Eagle Point Income Company Inc Stock

Greetings, and welcome to the Eagle Point Income Company's Second Quarter 2026 Financial Results Call.

[Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce Darren Daugherty from Prosek Partners. Please go ahead.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's earnings conference call for the second quarter of 2026. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser.

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 Securities and Exchange Commission. 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 second quarter 2026 financial statements and investor presentation with the Securities and Exchange Commission. 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. We appreciate you joining the Eagle Point Income Company earnings call today. EIC had a strong second quarter. As of June 30, our net asset value stood at $12.52 per share, which is an increase of 4% from $11.99 per share as of March 31. For the quarter, the company generated a GAAP return on common equity of 7.1%. During the quarter, we paid an aggregate of $0.33 per share in cash distributions to our common shareholders.

The improvement in NAV was driven by a meaningful recovery in loan prices and CLO valuations following the volatility experienced in the first quarter. Concerns around the potential impact of artificial intelligence on software borrowers, together with geopolitical developments weighed on leveraged loan prices and CLO valuations during the quarter. As sentiment improved during the second quarter, loan prices and CLO valuations recovered meaningfully while underlying credit fundamentals remained resilient.

We believe the first quarter decline reflected a market-driven pricing pressure rather than a broad deterioration in credit. Elevated refinancing, reset, and call activity during the second quarter resulted in the early repayment of certain of our CLO debt investments. Because many of these investments were purchased at discounts to par, the repayment at par allowed us to realize convexity embedded in those investments sooner than we had originally anticipated.

During the quarter, we deployed $39 million into new investments at a weighted average effective yield of 17.9%, allocating capital across CLO debt, CLO equity and complementary credit investments that -- where we identified what we believe to be very attractive risk-adjusted returns. We also repositioned the portfolio by rotating capital away from a certain group of underperforming CLO collateral managers towards higher conviction opportunities across CLOs and other private credit investments.

While this resulted in certain losses being realized, those losses had largely been reflected as unrealized losses in prior periods resulting in minimal incremental impact on our NAV during the quarter. Importantly, we believe the actions taken improve the portfolio's risk-adjusted return potential and enhance its long-term earnings power. Throughout the quarter, we continued to actively manage our CLO portfolio by completing 1 reset and 2 refinancings of CLO equity positions.

These actions resulted in a weighted average cost savings of 33 basis points for those CLOs. In addition to lowering the debt costs, the reset position also extended its reinvestment period out to 5 years. While CLO junior debt remains central to EIC's strategy, we continue to selectively increase our exposure to infrastructure credit, portfolio debt securities, asset-backed securities and other strategic credit investments.

These opportunities are sourced through dedicated teams with specialized expertise across the broader Eagle Point platform. As of June 30, CLO debt represented approximately 59% of our portfolio and CLO equity represented about 19% of our portfolio. Non-CLO investments totaled approximately 22% of our portfolio.

We believe this broader opportunity set enhances portfolio diversification and allows us to allocate capital to the most attractive risk-adjusted return opportunities we see in the credit markets. One recent example we wanted to share is our investment with Sports Illustrated Tickets, a specialty finance transaction that we originated that was secured by World Cup tickets that was originated by the Eagle Point team.

Following a 7-month holding period, this investment generated a 1.2x multiple on investment capital when it was fully realized back in June. We believe Eagle Point's ability to source differentiated investment opportunities complements EIC's core CLO junior debt strategy and enhances long-term shareholder value.

Turning to our capital structure. During the second quarter, we issued $1 million of our 6% Series AA convertible perpetual preferred stock. This fixed rate perpetual financing provides an attractive source of long-term capital and additional flexibility to deploy capital when compelling opportunities arise. You see this financing as a significant competitive advantage, and we're unaware of any other public CLO debt-focused fund with a similar perpetual convertible preferred program.

I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a brief update on the loan and CLO markets. The S&P UBS leveraged loan index rose 1.9% in the second quarter and returned 0.8% in July. Average corporate revenue and EBITDA growth remained positive, supporting overall credit fundamentals across the broadly syndicated loan market despite continued dispersion across sectors and issuers.

The trailing 12-month loan default rate ended the quarter at 1.0% compared with 1.4% on March 31st and remained below its long-term average of 2.5%. EIC's look-through exposure to defaulted loans remained low at 36 basis points, significantly below the broader market average. We believe this reflects both the quality of our underlying loan holdings, our active portfolio management and disciplined investment process. Software remained an area of focus during the quarter as investors continue to assess the long-term impact of AI across different sectors.

AI will likely create both winners and losers, but many software businesses continue to benefit from recurring contracted revenue, sticky customer relationships and mission-critical products. We believe the market reaction earlier this year overstated the likely impact on the broader software sector. For EIC, the diversification and structural protection within our CLO debt investments further helped mitigate the impact of weakness in any individual borrower or sector.

Loan prices recovered during the second quarter, although the improvement remained uneven across individual credits. At the end of the quarter, the look-through underlying loan portfolio had a weighted average market price of $95.30 providing opportunities for par-building through discounted loan purchases.

