Eagle Point Income Company Inc.

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. © transcript Emily Beynon We'll be right back. Greetings and welcome to the Eagle Point Income Company fourth quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Daugherty from Prozac Partners. You may begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's earnings conference call for the fourth quarter in fiscal year 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company, Dan Koh, Senior Principal and Portfolio Manager for the company's advisor, and Lina Umnova, Chief Accounting Officer for the advisor. 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 in 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 evolved, 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 for 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 12 cents a 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 3 cents per share, which was comprised of 35 cents of net investment income and offset by 32 cents 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 35 cents per share compares to 39 cents of net investment income per share recognized in the prior quarter. The decline in net investment income was driven primarily by two 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 in 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 79 cents per share, and that compares to the prior quarter's $17 million, or 67 cents 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 15 cents per share. NAV decreased to $13.31 per share as of December 31st, 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 gap 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 advisor has expertise in these other credit strategies and has been invested in them for some time for other funds and accounts that our advisor manages. We've also continued to actively optimize our capital structure, seeking to reduce financing costs. In 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 three-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 in NAV of 18.2%, resulting in a NAV accretion of approximately 14 cents 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 three monthly distributions of 11 cents 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 11 cents per share aligns with the company's near-term earning 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, and 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 advisor 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 Coe for an update on the market.