SLR Investment Corp.

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Good morning, everyone. Welcome to today's SLR Investment Corporation fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone, and you can remove yourself from the queue by pressing star 2. Please note this call is being recorded. It is now my pleasure to turn the meeting over to Mr. Michael Gross, Chairman and Co-CEO. Please go ahead, sir.

Thank you very much, and good morning. Welcome to SLR Investment Corp's earnings call for the quarter and year-ended December 31, 2025. I'm joined today by my long-term partner, Bruce Fuller, our Co-Chief Executive Officer, as well as our Chief Financial Officer, Shiraz KG, and members of the SLR Investor Relations Team. Shiraz, before we begin, would you please start by covering the webcast and forward-looking statements?

Thank you, Michael. Good morning, everyone. I would like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Investment Corp. and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast from the events calendar in the investor section on our website at www.slrinvestor.com. Audio replays of this call will be made available later today as disclosed in our February 24th earnings press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections. These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties. Past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC. We did not undertake to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website or call us at 212-993-1670. At this time, I would like to turn the call back to our Chairman of the OCO, Michael Gross.

Thank you, Shiraz, and thank you to everyone for joining our earnings call this morning. We are pleased to report that SLRC's fourth quarter results solidified a strong year for the company, showcasing another quarter of broad stability in our portfolio, slow but steady portfolio growth, and a shift to asset-based lending investments with primarily liquid current assets as collateral that are supported by actively monitored borrowing bases. For those who have been following us for the last two years, we have showed a cautious view with our stakeholders about the increasingly fierce conditions within sponsor finance from an oversupply of capital. The broader investor community and media are now signaling their concern of these conditions, the potential risk to forward returns, and ultimately an expectation of a wide dispersion in manager performance. While 2025 can be characterized by a surprisingly resilient U.S. economy that withstood tariff uncertainty, geopolitical tensions, and a government shutdown, The year, in hindsight, can also be marked as the beginning of a sea change for the maturing private credit industry. Sitting here today with investor concerns and skepticism running high, we feel relatively insulated from many of the risks facing many of our peers because of our deliberate decision to hold the line with their underwriting standards, particularly in the overcrowded sponsor finance market, to safeguard SLRC's performance and capital. We attribute the stability in our fourth quarter and full year results to our multi-strategy approach to private credit investing and our tactical asset allocation framework, which enables us to maintain investment discipline and diversification across asset classes. Importantly, we're able to say no and pass on investment opportunities that do not meet our conservative lending standards. As credit investors, we are obsessively focused on downside protection. Turning to our fourth quarter results, SLRC reported net investment income, or NII, of $0.40 per share and net income of $0.46 per share. Net investment income per share was flat quarter per quarter, and net assets of value per share of $18.26 as of December 31st increased both quarter per quarter and year over year from both unrealized and realized gains. Our net income for the quarter equated to a 10.1% annualized return on average equity. For the full year 2025, we generated net income of $1.70 per share, representing a 9.3% return on average equity, which we anticipate should compare favorably to publicly traded BDC and non-listed BDC peers, as well as the broadly syndicated loan markets. During the first quarter, we originated $462 million of new investments across a comprehensive portfolio and received repayments of $445 million for net funding of $17 million, resulting in a year-end comprehensive portfolio of $3.3 billion and annual growth of 7.2%. New originations were the second highest level achieved on record, increasing 36% year-over-year and 3% quarter-over-quarter, continuing the strong origination momentum we have delivered throughout this year. Originations for the year totaled $1.84 billion, The primary driver of new originations continue to be led by our commercial finance strategies, which we believe currently offer more attractive risk-adjusted returns. The company's strong commercial finance originations furthered our portfolio mix shift to asset-based specialty finance strategies over the last couple of years, which we believe provide greater downside protection from strong credit agreements, borrowing bases, and underlying collateral. As of December 31st, 2025, more than 83% of our portfolio investments were in senior secured specialty finance loans, which represents the highest percentage in our 20-year history. Our direct industry exposure to the software industry remains low, so low, in fact, that the approximate 2% exposure as of December 31st is among the lowest industry exposures among publicly traded BDCs. For investors concerned about the uncertainty of technology obsolescence risk and enterprise value destruction for the software industry, the burgeoning threat of artificial intelligence, SLRC's portfolio, with its lack of software exposure, can be viewed as a safe haven. Overall, we remain pleased with the steady expansion and further diversification of the portfolio, which has produced an analyzed growth rate of 10.1% since 2020, and a risk profile that is highly differentiated from other middle market lenders. Direct Corporate Asset-Based Lending, or ABL, A strategy we've been in since 2012 contains high barriers to entry to the complexity of both underwriting and collateral monitoring. This makes it difficult for private credit managers who are late comers to the strategy to build a book of asset-based loans that can withstand the pressures of changing economic and borrower conditions. We believe it's difficult to replicate expertise in our 20 offices spread across the country makes us a first call for both sponsors and non-sponsors who are seeking corporate financings for ABL solutions. For the fourth quarter, asset-based lending originations of $247 million were almost double the originations in the prior year period, while originations for the full year of $1.1 billion were close to double the originations in all of 2024. SLR's ABL strategies continue to offer all-in returns of SOFR plus 600. As a reminder, early in Q4, we hired a well-known and respected industry veteran as President of Asset-Based Lending at SLRC's Investment Advisor. MACFOWL is focused on expanding SLR's asset-based lending capabilities beyond the platform's existing ABL franchise. We believe our investment in people and infrastructure over the last couple years have contributed to our expansion in investment opportunities and a greater recognition of SLR's leadership in the ABL marketplace. SLRC's ABL platform provides the infrastructure and strategic growth capital to further grow our comprehensive investment portfolio, including through potential portfolio and business acquisitions, as well as geographic and industry expansion. With sponsor finance conditions competitive and illiquidity premiums tight, we passed on the refinancings of several cash flow investments in our incumbent portfolio, allowing our sponsor finance portfolio to further shrink. With cash flow loans representing just 14.5% of the comprehensive portfolio, the allocation of cash flow loans remains at the lower bounds of our historical mix. We will, however, continue to approach the investments in cash flow lending opportunistically. Our deep industry expertise in the healthcare sector, along with trends in private equity fundraising, a dedicated healthcare-focused sponsors, and deal activity should continue to present selective opportunities for us to be active in attractive cash flow lending during 2026. Moreover, our healthcare industry expertise in cash flow lending serves as an important informational resource and referral source for SLR's life science and healthcare ABL investment teams. Overall, we remain pleased with the composition, quality, and performance of our portfolio, a direct result of SLR's multi-strategy approach to private credit investing. At year end, Approximately 95% of our comprehensive investment portfolios was comprised of first lien, senior secured loans. 100% of our investments at cost were performing with zero investments and non-accrual, and PIC income continued to comprise a de minimis percentage of total income. We believe these credit quality metrics compare very favorably to peer public BDCs. At December 31st, including credit facility capacity at SSLP, and our specialty finance portfolio companies, we have over $850 million of available capital to deploy. Our liquidity profile puts us in a position to take advantage of either stable economic conditions or a softening of the economy. And I'll turn the call back over to Shiraz, our CFO, to take you through the fourth quarter highlights.