In terms of CLO market activity, new issuance totaled $33 billion during the second quarter compared with $47 billion in the first quarter. Reset activity totaled $55 billion compared with $32 billion in the first quarter, while refinancing activity totaled $39 billion compared with $24 billion in the first quarter. We expect refinancing and reset activity to remain robust. For our CLO equity investments, this activity can lower liability costs and extend reinvestment periods. For CLO debt investments purchased at a discount, resets, refinancings, and calls can create additional opportunities to realize embedded gains through early repayments at par.

We continue to believe CLO junior debt offers an attractive combination of floating rate income, structural protection and low historical credit expense relative to comparably rated corporate securities. If interest rates remain elevated or increase over the near to intermediate term, our CLO debt portfolio is positioned to benefit from higher income. Our CLO equity investments are less sensitive to changes in benchmark rates because returns are driven primarily by the underlying loan asset spreads less the CLO's financing costs. At the company level, the combination of predominantly floating rate investments and fixed rate preferred financing creates an attractive earnings profile in this environment. With that, I'll hand it over to our Adviser's Chief Accounting Officer, Lena Umnova to walk through our financial results.

Thank you, Dan. During the second quarter, the company generated net investment income, or NII, of $0.37 per share. NII less realized losses from investments was negative $0.29 per share. This compares to NII less realized losses from investments of $0.34 per share in the first quarter of 2026, and NII and realized gains of $0.39 per share in the second quarter of 2025. Including unrealized portfolio gains, GAAP net income was $20 million, or $0.84 per share for the second quarter of 2026. This compares to GAAP net loss of $0.95 per share in the first quarter of 2026 and GAAP net income of $0.49 per share in the second quarter of 2025.

Recurring cash flows from company's investment portfolio totaled $12 million, or $0.52 per share during the quarter and exceeded the company's common stock distributions and expenses. We paid 3 monthly common stock distributions of $0.11 per share during the quarter, and we declared monthly common stock distributions of $0.11 per share for the remainder of 2026. We believe the current distribution level reflects the company's near-term earnings potentials in today's interest rate environment.

Looking at our capital structure. As of June month end, the company had outstanding preferred equity securities equal to 12% of total assets less current liabilities. This is below our target range of 25% to 35%, where we expect to operate the company under normal market conditions. We expect leverage to increase over time as we raise additional capital through our continued offering of the Series AA and AB convertible perpetual preferred stock, the program that we launched early in 2026.

Looking at our portfolio activity during the month of July, the company received recurring cash flows from its investments totaled $8 million. Note that some of the company's investments are still expected to make payments later in the quarter.

As of July month-end, net of pending investment transactions and settlement, the company had over $53 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of July month-end was between $12.30 and $12.40 per share. At the midpoint, this represented a 1% decrease from June month end.

I will now turn the call back over to Tom to provide closing remarks before we take your questions.

Thanks, Lena. The second quarter demonstrated the benefits of active portfolio management and access to the full Eagle Point platform. We continue to selectively rotate capital towards higher conviction opportunities across CLO debt, CLO equity and differentiated private credit investments while strengthening our capital structure. With healthy CLO fundamentals, a predominantly floating rate investment portfolio and fixed rate preferred financing, we believe EIC is well positioned to generate attractive income and long-term value for our fellow shareholders.

We appreciate your continued support, and thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions]

Our first question is from Erik Zwick with Lucid Capital Markets.

Maybe just start with a question on the recurring cash distributions. You noted $8.3 million here to start the -- third quarter was a little bit more expected throughout the quarter. That rate would seem to be below what we've seen in the past couple of quarters and kind of, continuing a downward trend. So if you could, kind of, just frame it in terms of how much of that is related to, kind of, market factors versus the portfolio performance and then, kind of, what it would take to, kind of, see an inflection point and see that start growing again. Kind of curious on your thoughts there.

Yes. So this is Dan Ko here. A few things. So on the CLO debt side, I mean, given that we're seeing -- or we expect, kind of, rates to increase in the near to, kind of, intermediate term. Our expectation is that the cash -- at least the income from the CLO debt portion of the portfolio will likely increase over the next few months as, kind of, base rates increase.

The decrease in cash flows was probably mainly driven by the CLO equity portion of the portfolio, which has, kind of, faced spread compression over the past, kind of -- at least during 2025 and the effects of that is really being felt more now as all those, kind of, loan, kind of, coupons were reset. Some of it is also driven by the fact that the underlying in some of the CLOs do have semiannual paying bonds, and so there is a little bit of, kind of, a saw too, sort of, payments for CLO equity and that it will be down one quarter and then up another quarter, kind of, depending on how big the bond bucket is. So this quarter, kind of, being down, I expect this quarter meaning Q2 or Q3, then the following quarter would be higher. So our expectation is that we expect it to, kind of, recover over time.

Thanks, Dan. And Tom, I think when we -- on last quarter's call, when you discussed the opportunity for share repurchases. I think you noted that you had -- you're not used aggressive as you had in past quarters. NAV for the fund has recovered nicely in the past quarter. The stock price is not. So I guess, with the, kind of, discounted valuation again. Just curious if you could update your thoughts on allocating capital towards share repurchases in the next quarter or two?

Yes. The thing we grapple with, we definitely saw the increase in NAV coming. So we felt it happening as it happened, I guess, I don't know if you never say for sure you saw it coming. We're mindful of the discount on the share price balanced against the liquidity in the stock and the daily volume. And one of the things, I think I said on the last call was, we backed off somewhat just due to the impact we saw on the volume of the stock as we were buying it back. So we're kind of balancing the two of those.

