Chicago Atlantic BDC, Inc.

Good day and welcome to the Chicago Atlantic BDC Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I'd now like to turn the conference over to Trip Sullivan. Please go ahead.

Thank you. Good morning. Welcome to the Chicago Atlantic BDC conference call to review the company's results. On the call today will be Peter Sack, Chief Executive Officer, Tom Jeffrey, Interim Chief Financial Officer, and Dino Colonna, President. Our results were released this morning in our earnings press release, which can be found in the best relations section of our website. and in our supplemental earnings presentation filed with the SEC. The live audio webcast of this call is being made available today. For those who listened to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call. Before we begin, I'd like to remind everyone that certain statements that are not based on historical facts made during this call, including statements related to financial guidance, may be deemed forward-looking statements under federal securities laws because such statements involve known and unknown risk and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, March 19, 2026. Therefore, you're advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. I'll now turn the call over to Peter Sack. Please go ahead. Thanks, Chip.

Good morning, everyone. During the fourth quarter and the full year, the results continue to demonstrate that Chicago Atlantic BDC is a uniquely positioned BDC, investing primarily in direct loans to privately held companies in niche markets with the goal to deliver an attractive return while creating downside protection. We are one of the only public BDCs that is primarily focused on and able to lend to cannabis companies. We also focus on pockets of the lower middle market, commonly overlooked by capital providers. We believe that this differentiation provides uncorrelated distinct credit opportunities. Net investment income for the fourth quarter of 2025 was $0.36 per share and $1.45 for the full year, demonstrating the potential of the business model to generate a yield to book value of 2.7% for the fourth quarter and 11% for the year. During the fourth quarter, we executed on our pipeline, funding $31.7 million across seven new investments, including four new borrowers, effectively utilizing additional capacity on our credit facility. During the fourth quarter, the broader BDC market was impacted by negative sentiment among investors, with many more BDCs trading below net asset value by the end of 2025. Investors placed less reliance on book value as a primary valuation metric and focused more on potential dividend cuts and losses in existing loan books. They were concerned that the froth in the private credit markets may have led to looser underwriting standards, potentially pressuring portfolio performance and driving higher defaults. Additionally, the drop in the Fed funds rate in December has caused fears that this will weigh on earnings and dividends. Meanwhile, in global markets, companies operating in the software industry, which were heavily backed by private credit, fell out of favor with the perception that AI would eliminate the needs for their services. And now they're developing concerns about the banks that have backed private credit. It's clear to us that Chicago Atlantic BDC stock is being influenced by negative sentiment currently surrounding the private credit markets. I think it's important for us to reiterate how differentiated Chicago Atlantic BDC is from the rest. Chicago Atlantic BDC operates within a unique intersection of credit, the emerging sector of the US cannabis industry, and lower and middle markets underserved by other capital providers. Our thesis is simple. We apply best-in-class sector expertise, highly developed relationship-based sourcing capabilities, and fundamental credit and investment principles to make debt investments to borrowers with limited sources of debt capital. We take advantage of limited lending competition to structure first what we believe to be differentiated downside risk of senior secured positions, and second, a highly outsized return profile relative to broader credit and lending portfolios. Our portfolio has extremely limited overlap with other private credit managers, and the drivers of current private credit market pressure simply are not relevant to us. We have limited exposure to software, receivables factory, and no exposure to recent examples of fraud in some large syndicated facilities. Our focus areas have not experienced an over-allocation of capital, leading to compressed yields that we see across other sectors of private credit. Our strategy is built on a disciplined focus on credit and collateral. We work collaboratively with other borrowers to create value, and our work is executed by a team of originators and underwriters with deep industry and rigorous risk management expertise. The metrics speak for themselves, so I will call out a few. The public BDC industry data points that I'm about to mention are taken from Raymond James' BDC Weekly Insights as of March 13, 2026, and Oppenheimer's BDC Quarterly Report as of December 16, 2025. Our weighted average yield on debt investments as of December 31, 2025, was 15.8% compared to 10.8% for the average public BDC. 99.5% of our portfolio is senior secured compared to other BDCs who have an average of 24.9% exposure to subordinated debt, equity, and JV investments. 