Stellus Capital Investment Corporation

Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellis Capital Investment Corporation's conference call to report financial results for its fourth fiscal quarter ended December 31st, 2025. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press SAR 0 on your telephone keypad. This conference is being recorded today, March 12th, 2026. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellis Capital Investment Corporation. Mr. Ladd, you may begin your conference.

Okay, thank you. Thank you, Paul. Good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter and year-ended December 31st, 2025. This morning's call will be longer and more in-depth than previous calls. We have five topics to cover. First, the financial results for the fourth quarter and year-ended December 31st, 2025. Asset quality, including commentary regarding software exposure. Outlook for the first and second quarters of 2026. Our share buyback program recently announced. And our investment advisor joining forces with Ridge Post Capital. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements, as well as an overview of our financial information.

Thank you, Rob. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellis Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and PIN provided in our press release announcing this call. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stalliscapital.com under the Public Investors link, or call us at 713-292-5400. Now, I'll cover our operating results for the fourth quarter and year, but would like to start with our life-to-date activity. Since our IPO in November 2012, we've invested approximately $2.8 billion in over 220 companies and received approximately $1.8 billion of repayments while maintaining stable asset quality. We've paid $333 million in dividends to our investors, which represents $18.27 per share to an investor in our IPO in November 2012, which was offered at $15 per share. In the fourth quarter, we generated 29 cents per share of GAAP net investment income, and core net investment income was 29 cents per share also, which excludes excise taxes. During the quarter, we also realized gains of $5.5 million on five equity positions, which resulted in total realized income for the quarter of 48 cents per share. Net asset value per share decreased 23 cents during the quarter from two components. The first was 11 cents per share of dividend payments that exceeded earnings, which was necessary to continue to pay out spillover income balance from 2024. The second was net realized losses of 12 cents per share related primarily to two debt investments. On the capital front, on December 31st, we repaid the remaining $50 million of the $100 million of 2026 notes prior to their March 2026 maturity. Turning to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $1.01 billion across 115 portfolio companies, unchanged from $1.01 billion across 115 portfolio companies as of September 30th, 2025. During the fourth quarter, we invested $34.1 million in four new portfolio companies and had 18 million in other investment activity at par. We also received four full repayments totaling $37.9 million, five equity realizations totaling $7 million, which resulted in a realized gain of $5.5 million and received $9.1 million of other repayments, both at par. At December 31st, 99% of our loans were secured and 92% were priced at floating rates. The average loan per company is $8.8 million, and the largest overall investment is $19.2 million, both at fair value. Substantially, all of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 81% of our portfolio is rated a one or two, or on or ahead of plan, and 19% of the portfolio is marked at an investment category of three or below, meaning not meeting plan or expectations. We added one new loan to our non-accrual list and removed another from the non-accrual list during the quarter. Currently, we have loans to five portfolio companies on non-accrual, which comprise 7.5% of the total cost and 4.1% of the fair value of the total investment portfolio, respectively, which represents a slight increase from the prior quarter. We're always focused on diversification, including by industry sector. We have investments in 24 separate industry sectors, and with that, we have approximately 10% in high-tech industries. Over the last month, there's been a lot of press about the impact of artificial intelligence on large-scale SaaS software industry, which has resulted in concern around investment firms' exposure, both private equity and private credit, to the sector. Let me first say, Stellis does not have exposure to the large-scale SaaS software sector. Rather, we have a small number of loans to software companies that are related to the SaaS space, but are better characterized as industry-specific, tech-enabled solutions. This group consists of five companies out of 100 portfolio companies with debt investments and comprises 6.8% of the loan portfolio. The largest position is 1.8%, both at fair value. Each one of these companies provides integral products and services that are embedded in the businesses that they serve. They are using AI to enhance the software and information they provide, and in many cases are dealing with proprietary data. A common theme for these software businesses is that they're using AI to enhance their value proposition rather than a customer being able to do this all internally with AI. In summary, we believe AI will enable these and many of our portfolio companies across a variety of industry sectors to improve the speed and quality of information. And we do not believe that AI will supplant the need for what our portfolio companies provide. Let me add, each of these companies is owned by a substantial private equity sponsor. is well capitalized with material equity below us, has modest leverage, and EBITDA is stable to increasing. The risk rate of these companies is either a one or a two, meaning on or ahead of plan. We will continue to monitor these companies closely as we do with all of our portfolio companies. Importantly, looking forward, we would be surprised if AI had a material negative impact on the recovery of our loans to these companies. And now I'd like to turn the call back over to Rob to cover the outlook and a few additional topics.