At the same time, I also point out our leverage is well below our target ratio here. So actually buying back equity might be helpful to get back in a little bit in line in the -- of our leverage category, although we do have, I think, the revolver as of quarter end certainly was fully undrawn, correct, Lena?

Yes.

Yes. So we've got a couple of different tools to work on, but I am mindful of the value of liquidity in the stock, which is an important piece of the puzzle that we think about, but we look at all the levers every single day.

I appreciate the update there. And last one for me. One, I just want to say, I appreciate all the slides you guys put out every quarter. If I kind of look at one of the later ones in there, Slide 27, which shows annual CLO trading volume, just looking at the year-to-date figures for '26 would suggest that we'd see a, I guess, relative to at least 2012, a record year for this chart. Curious if you could just, kind of, explain the dynamics that are leading to a very strong trading year here, kind of the general upward trend and what that means for you managing the fund is having greater trading liquidity an advantage? Does it potentially bring in more competitors to the market? Just curious how you view the increase here.

Yes. I mean we like the focus that others have had on CLO equity. It's a lot different from 14 years ago, I guess, when we start -- nearly 14 years ago when we started the firm and having that liquidity allowed us to, kind of, reposition the portfolio this past quarter in Q2. And -- without actually it was, kind of, better than we anticipated in terms of, kind of, the levels that we were able to get, and that's really due to just the liquidity that has grown within the CLO market and just there being more eyes and people that actually look at CLOs versus 2012 when we initially started. So that's certainly been a benefit for the fund.

Our next question is from Timothy D'Agostino with B. Riley Securities.

Regarding leverage, it's noted that it was about 12%, which is below the long-term target of 25% to 35%. Could you just maybe help provide some color on why we're at 12% today and then maybe the path, and how you think about getting back in line with that leverage target?

Sure. So we, earlier this year, kind of retired, I guess, our most expensive preferreds, which were, I think, at 8% EICC and that there was just relative to, kind of, the opportunities we were seeing in CLO, that didn't make a ton of sense to keep outstanding. We have started a program of issuing, kind of, the EIC AA and AB, which are the convertible perpetual preferreds at 6%, which we do find very, very attractive. So we expect that to -- that issuance to continue over the next couple of -- several quarters, in fact. And so our expectation is that as we raise money there that we'll continue to improve -- increase the leverage that -- but also the revolver today stay -- remains undrawn. And so that, obviously, if we were to, kind of, fully draw that would increase the leverage and, kind of, get us more in line with, kind of, the range -- the target range over the long term.

Okay. Great. That's helpful. And then just a second one for me. Obviously, we just had the Eagle Point Credit Company call where we talked about other investments. I guess it seems that for EIC, that is a similar focus as well, just diversifying the portfolio. I guess, could you walk us through how the other -- that sleeve of other investments for EIC is similar and/or different to what you have at ECC?

Sure. No, it is similar in that many of the -- there's a good amount of overlap between the ECC and EIC kind of other investments. I guess EIC is somewhat -- given that it's a smaller fund, maybe has a little bit less concentration in some of these whereas ECC has, kind of, bigger positions. So we expect those to, kind of, merge or to have very similar -- not merge, sorry, that's not the right word. We expect those to have very -- a lot of overlapping positions, kind of, over time in the other bucket.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Thomas Majewski for any closing comments.

Great. Thank you very much for joining us today. Lena, Dan and I appreciate your interest in the call and Eagle Point Income Company. We'll be in the office later today if anyone has any follow-up questions. Thank you very much.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and we thank you again for your participation.

Greetings, and welcome to the Eagle Point Income Company First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may now begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the first quarter of 2026. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser. 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 first quarter 2026 financial statements and investor presentation with the Securities and Exchange Commission. 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. We're glad you're joining us today for Eagle Point Income Company's quarterly earnings call. Despite facing some broader market challenges, EIC had a strong first quarter. During the quarter, we had an increase in our net investment income from the prior quarter, and our recurring cash flows covered our distributions and our total company expenses. The CLO market faced challenging conditions in much of the first quarter of 2026, and the company was not immune to these broader dynamics. While CLO fundamentals remained relatively stable, a decline in loan prices, especially in the software sector and a cautious tone across credit markets due to the ongoing war in Iran weighed on our NAV during the quarter.

The software sector was a particular area of focus during the quarter and investors continue to assess the potential impact of artificial intelligence on certain business models and revenue streams. Importantly, however, our exposure is principally through broadly syndicated loans, not middle market loans that are commonly found in BDCs. The loans in our CLOs are typically larger, more liquid, institutionally syndicated credits with observable market pricing. While this observable pricing can result in more immediate mark-to-market volatility during periods of volatility, it provides clarity to investors as to the valuation of the underlying investments. While that volatility impacted quarterly valuations of many CLOs, we believe it also created opportunities for CLO collateral managers to reinvest proceeds from sales and paydowns into discounted loans with attractive forward return potential.

