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 second fiscal quarter ended June 30, 2026. This conference is being recorded today, August 11, 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, Jenny, and good morning, everyone. Thank you for joining the call. Welcome to our conference call covering the quarter ended June 30th, 2026. We have six topics to cover this morning. First, the financial results for the second quarter, portfolio and asset quality, the outlook for , an update on our advisor joining Rich Post Capital, our $20 million share buyback program, and opportunities for growth. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements. Todd, I'll turn it over to you.

Thank you, Ron. 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 number and pen 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 operating results for the quarter, but would like to start with our life-to-date activity. Since our IPO in November of 2012, we've invested approximately $2.9 billion in more than 225 portfolio companies while navigating multiple market and credit cycles. Over this time, we've received approximately $1.9 billion of repayments while maintaining disciplined credit performance. We believe our track record Our underwriting process and deep sponsor relationships provide us with meaningful competitive advantages, reflecting more than 20 years of working together as an investment team and nearly 14 years of operating as a public BDC. Our focus remains on preserving capital while generating attractive risk-adjusted returns for our shareholders. And we think our long-term credit performance as well as our 14-year track record of return on equity demonstrates the effectiveness of our underwriting process and our portfolio management approach. To that point, we've generated a life-to-date return on equity of 9.5%, which includes all realized and unrealized gains and losses across the portfolio to date. We've also paid $349 million of dividends to our investors since our IPO, representing $18.83 per share over this period. Now turning to operating results. In the second quarter, we generated $0.26 per share of GAAP net investment income and core net investment income, which excludes estimated excise taxes, was also 26 cents per share. Overall for the quarter, net asset value increased by 26 cents per share or 2% sequentially driven by three primary factors. First, net realized and unrealized gains contributed 30 cents per share, primarily driven by write-ups related to company-specific performance. Second, our share repurchase program was accretive to NAV adding approximately 5 cents per share. And finally, dividend payments exceeded earnings by 8 cents per share as we continued distributing the remaining spillover income from 2025. I'd like to note that these figures are in line with the preliminary results we previously reported. With respect to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $968 million across 116 portfolio companies. a decrease from $990 million across 116 portfolio companies as of March 31, 2026. During the second quarter, we invested a total of $18 million, of which $8.7 million was in three new portfolio companies and $9.3 million were add-ons to existing portfolio companies. We also received five full repayments totaling $38.7 million, $500,000 from one equity realization, which resulted in a realized loss of $200,000, and received $10 million of other repayments at par. At June 30th, 100% of our loans were secured and 92% were placed at floating rates. The average loan per company is $8.9 million and the largest overall investment is $26 million, both at fair value. For the 98 companies that comprise our loan portfolio, the weighted average EBITDA level was $15.6 million at quarter end and the weighted average normalized leverage quotient was 4.2 times for the performing loans. Substantially, all of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly below plan. At fair value, 74% of our portfolio is rated a one or two or on or ahead of plan, and 26% of the loan portfolio is marked in an investment category of three or below, meaning not meeting plan or expectations. We removed one loan from non-accrual status during the quarter and did not add any new loans. Currently, we have loans to five portfolio companies on non-accrual, which comprise 8.5% of the total cost and 5.4% of the fair value of the total investment portfolio, respectively, which represent a decrease from the prior quarter at cost and a slight increase at fair value. While the level of non-accruals and risk rate three loans remains higher than we would like, reducing both that number of these investments and Robert Ladd. Okay, thank you, Todd. As we look ahead to the third quarter of 2026, I'll cover four topics.