you will.

And we have reached the end of the question-and-answer session. Therefore, I'll now turn the call back over to Thomas Majewski for closing comments.

Great. Thank you very much, everyone. We appreciate your interest in Eagle Point Income Company. We'll continue to work very hard for shareholders. The biggest thing continuing to aggressively buy back our stock using the buyback program. Good to get the call of the preferred at the highest rate. We'll get that done this year and continue to optimize the company's balance sheet and continue to look for the best investments for the company. So we appreciate your time and effort and the time and interest, and we appreciate joining us today. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to Eagle Point Income Company's Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I'll now turn the conference over to Darren Daugherty with Prosek Partners. Thank you. You may begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the Second Quarter of 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser.

Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involve risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company and the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law.

Earlier today, we filed our Second Quarter 2025 Financial Statements and Investor Presentation with the Securities and Exchange Commission. These are also available in the Investor Relations section of the company's website, eaglepointincome.com. A replay of this call will also be made available later today.

I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom?

Thank you, Darren. Good morning, everyone, and thank you for joining us on the call today. Our portfolio delivered solid performance in the second quarter of 2025, generating strong cash flow from investments and investment income amid the rapidly shifting market landscape. The quarter started with heightened concerns related to global trade and its impact on economic growth. However, as market concerns subsided, the stock market led a broad rebound across asset classes.

The CLO market, which tends to lag other asset classes due to gradual recovery as well, reflecting in increased reset and refinancing activity.

During the second quarter, EIC generated net investment income and realized gains of $0.39 per share. This was comprised of $0.37 of net investment income and $0.02 of realized capital gains. The company received recurring cash flows of $18 million or $0.67 per share during the quarter. This compares to cash flows of $16 million or $0.71 per share in the first quarter. Recurring cash flows were less than our regular common distributions and total expenses as a result of the lower SOFR rates on our CLO debt portfolio, combined with some lower recurring CLO equity cash flows as a result of spread compression. That said, we expect third quarter cash flows to be roughly in line with that quarter's distributions and expenses.

Our NAV as of June 30 was $14.08 a share and this is slightly below March 31 NAV of $14.16 per share. While market volatility in April impacted CLO prices broadly, our portfolio has seen a recovery in our NAV from the April lows. And for the second quarter, the company generated a non-annualized GAAP return of 3.5%. The volatility we experienced in the latter part of the first quarter continued into April creating attractive buying opportunities for discounted CLO debt and equity securities.

During the quarter, we were able to opportunistically deploy $40 million into attractive investments, taking advantage of market-wide price dislocation.

Notably, for BB-rated CLO debt, we were able to buy some securities at prices we hadn't seen since the first half of 2024. When we can purchase CLO debt at a discount, this provides the potential for convexity or pull to par as markets recover and normalize. Our strong liquidity position allowed us to remain on the offensive during the period of volatility in the second quarter. We expect these purchases to help us create realized gains in the future, similar to how our previously discounted purchases from 2023 and 2024 contributed to realized gains that we've generated in more recent quarters.

Earlier in the quarter, we strengthened our balance sheet through our at-the-market program, raising about $20 million of common stock at a premium to NAV. This generated NAV accretion of about $0.01 per share. We also raised about $11 million of preferred capital during the quarter via our ATM program. In late May, however, our stock price dropped, and we quickly announced a $50 million share repurchase program. Our stock was trading at a high single-digit discount to NAV, and we aggressively began buying back our stock. The stock closed on June 6 at an 8.4% discount to the May 31 NAV. And in part, due to our buyback program, it ended the quarter at only a 2.9% discount. In total, we repurchased $6.5 million of common stock at an average discount to NAV of 6.4%. This helped generate $0.02 of NAV accretion during the quarter.

Due to regulations, we're limited to the volume we can buy on any given day, and we would have bought more if we could. Today, we declared 3 monthly distributions of $0.13 per share for the fourth quarter, maintaining the distribution level we established in the previous quarter. We completed 2 resets of our CLO equity positions in the quarter. These actions lower debt costs within the CLOs and extended the CLO's reinvestment period, which continued to enhance our portfolio's weighted average remaining reinvestment period and our long-term earning power.