While these factors led to a decline in CLO valuations during the quarter for many securities, we believe the market typically undervalues the reinvestment option embedded in CLOs during times of volatility. The ability to buy loans at material discounts to par has allowed CLO equity to deliver attractive intermediate and long-term returns many times in the past. In addition, we believe our floating rate CLO junior debt portfolio will benefit from higher income should we see an upward movement in short-term rates. With an increase in inflation, more and more of the outlook by many market participants, it seems the potential for a rise in short-term rates may be more on the table than we thought even just 3 months ago. During the quarter, we deployed $56 million into new investments across multiple credit asset classes with a weighted average effective yield of 16% as we took advantage of compelling relative value opportunities created by a particularly uncertain macro environment.

Throughout the quarter, we continued to actively manage our CLO portfolio by completing 4 resets and 2 refinancings of our CLO equity positions. This resulted in weighted average CLO debt cost savings of 48 basis points for those CLOs. In addition to lowering debt costs, the reset positions extended their reinvestment periods to 5 years. While CLO junior debt remains central to EIC's strategy, we opportunistically increased our exposure to other credit classes, including infrastructure credit, regulatory capital relief transactions, portfolio debt securities and other structured and private credit investments. Eagle Point's platform has a dedicated team with deep specialized expertise across all of these asset classes, and this is a meaningful platform advantage, enabling EIC to access originated investment opportunities, increase portfolio diversification and generate excess returns above traditional CLO securities.

NAV decreased to $11.99 per share as of March 31 from $13.31 per share at year-end. The decrease primarily reflects negative mark-to-market adjustments on the company's CLO debt portfolio driven by wider spreads and weaker risk appetite for CLO junior debt during the quarter. Our GAAP return on first equity was negative 7.2%. That said, we saw a meaningful rebound in April, and indeed, EIC's NAV increased to between $12.48 and $12.58 per share. This is a 4.5% increase at the midpoint of the range. Despite the decline in NAV during the first quarter, our net investment income increased quarter-over-quarter to $0.36 per share, and that's up from $0.35 per share in the fourth quarter of 2025. Both of these measures are in excess of the $0.33 per common share in distributions that we paid.

Turning to our capital structure. During the first quarter, we launched our 6% Series AA and Series AB convertible perpetual preferred stock offering. This provides the company with a source of low-cost, long-duration capital and increases our financial flexibility. We are unaware of any other publicly traded entity that invests primarily in CLO debt with perpetual financing and consider this to be a material competitive advantage for our company. Subsequent to quarter end, we completed the full redemption of our 8% Series C term preferred stock, which had been our highest cost debt financing. These actions reflect our continued focus on lowering our cost of capital, lengthening our maturity profile, all with the goal to enhancing our long-term earning power.

During the quarter, we repurchased almost 390,000 shares of our common stock at an average discount to NAV of 19.3%. This resulted in NAV accretion of $0.04 per share. And since June of 2025, when the Board initially announced the share repurchase authorization through March 31 of this year, we've repurchased a total of $50 million of common stock at an average discount of 13% of NAV, resulting in NAV accretion of $0.26 per share. We plan to selectively continue our common share buybacks as market opportunities present themselves. We believe the actions we've taken during the quarter, together with our current portfolio positioning, leave us well situated for the quarters ahead. I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a brief update on the loan and CLO markets. In the first quarter, the S&P UBS Leveraged Loan Index fell by 0.5%, but rebounded by 1.2% during the month of April. Despite this mixed performance in loan returns, underlying loan borrower fundamentals have remained stable as corporate revenue and EBITDA growth remained positive, supporting overall credit performance across the broadly syndicated loan market. The trailing 12-month default rate ended the period at 1.4%, modestly higher than year-end levels, but well below the long-term average of 2.5%. While lower loan prices have pressured CLO valuations in the near term, they are also creating a more attractive reinvestment environment. With many loans trading below par and repricing activity slowing in the first quarter, we saw a greater potential for par build, wider spreads on new investments and improved forward returns.

For junior CLO debt securities, we believe this rate environment is constructive. With intermediate and long-term rates increasing, we expect short-term rates, including SOFR, which CLO debt floats off of to follow. Indeed, the market is pricing in potential Fed rate hikes in the next year. With the potential for higher short-term rates, junior CLO debt investments continue to offer attractive floating rate income potential, which we would expect to support higher income on the portfolio in the future. In addition, periods of market volatility can create opportunities to purchase CLO debt at discounts, providing the potential for pull to par as markets normalize.

We believe that the combination of income generation, structural protection and potential convexity makes junior CLO debt particularly compelling in the current environment. In terms of CLO new issuance, we saw $47 billion of volume during the quarter, down slightly from $55 billion in the fourth quarter of 2025. Reset activity for the first quarter was $32 billion, down from $54 billion last quarter, while refinancing activity was $24 billion, up from $20 billion last quarter. With the broader markets normalizing into the second quarter, we expect CLO volumes to remain robust going forward. With that, I'll hand it over to our advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. During the first quarter, the company generated net investment income or NII of $0.36 per share and NII less realized losses of $0.34 per share. This compares to NII less realized losses of $0.03 per share last quarter and NII and realized gains of $0.44 per share for the first quarter of 2025. Including unrealized portfolio losses, GAAP net loss was $22 million or $0.95 per share for the first quarter of 2026. This compares to GAAP net loss of $0.60 per share last quarter and a GAAP net loss of $0.46 per share for the first quarter of 2025. Recurring cash flows from the company's investment portfolio totaled $14 million or $0.62 per share during the quarter and exceeded the company's common stock distributions and expenses.