Thank you, Michael. Estelar Investment Corp's net asset value at December 31st, 2025 was $996 million, $18.26 per share, compared to $18.21 per share at September 30, 2025, and $18.20 per share at December 31, 2024. At year-end, SLRC's unbalanced sheet investment portfolio had a fair value of approximately $2.1 billion in 100 portfolio companies across 31 industries, compared to a fair value of $2.1 million in 109 portfolio companies across 31 industries at September 30. SLRC's investment portfolio is funded by a combination of revolving credit facilities and the issuance of term debt in the unsecured debt markets to institutional investors. The company is investment-grade rated by Fitch, Moody's, and DBRS, and more than 40% of the company's debt capital is comprised of unsecured debt at December 31st. During the quarter, the company was active in the management of various credit facilities with multiple banks, including the closing of a new credit facility at the SSLP that enhanced the joint venture's borrowing flexibility and reduced the spread by 75 basis forms. These actions, combined with others taken during the year, have improved borrowing flexibility via better advance rates, expanded the unsecured investor base, and extended maturities. The company does not have any near-term refinancing obligations, with the next unsecured note maturity occurring in December 2026. We expect to continue to prudently access the debt capital markets and issue unsecured debt as and when needed. At December 31st, the company had approximately $1.2 billion of debt outstanding with a net debt-to-equity ratio of 1.14 times, which was within our target range. We believe we have ample liquidity to support our unfunded commitments. Moving to the P&L. For the three months ended December 31st, gross investment income totaled $54.5 million versus $57 million for the three months ended September 30th. Net expenses totaled $32.9 million for the three months ended December 31st. This compares to $35.4 million for the prior quarter. Accordingly, the company's net investment income for the three months ended December 31st, 2025, totaled $21.6 million, or 40 cents per average share, the same as the prior quarter. Below the line, the company had a net realized and unrealized gain for the fourth quarter totaling $3.5 million versus a net realized and unrealized gain of $1.7 million for the third quarter of 2025. As a result, the company had a net increase in net assets resulting from operations of $25.1 million for the three months ended December 31st compared to a net increase of $23.3 million for the three months ended September 30th. On February 24th, the Board of SLRC declared a Q1 2026 quarterly base distribution of 41 cents per share, payable on March 27th, 2026, to hold as a record as of March 13th, 2026. With that, I'll turn the call over to our co-CEO, Bruce Bowler.