I'd now like to turn the call over to Senior Principal and Portfolio Manager, Dan Ko for a broader market update.

Thank you, Tom. We continue to find attractive investment and opportunities across the CLO market in both junior CLO debt and CLO equity. The market volatility that began in the latter part of the first quarter and continued into April created significant buying opportunities for EIC. We capitalized on the market disruption by buying BB-rated CLO debt and equity at discounted levels.

The S&P UBS Leveraged Loan Index experienced volatility during the second quarter, with the April decline being offset by recovery through May and June. During the second quarter, the loan index had a total return of 2.3% and is up almost 3% year-to-date as of June 30. The index continued to perform well through July and is up 3.8% as of July 31. The recovery in loan prices from the April lows has been encouraging, although CLO debt and equity have not yet fully participated in this recovery, presenting continued upside potential for EIC. The trailing 12-month default rate increased to 1.1% as of June 30, remaining well below the historical average of 2.6%. The quarter included a notable default by [ Altice ], representing approximately 38 basis points of the CLO market, though the event was largely anticipated by market participants. EIC's portfolio default exposure as of June 30 stood at 41 basis points. Our portfolio is well positioned, even if defaults were to rise in the future.

During the second quarter, approximately 3.3% of leveraged loans or roughly 13% annualized were prepaid at par. Many loan issuers continue to be proactive in tackling their near-term maturities. And the maturity wall of the market continues to get pushed out further. In terms of CLO new issuance, we saw a $51 billion issued during the second quarter with most of the activity concentrated in the second half of the quarter as markets stabilized. Reset and refinancing activity for the second quarter was $44 billion and $9 billion, respectively. Our CLO debt portfolio benefits from its floating rate nature, although the impact of lower benchmark rates since last year's has lowered our earnings. I'd like to note that the CLO equity exposure in the company's portfolio provides some insulation from rate movements and benefits from the reinvestment optionality during periods of market stress.

As of June 30, we had over $20 million of cash and undrawn revolver capacity available for investment and common stock repurchases, providing ample liquidity to capitalize on opportunities. We believe the recent market volatility has created attractive entry points, and we remain well positioned to deploy capital into investments that offer compelling risk-adjusted returns for our shareholders in the long run.

With that, I will now turn the call over to our adviser's Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. During the second quarter of 2025, the company recorded net investment income and realized gains of $10 million or $0.39 per share. This compares to NII and realized gains of $0.44 per share recorded for both the first quarter of 2025 and the second quarter of 2024. When unrealized portfolio gains are included, the company recorded GAAP net income of $13 million or $0.49 per share. The company's second quarter net income was comprised of investment income of $15 million realized gains of $0.5 million and unrealized gains on investments of $4 million, partially offset by unrealized losses on certain liabilities recorded at fair value of $1 million and financing and operating expenses of $6 million. Additionally, other comprehensive income was less than $0.5 million for the second quarter.

During the second quarter, we paid 3 market distributions of $0.20 per share. Earlier today, we declared [ 3 month ] distributions of $0.13 per share for the fourth quarter of 2025, in line with the level of distributions previously declared for the third quarter. As of June [ 110 ], the company had outstanding preferred equity securities and borrowings from our credit facility, which totaled 31% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35% at which we expect to operate the company under normal market conditions. The company's asset coverage ratios at the quarter end for preferred stock and debt calculated in accordance with Investment Company Act requirements were 325% and over 6,500%, respectively. These measures are well above the statutory requirements of 200% and 300% for preferred stock and debt.

As of June [ 1 10 ], the company's NAV was $373 million or $14.08 per share, a slight decrease compared to $14.16 per share as of March month end. During the second quarter, [ BD ] purchased over 488,000 shares of our common stock on the share repurchase program for total proceeds of $6.5 million. The shares were repurchased at the average discount to NAV of 6.4% per share, resulting in a NAV accretion of $0.02 per share. We would like to highlight that all repurchases were retired.