During the quarter, we paid 3 monthly common stock distributions of $0.11 per share. And last week, we declared 3 monthly common stock distributions of $0.11 per share for the third quarter of 2026. As of March month end, the company had outstanding preferred equity securities equal to 34% of total assets less current liabilities, which is within our target range of 25% to 35%, where we expect to operate the company under normal market conditions. Looking at our portfolio activity during the month of April, the company received recurring cash flows on its investment portfolio of $11 million.

Note that some of the company's investments are still expected to make payments later in the quarter. As of April month end, net of pending investment transactions and settlements, the company had $15 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of April month end was between $12.48 and $12.58 per share. At the midpoint, this was an increase of 4.5% from March month end. I will now turn the call back over to Tom to provide closing remarks before we take your questions.

Thanks, Lena. In our view, the combination of lower loan prices, reduced loan repricing activity and the potential for higher short-term rates is improving the outlook for our earnings power. Combined with our disciplined capital allocation and access to the full Eagle Point origination platform, we believe we are well positioned to translate this environment into stronger results for shareholders over time. We appreciate your continued support, and thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Erik Zwick with Lucid Capital Markets.

I wanted to start with a question on software. You mentioned it in your comments, and it's obviously been very topical of late in the leveraged loan market. And looking at your -- I think it's Slide 22, maybe, where you kind of showed a concentration of different industries in the portfolio technology and software is -- I guess, kind of double at least the next largest one is 12%, 12.5%. So curious what the last thing kind of -- I guess, maybe, Thomas, this is a bigger picture question. Just think of the impact could be. Is it likely to result in changes to volume in the leveraged loan issuance as potentially fewer IPOs in software? Or do you think it leads to increased defaults and credit quality issues? And maybe more importantly, how are you thinking about this and your desired kind of target for exposure to software in the portfolio?

So a lot of questions packed into one there. But overall, indeed, you can see it is software and services is the largest category by a factor of more than 2 compared to the second place. I guess one of the first things we think about broadly is not all software companies are created equally. At a high level, there are statistics that 70% of Fortune 500 companies still use mainframes, forget about blades or SaaS or things like that. The risks are more pronounced in some sectors of software than others.

An example, like an airline reservation system would be something so critical not to be SaaS'ed away anytime soon. At Eagle Point, our internal books and records, like the official custodian records, it's a long time away before we see that. At the same time, how we track vacation time and things like that, I'm sure we subscribe for some silly thing that we could probably just make and do it less expensive. So broadly, the criticality of a tool is an important factor in its SaaS vulnerability, first off.

And then two, I'll make an analogy back to e-commerce and amazon.com's IPO, which I think was back in 1997, give or take. One of the things we talked about then, you could probably find Bloomberg articles and other mass media articles, the end of retail as we know it. And indeed, Amazon has significantly changed retail. We're going on 29 years ago that, that IPO happened, and there's still plenty of stores. And one stat I saw recently actually said retail was the -- had the highest occupancy rate of any category in CMBS in the CMBS market, the lowest vacancy. So while the predictions of doom are always great in the credit market, in my opinion and experience, they are often overstated. That said, there are snakes lurking in the grass and risks are out there. And there are software loans in the syndicated market that are trading in the 50s, perhaps some even lower at this point. That's the exception, that's not the majority, but it is certainly greater than 0.

When we look at our portfolios, we're not buying or selling specific loans in any CLOs. The collateral managers are the ones doing that. That said, the software industry is an area of significant focus for us, both in our monitoring and ongoing diligence of existing investments in the ground, including the decisions potentially to sell investments as well as an important part of our decision when we're selecting a new security to invest in. So we don't sit here and say we have a target software exposure. All else equal, I would seek to lower it. That said, due to activity in the underlying portfolios, it's possible it goes the other way as well.

Overall, I suspect that trend is going to be in the downward direction. But I do -- I highlight and I really underscore the pace of transition, while it's probably faster this time than it was with e-commerce 29 years ago, we're not in an immediate situation. There are a small number of watch names -- that said, I think many companies have a fair bit of runway to go. So it's something we're actively watching. We're in active dialogue with our collateral managers, and it is impacting our investment decisions, but it's by no means the only factor we consider when we decide to buy, sell or make the decision to hold the security.

I appreciate the insight on that topic. And last question for me, and then I'll step aside. Just given especially looking at the update for the April NAV that the stock continues to trade at a discount to NAV. So is it fair to say that the share repurchases still remain attractive from your viewpoint and likely to continue for the repurchasing for the near term?

We have continued to use the program, although I'll say it's not been as aggressive as we've used it in the past. If you listen to prior calls, I definitively used that word or a similar word. One of the things we balance is the potency of the buybacks in terms of NAV accretion. And I think we've built up about $0.24 of NAV through discounted buybacks.

The flip side, we also balance liquidity in the stock and the actual potency of our buying to the stock price. So it's something we continue to monitor and tweak. The program remains open and active, and we do have open capacity on it. I will say I balance -- we love buying our stock cheap. We love volume in our stock, and we like to use our powder when we can really move the stock price. So it's a collage of all of those 3 that make inform our decision every day. I would no longer say right now, we're aggressively buying back stock, but the program is open and active.