Bruce Bowler Thank you, Shiraz. As Michael shared, we've continued to shift the portfolio toward our specialty finance strategies throughout 2025. due to their more attractive risk-adjusted returns. Our pipeline also reflects this continued momentum. Our specialty finance strategies currently offer higher pricing than sponsor finance loans and greater downside protection through their underlying collateral support and tight documentation. We view these more favorable terms as a complexity premium that we earn through investing in structures that require significant expertise and infrastructure that most private credit firms don't have. Turning to the portfolio, at year end, the comprehensive investment portfolio consisted of approximately $3.3 billion, with an average exposure per borrower of $3.8 million. Measured at fair value, approximately 98 percent of the portfolio consisted of senior secured loans, with 95 percent invested in first lien loans. The 3% of our portfolio invested in second lien loans consists entirely of asset-based loans with underlying borrowing bases and no second lien cash flow loans. At year end, our weighted average yield on the portfolio was 11.6%, which was down from 12.2% in the third quarter and 12.1% at the end of 2024. Sequential decline in yield was primarily due to two factors. the decline in base rates in the fourth quarter that began to impact results, as well as timing due to the funding of our new investments towards the end of the December month and receipt of repayments earlier in the quarter. Overall, we believe our portfolio has been less impacted by changes in base rates and spread compression compared to the BDC peer group because of our lower allocation to cash flow loans made possible through our current focus on the less competitive specialty finance investment sectors. Based on our quantitative risk assessment scale, our portfolio continues to perform well. At year end, the weighted average investment risk rating was under two, based on our one to four risk rating scale, with one representing the least amount of risk. Just under 98 percent of our portfolio is rated two or higher at year end. Importantly, 100% of the portfolio was performing with no investments on non-accrual. Now let me touch on each of our four investment verticals, starting with our specialty finance segments. As a reminder, we dynamically allocate across our strategies based on market and economic conditions, which allows us to source attractive investments across market cycles. Let me first discuss asset-based lending. Given current market volatility, as well as investor sentiment, I'd like to take a moment to review the investor protections inherent in our ABL asset class that serves as the bedrock of our conservative investment philosophy. In old school ABL lending, which we define as bilateral corporate lending by teams with significant infrastructure support, as well as experience in evaluating and monitoring collateral. we're able to structure credit agreements and borrowing bases with terms that haven't degraded in lockstep with the ballooning of private credit cash flow focused AUM. We're also able to maintain greater visibility and influence during the life of our investments. Simplistically, with cash flow lending, we are viewing portfolio companies through a quarterly rear view mirror, whereas in asset-based facilities with borrowing base requirements, we are essentially using binoculars. We can get to the table at the first sign of a problem, and our teams have decades of experience in structuring our investments to ensure that the V, or value in loan to value, sufficiently covers our principle, even in severe downside scenarios. Old school ABL requires significant in both people, investment in both people and infrastructure. We began this build-out in 2012 with our first control stake acquisition, which was then followed by eight additional tuck-in acquisitions. Our collaborative ABL and equipment finance strategies provide a moat that newer entrants cannot easily create. At year end, our ABL portfolio totaled just under $1.5 billion across 252 issuers. representing approximately 45 percent of our comprehensive portfolio. For the fourth quarter, we originated approximately 250 million of new ABL investments and had repayments of approximately 235 million. In the fourth quarter, the weighted average asset level yield of the ABL portfolio was 12.6 percent. Now, let me touch on equipment finance. Quarter end, This portfolio totaled just under $1.1 billion, representing approximately a third of our comprehensive portfolio, and was highly diversified across 585 borrowers. The credit profile was unchanged quarter over quarter. During the fourth quarter, we originated just over $150 million of assets, with the majority of them coming from our business that provides leases predominantly to investment-grade corporate borrowers, for their mission-critical equipment. We had repayments of just over $120 million. The weighted average asset-level yield for this asset class was just under 11 percent. We remain encouraged by some of the trends we're seeing in our equipment finance business. Our investment pipeline has expanded, and we're seeing demand from our borrowers and sponsors to extend existing leases on equipment rather than buy new equipment at higher tariff-adjusted prices. Now let me turn to Life Sciences. Over the last few years, Life Sciences' venture debt market has been characterized by fierce competition as asset managers look to make a splash in perceived adjacencies. As we see it, this influx of capital into Life Science lending has led to the prevalence of stretched deals, where some market participants prioritize enterprise value methodology over credit discipline. Throughout this time, we have chosen to maintain a strict, late-stage investment approach with a focus on drug discovery and medical device companies that are in or approaching commercialization and that possess structural protections that have historically mitigated risk throughout market cycles and FDA risks. The