Moving on to portfolio activity during the month of July, the company received recurring cash flows on its investment portfolio of $17 million. Note that some of the company's investments are still expected to make payments later in the quarter. As of July month 10, [ net Aventics ] investment transactions and settlements, the company had $51 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of [ July month 10 ] was between $14.34 per share and $14.44 per share. This is an increase from June [ month 10 ] and above where we stood on March 31 NAV.

I will now turn the call back over to Tom to provide closing remarks before we open the call up for questions.

Thank you, Lena. The second quarter demonstrated our proactive approach to investing and managing the company. While the market volatility in April created short-term pressure on NAV it largely recovered by the end of the quarter and as of July is above where we stood at the end of March. Volatility provides us with attractive investment opportunities allowing us to buy securities at discounted prices that we hadn't seen in some time.

While we are disappointed with our share price move in May, it also presented the opportunity for us to buy back stock cheap. We are generally limited to a percentage of the daily volume so we can't buy as much as I'd like, but I know this is one of the best investments we can make. We plan to continue buying back our stock as market opportunities present themselves. The recent market volatility reinforced our views that periods of dislocation can create opportunities for patient well-capitalized investors like EIC. We believe our strong liquidity position and experience team allows us to capitalize on these opportunities while maintaining focus on generating attractive long-term risk-adjusted returns for our shareholders. We remain confident that EIC is well positioned to continue generating strong returns, and we appreciate your continued support.

We'd like to thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] The first question comes from the line of Randy Binner with B. Riley.

And yes, I think that was well covered the result was stable, I think, maybe more so than some of the more equity-focused names and on the NII, all-in NII and yield. Could you just spend -- I mean it was discussed by Dan and Tom on the call, but could you spend a little more time just how we should think about that kind of that all-in yield coming through on the debt portion of your CLO portfolio? I guess I'm just kind of focused on the Fed, and like if rates dropped, if spreads can widen and just how we should think about that kind of all-in yield back half this year into next.

Sure. Let me jump in and maybe Dan will come in with a few other points. So whereas CLO equity is far less rate sensitive than the average fixed income investment CLO debt, which is a P&I kind of bond to get your interest and principal back at the end with rates typically based off of SOFR does move around with short-term rates. Rates on or about the 10th day of a quarter, give or take a few days. So let's say the Fed did take action in September, probably you could see lower SOFR rates in October when the bonds were reset. So if you were to see a Fed rate movement in September, it could translate through to a little bit lower income at EIC into the fall.

That said, the CLO equity component of that portfolio probably doesn't move around meaningfully based on any sort of rate movement. The way we've looked at the company broadly so I guess your question, first off, was would you see some spread widening in CLO BBs if rates were cut? Potentially, it's not a hard and fast rule. You do start getting to a -- at some point, there becomes floors and all in returns that people are interested in buying CLO BBs, so tightening rates, all else equal, probably doesn't bring about tightening in spreads, maybe widening. I don't know, Dan, some of the things as we've seen rates go from 0 to 5 to 0 to 5 to whatever.

[Audio Gap] CLO double lease on the 2.0 inside of, let's say, a 7% yield for very long. Probably closer to kind of 8, maybe 9-ish percent sort of yields. So while obviously, these are floating rate instruments, I guess there is a kind of a relative value versus kind of high-yield bonds where a lot of people look at high-yield corporates or CLO BB's kind of yielding a higher amount than high-yield corporates. So you probably continue to see a higher yield for CLO BB's despite kind of rates going down, at least that's what we've experienced historically. But I guess who knows what happens in the future.

Okay. Great. That was helpful. I appreciate it.

To cut it maybe even more to a point [ 25-point ] move is not that big of a move if we see rates move down 100 basis points. That starts becoming interesting in terms of impact on earnings. Rates could also go up, too. I mean it's -- it kind of -- it obviously goes both ways on this one, but you should think of this as a -- principally floating rate portfolio.