73% of the portfolio at par is either fixed rate or floating rate at floor, insulating the company against a drop in interest rates. Only 27% of the portfolio is impacted by a further decline in interest rates. We calculate that 100 basis point drop in rates only impacts NII of the company by approximately 1%. Only 3% of the portfolio is currently exposed to the software industry. Our unique investment strategy is focused on underserved markets, providing no overlap in investments made by any other public BDC that we are aware of. We conduct full due diligence on new credits ourselves instead of relying on underwriting conducted by bankers or co-investors, and we carefully monitor the performance of each of our portfolio companies ourselves. The portfolio is under levered with only 25 million of debt as a quarter end and with a 0.08x debt to equity ratio. This compares with the BDC average of 1.2 times debt to equity. Assuming full utilization of our $100 million credit facility during the year, we would still be well below industry averages of leverage. Lastly, we have no non-accruals compared with an industry average of 3.3% of cost. Today, we announced a $0.34 dividend, marking the sixth consecutive quarter at that rate. Total dividends paid out for the year now total $1.36 per share. The platform is performing well, exceeding returns from the larger BDC market with low downside risk and an expanding opportunity set. Recent M&A in the cannabis market has increased our pipeline for 2026. In addition, in recent months, there has been positive momentum in cannabis policy. At the federal level, there was a meaningful shift in December 2025 with the current administration committed to pursuing the reclassification of cannabis from Schedule 1 to Schedule 3. While this is not federal legalization, rescheduling would represent a significant federal policy. As I've said before, rescheduling would dramatically increase cash flow after taxes for our borrowers. In the short term, this would translate into higher equity valuations of both public and private cannabis companies. There would likely be increased M&A activity and higher capital expenditures driven by the higher free cash flow of operators, leading to greater opportunity for our platform. In the medium and long term, there's lingering uncertainty that would continue to limit investment until federal regulators put in place a regulatory framework for cannabis as a Schedule III substance. This continued ambiguity will continue to create challenges for U.S. public listings and access to debt markets. We highlighted a slide in this quarter supplemental on how this may set the stage for improved industry economics without opening the door for increased lending competition. We believe that Chicago Atlantic BDC is well positioned to benefit from these developments although the success of our strategy is not dependent on these changes. We manage the business assuming that the regulatory environment does not change. With this mindset, we will continue to pursue higher yields in niche markets where we believe the risk-reward is attractive, deploying available liquidity, all while continuing to build a portfolio with strong credit metrics and protections. We have carved out a unique strategy with above-market returns opportunity for growth, and limited competition. We've demonstrated that this strategy delivers positive results. Now I'll turn it over to Tom to discuss the numbers in greater detail. Good morning. Thanks, Peter. I want to highlight the investor presentation that was filed with the SEC this morning that serves as our earnings supplemental. I'll start with the investment portfolio. We have 39 portfolio company investments. 25% of the portfolio is invested in non-cannabis companies across multiple sectors. The average credit investment size is approximately 2.4% of our debt portfolio at Fair Value. 73% of the debt portfolio is insulated from further interest rate declines due to either fixed rates or floating rate floors. The gross weighted average yield of the company's debt investment portfolio is approximately 15.8%, which is in line with the last quarter's yield. And none of our loans are on non-improval status. As of December 31st, 2025, the company had $25 million of debt outstanding, all of which was drawn from the revolving line of credit. As of March 18th, 2026, The company had approximately 47.5 million of liquidity, comprised of 45.5 million of borrowing capacity under its $100 million credit facility, subject to borrowing base and other restrictions, and approximately 2 million of cash on the balance sheet. We started 2026 with ample liquidity and lower leverage than other BDCs, providing us the flexibility to deploy additional capital strategically. Financial highlights for the fourth quarter were gross investment income totaling $14.2 million compared to $15.1 million for the third quarter. The net decrease in investment income of approximately $0.9 million from the prior quarter was primarily due to one-time fees from unscheduled repayments recognized in the third quarter of approximately $2 million. which were partially offset by increases of approximately 0.7 million in amendment and origination fees and an increase of 0.4 million of interest income for the fourth quarter. Net expenses for the quarter were 5.9 million compared to 5.6 million in the third quarter. Net investment income for the quarter was 8.3 million or 36 cents per share. compared to $9.5 million or $0.42 per share in the third quarter. The decrease again was primarily due to the impact of one-time fees earned in the third quarter. Net assets totaled $303.4 million at quarter end. Net asset value per share was $13.30 compared to $13.27 in the third quarter. At quarter end, there were 22.8 million common shares issued and outstanding on a basic and fully diluted basis. I will now turn it over to Dino to talk about our originations efforts.