broader life science industry has seen a surge in healthcare services transactions, which are predominantly software company loans to healthcare borrowers. We have intentionally avoided this segment. In contrast to the high FDA barriers that are present in drug discovery and medical devices, which entail several year-long FDA approval process, the barriers to entry in software are lower and IP protections are more limited. As a result, the reliance on software IP as collateral presents elevated risks of technological obsolescence and valuation volatility in life sciences that we have avoided. Given those market dynamics, we have consciously allowed our life science portfolio to shrink across the SLR platform. In 2025, we made first lien term loan commitments of approximately $500 million and partnered in the origination of $60 million of ABL facilities for life science borrowers issued by our healthcare ABL team. During that same period, we had over $400 million in repayments. Looking ahead, our pipeline of opportunities is notably larger than it was at the beginning of last year. We think the drug discovery pipeline is poised for reacceleration after a period of relative sluggishness and public market valuations. Despite ongoing uncertainty regarding the FDA's direction, a recent wave of high-profile acquisitions has significantly bolstered public market valuations for bioscience companies. Furthermore, the integration of AI technology holds the promise of shortening the drug development timeline and create a more dynamic investment opportunity set. although we acknowledge that this will take time to evolve. We will remain disciplined, leveraging our 25-year track record to identify late-stage development companies with robust clinical data and clear paths to commercialization. At year end, our life science portfolio totaled approximately $180 million across seven borrowers. Importantly, 100% of these portfolio companies are revenue-generating. with at least one product in the commercialization stage, which significantly de-risks our investment. During the fourth quarter, the team funded $26 million to a new borrower and had just under $60 million of repayments. At quarter end, the weighted average yield on our first lien life science portfolio, including success fees but excluding warrants, was 12.3 percent, consistent with the prior quarter. Now, finally, let me turn to our cash flow lending business. Middle market sponsor activity improved modestly in the fourth quarter, and the momentum appears to be carrying over into 2026. Yet competition for quality assets remains intense, and the looming 26-27 maturity wall continues to shape borrower behavior. In cash flow lending, all eyes are currently on software exposure. Michael has already provided specifics on our underweighting to that sector. I'll touch on the why and how we avoided this sector. As the software sector was experiencing its heydays in the COVID economy era and private credit leaned into the massive capital deployment opportunity, we too evaluated the potential for developing a core expertise in the software sector. However, we determined that loans to SaaS businesses do not offer the same downside protection as our existing investment strategies. For example, unlike in our life science strategy where loans are backed by IP that takes typically 10 to 15 years to create and hundreds of million dollars of investment, the technology backing IP software faces a far greater risk of obsolescence. the risk-reward profile of software loans is less attractive also to our asset-based lending strategies, which are typically backed by accounts receivable or liquid inventory. Additionally, we viewed our existing healthcare expertise across cash flow lending, healthcare asset-based lending, and late-stage life sciences as a means of capitalizing on an investing edge that we possess in an essential sector. In short, our existing strategies have enabled us to avoid the software industry while still delivering portfolio growth and steady income. If software leads to broader cash flow dislocation, we too will be opportunistic investors once again in the cash flow market. At quarter end, our sponsor finance portfolio is just over $475 million across 27 borrowers, including the loans held in our SSLP, or just 15% of the total portfolio. With 100% of our cash flow loan invested in first lien loans, we believe that we are well positioned to withstand tariff or economic headwinds. Our borrowers have a weighted average EBITDA of just over $100 million and carry low LTVs of approximately 40%. Our borrower fundamentals are trending positively with portfolio, company, average EBITDA and revenue growth in the middle single digits year over year. Overall, our portfolio companies have successfully managed the transition to an environment with higher cost of capital as well as input prices. Weighted average interest coverage on our sponsor portfolio was 2.3 times up from the prior quarter. Additionally, only 1.1% of our fourth quarter gross investment income is in the form of capitalized PIC from our cash flow borrowers resulting from amendments. During the quarter, we made new investments of $37 million in cash flow loans and experienced repayments of approximately $30 million. Quarter end, the weighted average yield on the cash flow portfolio was just under 10 percent compared to just over 10 percent the prior quarter. Lastly, let me touch on our SSLP. During the quarter, the SSLP revolving credit facility was refinanced, lowering our interest rate from SOFR plus 290 to SOFR plus 215. Adjusted for one-time credit facility charges associated with this refinancing, the company would have earned $1.5 million in the fourth quarter, representing an annualized yield of 12.6 percent. During the quarter, SSLP invested $13 million and had $19 million of repayments. Net leverage was just under 0.9 times. We expect to continue to rebuild this portfolio this year. And at quarter end, we had roughly $55 million of undrawn debt capacity. Now, let me turn the call back to Michael.