Our next question is from the line of [ Christopher Nolan ] with [ Ladenburg Salmon ].

Dan had his market comments earlier indicated recovery in leveraged loan pricing from the UBS index. And then immediately afterwards, talked about pushing out of loan maturities Wouldn't the push out of loan maturities sort of indicate some credit distress at the bank level?

No, not necessarily. I mean just these issuers are refinancing their debt since the market is strong. They're able to kind of restrike I guess the [ Lantana ] the maturities by refinancing the old debt and giving themselves more runway. So we've seen a healthy amount of refinancing activity. These are all being paid off at par. It's not like it's a restructuring and the maturities are being trucked out -- pushed out. It's the holders have the option to take par and kind of invest somewhere else or they could kind of roll in the refinancing of the loan.

Okay. And I guess as a follow-up on that note. I mean we're pretty -- where do you guys -- I mean, are you sort of in the holding pattern in terms of the risk on or risk off for EIC or where are you thinking about that? Because there seems to be a lot of cross currents with the macro news.

Yes. No. I mean we think that CLO BBs as well as CLO equity behave -- is a resilient asset class and kind of performs through the cycles. So we're constantly kind of evaluating relative value between the 2 within our portfolio and are staying active in kind of trading the portfolio around. We have had, as noted kind of during the call that we've had several positions kind of being paid down at par because the CLOs are being refinanced and reset as well, which leads to kind of debt being paid off at par and so kind of looking to redeploy those proceeds to earn income.

Okay. So the read into that is really just opportunistically trying to add on to your positions.

The next question is from the line of [ Eric Swick ] with [ Lucid Capital ] Markets.

I jumped on a little bit late, so apologies if you address something that I ask here. But wondering if you could just kind of characterize your pipeline for new investments today? How that's shaping up at this point?

Yes. I mean we look at both on the CLO BB side, we're looking at both new issue and secondary, all things equal, we prefer seeing discount, and there are opportunities to kind of buy CLO BBs at a discount in the secondary market. And even in primary, we were able to kind of source that just given the size of our orders, we're able to kind of drive some [ OID ] and primary transactions as well.

So looking across various different opportunities. There's again, it's relative value between secondary, between primary new issue, primary refis, primary resets and there's been a lot of activity in the first half of the year, it was about $100 billion of new issuance, a little more of refis and resets. And we've seen that kind of pace continue through July and into August. So plenty of opportunities and lots of things to look at. So the pipeline kind of remains strong on CLO equity side, we've erred towards secondary, although primary can present some opportunities with some of our -- with some of our structure and our ways that we can kind of originate transactions but both the debt and equity side of EIC us reasonably attractive in adding to our portfolio today.

And then just following up on Tom, your comments about the share buyback that you did in the quarter and kind of given the discount where the stock is trading relative to NAV now, you don't potentially wanting to buy it more. Just curious, do you find it more beneficial from your seat to manage that program manually or with a program kind of put in place and then kind of maybe a bit of a follow-up to that when I would assume then if the price action were to become more constructive and you're trading at a premium, again, you kind of flip the switch and potentially go back to issuing shares by the ATM.

Yes. Good question. And we're 1 month into figure out how to work in 2 months in, I guess, into working a buyback program. When we launched the buyback, I think the stock was around an 8.5% discount give or take. Through our buying and buying of others, it got to around a 2% discount to a 3%. So that's the program we're supposed to be doing.

When I look at this, if I can buy our stock at a 7% discount Dan Ko can't buy a quality BB at 93 right now. We can buy quality BBs at 99 probably, but that's about it, just because now that the [indiscernible] the market doesn't exist. So when I look at it, like that's, in general, the cheapest thing we can do, so we're going to do it.