The next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

Dan -- actually for anyone. The 12-month default rate was 1.40, and part of my notes, is 1.20 last quarter. Was software the reason for that change?

Yes. Some of it was -- I mean, we haven't seen really the software names default significantly. It's more so it was not necessarily in this specific sector yet. I mean a lot of the software names, we're kind of seeing kind of them play out in terms of kind of whether they'll survive or not. We think that there's been a lot of baby thrown out with the bathwater for software names in that. About 75% of them still trade above H. And so there's actually a pretty decent kind of [indiscernible] building opportunities there. I mean a lot of the CLO collateral managers were selling software last year in 2025 because they were kind of getting ahead of this AI disruption risk.

So this is not anything that's new to the CLO market. And with kind of the lower concentrations than kind of private credit and the ability to trade loans, there is an ability to kind of make those relative value swaps. And so maybe there certainly will be defaults kind of in some of the software names that could lead to kind of higher defaults in the future, but kind of getting ahead of it, trading it around allows us to -- at least the BSL market seems to keep the default rate still relatively low.

So you're not really seeing higher nonaccruals or anything like that per se, just necessarily a bank, not a performer.

Correct.

Okay. On a follow-up, some of the BDCs I cover, believe it or not, have started seeing increased credit stress in health care. Have you guys seen anything like that?

Not significantly unless it's, I guess, somehow related to AI, if it's like some sort of software company that's really categorized within health care and has a risk of being disrupted by AI. But otherwise, no, we haven't seen that.

There are no further questions at this time. And I'd like to turn the call back over to Thomas Majewski for closing remarks.

Great. Thank you very much, everyone, for joining today. Lena, Dan and I appreciate your interest in Eagle Point Income Company. If you have any further questions, we'll be in the office later today and I'd be happy to speak. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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.

Greetings, and welcome to the Eagle Point Income Company Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I will turn the conference over to Mr. Darren Daugherty from Prosek Partners. You may begin.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the Fourth quarter and fiscal year 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's adviser, and Lena Anova, Chief Accounting Officer for the adviser.

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 and 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 evolves, 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 or 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 $0.12 of 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 $0.03 per share, which was comprised of $0.35 of net investment income and offset by $0.32 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 $0.35 per share compares to $0.39 of net investment income per share recognized in the prior quarter. The decline in net investment income was driven primarily by 2 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 and 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 $0.79 per share and that compares to the prior quarter's $17 million or $0.67 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 $0.15 per share.

NAV decreased to $13.31 per share as of December 31, 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 GAAP 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 adviser has expertise in these other credit strategies and has been invested in them for some time for other funds and accounts that our adviser manages.

We've also continued to actively optimize our capital structure, seeking to reduce financing costs. During 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 3-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 to NAV of 18.2%, resulting in a NAV accretion of approximately $0.14 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 3 monthly distributions of $0.11 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 $0.11 per share aligns with the company's near-term earnings 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 in 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 adviser 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 Ko, for an update on the market.

Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the fourth quarter. Loan market fundamentals remained largely stable through the year despite occasional bouts of volatility due to headlines concerning tariffs, interest rates and global acute political factors. Loan issuers continue to have positive growth in their revenues and EBITDA throughout the year, contributing to a relatively healthy credit market.

The S&P UBS Leveraged Loan Index posted a 1.2% return for the fourth quarter and a 5.9% return for the entirety of 2025. The trailing 12-month default rate decreased from 1.5% at the end of September to 1.2% as of December 31, still considerably below the long-term average of 2.6%. As of December 31, our portfolio's default exposure was 32 basis points, continued rate declines should support a lower default rate environment as issuers save on interest costs.

The loan new issuance rose slightly to $55 billion in the fourth quarter, totaling $209 billion for 2025, surpassing the 2024 record of $202 billion, Fourth quarter resets and refinancings were $54 billion and $20 billion, respectively. Combined full year CLO issuance, including resets and refinancings, hit $546 billion for 2025, exceeding last year's total volume of $511 million.

Tight loan spreads and increased supply of new issue CLOs were headwinds to CLO equity returns causing some pressure on our results. At the same time, new issue loan activity is picking up with several large loan deals recently announced. This increase in supply could cause loan spreads to widen as the market absorbs higher loan volumes leading to potentially higher equity cash flows in the future and creating a potential tailwind for CLO equity.

CLO debt spreads have remained resilient despite the modest volatility that we observed in the fourth quarter. our CLO BB positions, which are focused on the higher quality portion of the market benefit from attractive yields and our subordination. As of December 31, we had $52 million of cash and undrawn revolver capacity available. providing ample liquidity to deploy into attractive investment opportunities or opportunistically repurchase our stock and deliver long-term value for our shareholders.

With that, I'll hand the call over to our advisers Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. During the fourth quarter, the company recorded net investment income or NII less realized losses from investments of $0.7 million or $0.03 per share. This compares to NII less realized losses of $0.26 per share in the prior quarter and NII and realized gains of $0.54 per share in the fourth quarter of the last year. including unrealized investment portfolio losses, GAAP net loss was $15 million or $0.60 per share for the fourth quarter.