Thank you, Bruce. In hindsight, we think 2025 has the appearance of being marked as a consequential year for the private credit industry and for the value proposition of SLRC. Over the last couple of years, we've been vocal about how the seemingly limitless access to private credit for investors can lead to the unsatisfactory achievement of marketed outcomes, especially given that two key drivers of outperformance in private credit investing comes from avoiding and minimizing credit losses and the use of leverage. As we see it today, the markets are clearly demonstrating an understanding of the private credit market's maturation and are recalibrating expectations to a more normalized default loss experience. While the private credit landscape has shifted dramatically, our core philosophy remains unchanged. Stakeholder alignment drives every decision at both the SLR Capital Partners and SLRC. Last year, SLRC surpassed its 15-year record history as a publicly traded company, and this year SLR Capital Partners will surpass 20 years of operating history. As co-founders of SLR and co-CEOs of SLRC, Bruce and I continue to lead a team that has largely worked with us since the start and are now responsible for more than 300 employees, including professionals at the five specialty finance affiliates within SLRC. Our platform's value proposition has attracted very high-quality senior talents such as Mac Fowle, from JP Morgan and others. Based on our team's investment experience through multiple cycles over the past 30-plus years and our multi-strategy approach to private credit investing, we believe we are well equipped to continue outperforming across shifting private credit markets. SRC achieved a net income ROE of 9.3 percent in 2025 and a total economic return of 8.1 percent over the last three years, which we expect to be at least 200 basis points wide of the public BDC peer group average when results for year-end 2025 are fully released. We believe that the discipline we've exercised through SLRC's history can be seen through the backward-looking lens of performance as well as a forward-looking lens of portfolio quality. With credit quality top of mind today, we remain pleased with our portfolio, which sits near the midpoint of our target leverage, is 100% performing, has exposure software of approximately 2%, and restructured PIC income of approximately 2% of total investment income. Moreover, our portfolio companies continue to experience both top-line and EBITDA growth and should benefit from recent reductions in SOFR. We continue to acknowledge that our results are not fully immune to the impact of recent reductions in base rates by the Federal Reserve and Q4, but we believe SLRC's earning sensitivity to changes in base rates is one, if not the lowest, amongst our peers. Fourth quarter 2025 originations and our pipeline in 2026 continue to reflect new investment opportunities at spreads that exceed our cost of capital. Our North Star continues to be protecting capital, avoiding losses, and not chasing higher spreads at the expense of structural protections. While maintaining dividend coverage is important, as many of our investors rely on the distribution of our income, we believe it must be done in a way that does not compromise credit quality. We've made significant investments in resources across the platform and continue to see some levers to pull at SLRC that can help offset base rate declines. Importantly, we have the available capital to be opportunistic in market dislocations. In closing, SLRC trades at approximately an 11.2% dividend yield as of yesterday's market close, which we believe presents an attractive investment for both income-seeking and value investors, and offers a more diversified investment portfolio compared to direct lending-only private credit strategies. Our investment advisors' alignment of interest with SLRC shareholders continues to be a hallmark principle. The SLR team owns over 8% of the company's stock and has a significant portion of their annual incentive compensation invested in SLRC stock each year. The team's investment alongside fellow institutional and private wealth investors demonstrates our confidence in the company's profile, portfolio, stable funding, and earnings outlook. Thank you again for all your time today, as we hope to see you in person at a conference in 2026. Operator, will you please open the line for questions?