Yes, as they start getting up to low single digits, NAV, you do back off a little bit. Generically, you don't want to accidentally go above NAV or anything like that. And you have just a little margin is fine there. So when we look at this, if our stock was at 93% of NAV and CLO BBs were 80, I'd probably buy CLO BBs at 80, quality BBs if that was the price opportunity. But relative to other opportunities, that's what I think is the cheapest. That said, we're capped at something like 20% of volume or trailing -- there's a whole series of rules around it that we can't over -- and you don't want to deploy all your capital in 1 day and then the next day, someone comes back and sells. So while I'd like to buy more. It's probably not an unreasonable governor of the volume limit that we're able to be but we do try on soft days try and get as close to that limit as we comfortably can.

As to turning back on the ATM, we're really fortunate we've got a ton of room on our revolver which we do use as a tool very, very comfortably. The size and scale of the company makes the revolver. I mean, the asset coverage ratio now is at 6,000% or something like [indiscernible]. The revolver is relatively small relative to the overall size of the company. So we can move that up and down freely without materially changing leverage. So I would expect what I know today we wouldn't necessarily be issuing stock even if we got back to or when we get back to a premium, I suspect we'd simply be using the revolver to make investments when we saw attractive pieces of the puzzle.

When the stock was at a premium, kind of the day-to-day functionality, this didn't work all the time. But a lot of the time, keep the revolver partway drawn when we were issuing stock on the ATM, just go pay down the revolver with those proceeds, not sit on cash. That use the revolver to make investments. And then when the ATM made sense issued a pay down revolver and then redraw, if we magically got to a premium tomorrow, I think just continue making investments off the revolver for the foreseeable future.

The next question is from the line of [ Shalabh Merge ] with [ Vision Cap Advisors ].

Just a couple of quick questions. The first one was on recurring cash flow. So I noticed that recurring cash flow is below distribution and operating costs of the quarter, but those were the old distributions of $0.20 and now $0.13. So is it fair to say that there's quite a bit of excess, which have taken paining cost and distributions that don't come so there's some chance of a special solution perhaps at the end of the year?

I love the way you're thinking. Let's see, so the specials are a tricky a tricky one. I guess the first thing, a couple of parts of your question there. In the second quarter, recurring cash flow came in below distributions and expenses. We did make an adjustment to the distribution rate beginning in the third quarter. And if you use last quarter's recurring cash flows and apply it to this quarter's anticipated recurring expenses and distributions, it's about equal. We like it when it exceeds but [indiscernible] would start with people. So we flash the -- we said the amount of cash received so far to date this quarter, correct. It's a touch less than where it was last quarter, but all in close band so the vast majority of the cash is already in the bank for this quarter, which is good.

So first step, we were below recurring cash was below distributions and expenses. So that's not so good. It looks like we're going to be roughly in line this quarter based on the cash numbers we've shared so that's good. As to getting to a special, what prompts special dividends or special distributions is when taxable income exceeds the distributions we paid. Now there is some concept of using spillover income in the first few distributions and the new tax year can be applied to the old tax year and some things like that. We look at -- and one other variable while CLO debt taxable income is very easy to calculate, CLO equity taxable income is all over the place.

And if you look at our sister vehicle [ ECC ] there's been periods where years where a significant portion of the distributions were treated as a return of capital because the CLOs didn't flash up much income to the equity, even though they paid lots of cash. There's been other years where the CLOs have had more taxable income than cash. And an example of that, if you bought a lot of loans cheap in 2020 during COVID, and they all paid off at par in '21, that realized gain counts taxable income, but you don't actually get the cash.

So it's -- and ECC had a special program for a while that ended last year. So it whips around all over the place on equity. It's easier on debt, and here, we've got roughly 70-30 debt and equity. So 70s as 30 is difficult to predict. And even if we had a perfect model today, if a CLO collateral manager realizes a big gain or takes a big loss the last day of the tax year, it could make up all our projections. So you can't really flow things through.