This compares to GAAP net income of $0.42 per share for the third quarter. The company's fourth quarter net loss was comprised of investment income of $15 million, offset by net unrealized losses of investments of $16 million net realized losses of $8 million and financing and operating expenses of $6 million. In addition, the company recorded an other comprehensive loss attributable to changes in the mark-to-market of the company's liabilities recorded at fair value of $1 million for the fourth quarter.

We paid 3 monthly distributions of $0.13 per share during the fourth quarter of 2025 and last week, we declared market distributions of $0.11 per share for the second quarter of 2026, in line with the distributions for the first quarter of 2026. As of December month end, the company had outstanding preferred securities, which totaled 31% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions.

As of December 31, the company's NAV was $312 million or $13.31 per share versus $14.21 per share as of September month end. During the fourth quarter, we repurchased over 1.6 million shares of our common stock for $19 million at an average discount to NAV of 18.2% per share. That resulted in NAV accretion of $0.14 per share. Looking at our portfolio activity during the month end of January, the company received recurring cash flows from its investment portfolio of $14 million. To note, some of the company's investments are still expected to make payments later in the quarter.

As of January month end, net of pending investment transactions and settlements, the company had $85 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of January month end was between $13.23 per share and $13.33 per share.

I will now turn the call back to Tom to provide closing remarks before we take your questions.

Thanks, Lena. Our fourth quarter reflected our continued focus on active portfolio management amid dynamic market conditions. Performance faced technical headwinds driven by spread compression in the leveraged loan market and the pace of repricing rather than deterioration in credit fundamentals.

Throughout this environment, we have focused on relative value and disciplined capital allocation across CLO debt and selectively CLO equity and other asset classes in the credit market beyond CLOs. We continue to actively execute on our share repurchase program as we view our stock as undervalued and believe repurchasing shares at a discount represents an attractive use of capital.

Looking ahead, we remain constructive on the CLO market fundamentals. We have a robust pipeline of refinancings and resets, which we believe will help lower the liability costs in our CLO equity portfolio. At the same time, increased new issue loan activity may help rebalance supply and demand in the loan market over time, which we also believe could be incrementally supportive for CLO equity.

Overall, we believe the current market environment represents a compelling opportunity for patient well-capitalized investors with a strong balance sheet, active portfolio management and a continued focus on relative value, we believe Eagle Point is well positioned to navigate the evolving market conditions and deliver solid risk-adjusted returns and long-term value for our shareholders.

Thank you for your time and interest in Eagle Point Income Company. Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] Our first questions come from the line of Erik Zwick with Lucid Capital Markets.

Wanted to start with just a follow-up on some of your comments, Tom, about the realized losses in the quarter being driven by rotating out of some underperforming managers. I wonder if you could just add a little more color to that, what particular measures or metrics were they kind of falling short of expectations. Just kind of curious if you can add something there.

Eric, this is Dan. So I guess in terms of the underperforming collateral managers, these are some of the ones that had, I guess, more credit issues and kind of loan spread compression that we had kind of anticipated on the CLO equity side. Maybe there were a handful kind of on the COO BB side as well that have kind of underperformed our expectations on credit. And so we just thought that it was best to exit and kind of rotate into both other CLOs, but also some of the asset classes away from CLOs that you've seen kind of grow kind of within your portfolio, whether it's collateralized fund obligations, as securities and then some other portfolio debt securities, which are all kind of asset classes that Eagle Point and other funds -- within Eagle Point are investing and we just found kind of better relative value there.

And so I thought we would kind of enhance the yield of the portfolio as well as kind of a little bit of diversity within the portfolio through those.

That's great color. And then in terms of the announced redemption of the Series C term preferred stock, Curious about your source of funds for redeeming that? Is it kind of a combination of cash on hand and maybe utilization of the new revolver? Or how do you plan to fund that.

Yes, exactly -- There -- it's definitely the revolver, a new revolver that's in place. There's kind of cash on hand, but also just continues to be a a lot of refis and resets for our CLO debt that means that we're getting paid off kind of at par, stuff that we typically bought at a discount earlier. So we're achieving that convexity and then able to kind of get par back and use those proceeds to ultimately pay back the EICC.

Got it. And then last 1 for me. In the press release, There's an indication that the weighted average expected yield on the CLO portfolio was 12.5% at the end of the quarter, and that was up from 11.6% curious. the driver of that increase, was it kind of income related or more in the denominator just the change in the fair market value of the portfolio?

Well, I think it's more just so that we -- was a little bit, I guess, the denominator, but it was also just kind of being able to redeploy into kind of wider yielding assets versus CLO BBs and CLO equity. So it's really that kind of non-CLO bucket that was accreted.

Our next questions come from the line of Christopher Nolan with Ladenburg Thalmann.

Lena, were there any nonrecurring items in the earnings?

No, we're not, this quarter.

Okay. And then I guess a follow-up on Eric's question on the refi. Should we expect the balance sheet investment portfolio to shrink in the first quarter and possibly into the second quarter as well relative to year-end.

No. I mean I guess we're obviously redeeming kind of the EICC, and we have been kind of opportunistically buying back our stock. That being said, it typically over the long-term target at 25% to 35% leverage ratio. And we're -- I guess, with the EICC being redeemed, will be kind of on the lower end of that. So I guess we have that target of 25% to 35%. And I guess that's really kind of all I can say for now.