Certainly, Mr. Gross. Thank you. Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone at this time. If you do wish to leave the queue, you can press star 2. Once again, that is star 1 for questions. We'll go first this morning to Eric Zwick of Lucid Capital Markets.

Thanks. Good morning, all. One, thank you for all the detailed comments on the individual lending verticals and kind of outlooks there. A bit of a follow-up maybe in terms of you know, the pipeline within the ABL and equipment finance, and more from the integrated and organic perspective. You know, I know sometimes you review opportunities to acquire portfolios and or lending teams. Wondering if you could just update us on any recent activity or, you know, outlook for 2026 there.

David Lamont Wilson Yeah, great question. We have been very active. We don't win them all because we're as disciplined in our acquisitions as we are in our individual investments. But I will say that the quality of potential opportunities is high. And as you may recall, one of the strategies that we have is to lend into some of these potential platforms as a way to get to know each other and see if there's an opportunity to bring them on to the SLR platform. rather than just lend them capital. So we have a number of those in the pipeline that are currently in portfolio that we have an active dialogue. Those take time to germinate, so I would say that we don't see anything imminent, but we are very actively engaged in potential acquisitions.

Thanks for the update there. And then I'm just curious in terms of you know, the tight spreads that are being witnessed in the public debt markets. Are those impacting, you know, the spreads in the ABL and equipment finance opportunities you're seeing today? Or because of some of the, you know, structural, you know, defense mechanisms you have in place, have you been able to kind of maintain, you know, new spreads relative to the existing portfolio?

David Morgan Yeah, you know, as Michael mentioned, you know, the overall return has come down a little bit across all the strategies. but we still believe 11.5% or so compares extremely favorably to the market more broadly and specifically the cash flow market. So we still like the opportunities. The structural protections help us on the risk side. It's really the, as we touched on, the lack of capital flows coming into these markets That allows us to maintain our competitive position. Plus, our peer group here is smaller but also extremely disciplined. Our peers share the same decades-long experience in asset-backed lending and appreciate that discipline is critical for their performance. So we find people to be very disciplined and not many new entrants.