So the short answer is, right now, based on where we look, it looks like the company's recurring cash flows are in line with operation expenses and distribution. So that's good to the extent taxable income materially exceeds our distributions, which is not a prediction at this point, and we really won't know towards the end of the year. We obviously do have to maintain paying out substantially all of our taxable income. If that would happen, we certainly -- the appropriate plans. I wouldn't -- where we sit, it doesn't seem super likely, but it's 5 more months of the year and a lot of things can happen.

Second question was on the coupon on the BB CLO debt as you report in your monthly reports. I noticed that the -- going from June to July or even going from May to June, the coupon didn't change dramatically, in fact, have increased from May, June and it was unchanged from March. Is that because despite the fact it's said to be tightening and then are being refi. Is that because you're picking up more attractive opportunities in the sector market as you alluded to?

So the question relates to -- and maybe Dan will drive on this. The question kind of pondering is how does our CLO debt coupon hasn't changed much. The market is certainly tightening in general, but over the last few months, spreads haven't moved. The overall yield or a coupon of CLO BBs hasn't moved that market.

Yes, so far is actually being slightly gone up. So as kind of rates have reset that we've seen kind of coupon [Audio Gap] opportunities in that new issue kind of pricing in the, let's say, the high 400s, low 500 per spread, Tier 1 resets. I don't know I'm talking about Tier 1 collateral managers here. You got some clean resets pricing kind of in the low 500s to mid-500s, and you've got even some of the more banged-up resets kind of pricing at 600 plus for Tier 1 collateral [indiscernible]. So there's just a wide variety. And so really finding kind of the right mix of various different profiles within the portfolio is our goal in that. And there still are opportunities at some of the wider levels for kind of a little dirty or Tier 1 [indiscernible].

Got it. That's very helpful. And finally, my last question was on the [ OC ] cushion. So I know the [ OC ] cushion. Actually, this is really going from June to July. So as long as the into the quarter end numbers. But going from June to July, the OC cushion declined by [ 18 ] basis points. Is that because the rating agencies, especially Moody's has been very aggressive with the CCC downgrades?

Not really. It's not -- we haven't seen the CCCs pick up. Actually, in the month of July, we saw more upgrades than downgrades during that particular month. So if anything, I think it's due to, I guess, there was a credit called [ Altice ] that was in a lot of CLO portfolio roughly up, I think we mentioned 38 basis points exposure across the market. And so that went into 12. Most people expected that default. It was priced as a loan that was going through default and structure. So that's probably the biggest driver of it.

That being said, I mean, there's plenty of cushion within the OC test. I guess we have 460 basis points as the OC cushion listed so that's -- to put that in perspective, I guess, basically how much CCCs would you need for that cushion to be eroded. It's basically 16.5% CCCs roughly because you've got 7.5% of CCCs that you're allowed and then kind of assuming a $50 price on the CCCs that's kind of 9.2% more CCCs you can have before the OC cushion has eroded.

Similarly, another way to look at it is, I guess, what default rate kind of causes this to go away, assuming kind of a, I guess, a 50% carrying value for the default, that's still, I guess, 9.2% of the portfolio.

Right. Okay. Appreciate it. And I guess, finally, I mean, you've already talked about this that the stock is trading at a substantial discount to the latest reported lab, it's like double digits now. Maybe like 10% or 12% discount so I guess it's still pretty attractive from a repurchase standpoint, right?

That's our opinion. I think I used the word keep in the prepared remarks. Just really to -- I mean, I just look at the share price and the midpoint of our NAV would like -- it's about a little more than 10% discount right now, maybe even close to 12%. This is equivalent -- I mean the CLO BB market for quality BBs is around par. So by this, it's like buying quality CLO BBs at 88 so we're not a 0.25 point smart, but we're probably 12 points smart.

At this time, I'd like to turn the floor back to Mr. Majewski for closing remarks.

Lena, Dan and I appreciate your interest in Eagle Point Income Company. We are going to be around today. If anyone else has follow-up questions, please try to reach out directly. Thank you for your time and interest.

Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's conference. Please disconnect your lines at this time, and have a wonderful day.