And the last one for me, just, you know, your portfolio remains very clean from a credit perspective from almost, you know, any metric you would choose to look at it. I'm curious, are you seeing anything, you know, that might be kind of an early sign of concern in terms of, you know, greater miner requests or increased revolver usage or anything, you know, noteworthy from that perspective?

So the short answer is no. We, you know, private credit is a business of not sleeping at night and worrying about every name in your portfolio. So, as we mentioned, we do have, you know, a watch list. It's roughly 2%. And that's a constant. But what I would say is in our ABL strategies, and we touched on this in the comments, you have metrics that allow you to see more real-time the underlying performance of your borrowers and get a window into the broader economy. and, you know, specifically we get to see inventory turns. We get to see receivable collections because we're monitoring those underlying pieces of collateral on a weekly, monthly basis. And I would tell you that we're not seeing any themes coming out of that. It's very idiosyncratic, you know, a one-off borrower here or there, but nothing that we can call a theme.

That's great to hear. Thanks for taking my questions today.

Thank you.

We'll go next now to Rick Shane of JPMorgan.

Hey, guys. Thanks for taking my questions. Look, you know, one of the advantages that you guys have is that your leverage is relatively low and you have capacity to flex that as you choose. You also talked about being opportunistic during market dislocations. if we sort of stay in this environment right now, should we expect you to be opportunistic or should we expect the portfolio and leverage to be roughly flat and you would be sort of waiting for a more severe environment to take advantage of that liquidity?

So I'm going to answer it two ways. Part of what we're doing is to Eric's questioning is we always try to have a little bit of dry powder for potential acquisitions. So, that does inform how we look at the leverage ratio at any moment in time based on what we're seeing out there on the acquisition front as well as individual investment opportunities. We're blessed that we have multiple strategies. We're seeing good opportunities. in the specialty finance strategies, particularly ABL, although we did mention that we're seeing life science pick up. And we also could see, as we get deeper into 2026, cash flow dislocation create opportunity for us as we took advantage of back in 2023 when there was a dislocation in the cash flow market. So we're happy to take leverage up either through acquisitions or individual investments throughout 2026, the high end of our target range, which is one and a quarter times. So whether that will happen or not, we'll see, because the other side of that equation is obviously repayments. As a lender, we celebrate repayment. That generates a memo internally. Not so focused on deployment. We're more focused on getting repaid. And as you can see, we've had an elevated level of repayments, and that's been very intentional where we have the ability to make that decision, do we stay or do we get repaid? By and large, we've been choosing to get repaid because either terms or structures or pricing has been less attractive than we'd like. So that's the unknown for this year, although our crystal ball says we probably will see less repayments because I do see less capital coming into the market and a bit more discipline. So long-winded way of saying we would like to see that leverage ratio come up in this environment because of the very attractive opportunities.

Got it. Okay. No, long-winded is fine. I've asked a few long-winded questions in my time, so I appreciate the answer.

Thanks, Rick.

Thank you. Just a quick reminder, star one, please, for further questions today. We go next now to Heli Sheff at Raymond James.

Good morning. Thanks for the question. You mentioned M&A opportunities in the ABL business remain high. Any sort of shift in sentiment or outlook there? Does it seem more or less likely that some players may be willing to sell with all of the recent market noise?

I think this location always kind of forces people to kind of rethink their business and access to capital. So I would, you know, if we go through a period of time for quite some time like this, I think we will see more opportunities at better pricing. And, you know, we have a team that's actively looking at many situations all the time. So, you know, we're hopeful something happens in the relatively near term.

Got it. Thank you. And then, Could you quantify how much spillover you have as of year end?

We don't have any to speak of.

Okay. Thank you.

Thank you. And gentlemen, it appears we have no further questions today. Mr. Gross, I'd like to turn things back to you, sir, for any closing comments.

No closing comments at the time other than to thank you for all your time today. We realize it's a busy earnings season, and with all the turmoil in private credit, everyone's quite busy. But if everyone has any questions or people who are listening to this call after the fact, please feel free to reach out to any of us to continue the dialogue. Thank you.

Thank you, Mr. Gross. Again, ladies and gentlemen, that will conclude today's SLR Investment Corporation Fourth Quarter Earnings Conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.