Okay. And then I guess for the indication is you're going to be focusing less on CLO more on alternative credit assets. Are these going to be assets which you have any sort of direct exposure directly underwriting, let's say, a company? Or is it you're going to be buying packaged securities as before?

Yes. So this is -- these are investments that are being made kind of across the Eagle Point platform and other funds or accounts that we manage. We have dedicated teams that are focusing on these investments. And then the EIC, based on kind of the merits of the investment based on kind of my decision as the portfolio manager can participate in these investments. And so relative to kind of the opportunities that we were seeing in CLOs, we found that these other non-CLO investments I guess -- provided a better relative value opportunity. So that could change tomorrow if we find kind of CLOs provide a better kind of relative value kind of attractive yield.

But during the fourth quarter, we found better relative value within these kind of non-CLO asset classes.

Thank you. We have reached the end of our question-and-answer session. I would now like to hand the call back over to Tom Majewski for any closing comments.

Great. Thank you very much, everyone. We appreciate your time and interest in Eagle Point Income Company. Hopefully, we're giving some good color on the strategy for the portfolio as we move forward. Certainly, will remain in the foreseeable future to the focus on the core of a CLO BB portfolio but with the goal of enhancing the return where we can just as we've added CLO equity from time to time, similarly, introducing some other asset classes that we're investing in across Eagle Point's broader platform where we see opportunities on a relative basis to add incremental value.

So we're excited about the company. Our #1 job is to be delivering strong returns to shareholders through credit products. And we believe as we continue to evolve the strategy of the portfolio consistent with broader developments here at our firm. We're excited for the future prospects for EIC.

We appreciate your time and attention. Lena, Dan and I are around today if anyone has any follow-up questions. Thank you.

Thank you, ladies and gentlemen. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Greetings, and welcome to the Eagle Point Income Company Third Quarter 2025 Financial Results Call. [Operator Instructions]

It is now my pleasure to introduce your host, Darren Dougherty.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's Earnings Conference Call for the third quarter of 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company; Dan Ko, Senior Principal and Portfolio Manager for the company's Adviser; and Lena Umnova, Chief Accounting Officer for the Adviser.

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 Securities and Exchange Commission.

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 third quarter 2025 financial statements and investor presentation with the Securities and Exchange Commission. 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. We're glad you're joining the call with us today. EIC had a positive third quarter. Our NAV increased and we covered our distribution from both net interest income as well as recurring cash flows. The scale and experience of the Eagle Point platform remain key advantages as we seek to capitalize on opportunities in a dynamic market environment for CLO investing.

For the quarter, the company generated net investment income less realized losses of $0.26 per share. This was made up of $0.39 per share of net investment income and offset by $0.13 of realized capital losses. Recurring cash flows totaled $17 million or $0.67 per share, and this is consistent with the prior quarter's $18 million or $0.67 per share. Recurring cash flows exceeded our regular common distribution and total expenses by $0.05 per share.

NAV rose to $14.21 per share as of September 30, and that's up from $14.08 per share at the end of June. The increase reflects our continued portfolio performance, net investment income coverage of our common distribution, improving market conditions and disciplined capital management. Our GAAP return on equity for the third quarter was 3%.

During the quarter, we deployed $60 million into new investments. The new CLO equity we purchased during the quarter had a weighted average effective yield of 16.6%. The company's ability to invest in both CLO debt and CLO equity in both the primary and secondary markets allows us to assess relative value opportunities wherever they present themselves. Backed by Eagle Point's deep expertise in the CLO market, we believe this approach positions us to deliver attractive returns and long-term value for shareholders.

We completed 3 resets and 4 refinancings of our CLO equity positions during the quarter. These actions lowered the debt costs in those CLOs, and in the case of the resets, extended the reinvestment periods, which continue to enhance our portfolio's weighted average remaining reinvestment period and long-term earnings power.

During the third quarter, we issued $35 million of preferred stock through our at-the-market program. In light of recent Fed rate cuts, earlier today, we announced the scheduled redemption of 100% of our 7.75% Series B term preferred stock. This redemption allows us to further optimize our capital structure and reduce financing costs, positioning the company to enhance earnings power for our common shareholders over time.

Also during the quarter, we repurchased $21 million of common stock at an average discount to NAV of 8.3%. This resulted in NAV accretion of $0.07 per share. Today, we announced that our Board has increased our common share repurchase authorization to $60 million from $50 million, which had been previously announced in June of this year.

Since June, through October 31, we've repurchased in total $33 million of common stock at an average discount of 8.8% to NAV, creating $0.11 per share of NAV accretion for our shareholders. These actions reflect our ongoing commitment to enhancing shareholder value while maintaining prudent leverage and balance sheet flexibility. We plan to continue to be aggressive in buying back shares when they are trading at a discount to NAV.

Since our last earnings call in August, the Fed has cut interest rates twice. Our CLO debt portfolio, which makes up the majority of our holdings, is directly indexed to short-term rates and will earn lower coupons as a result of the Fed rate cuts.

Earlier today, we declared 3 monthly distributions of $0.11 per share for the first quarter of 2026. This is a reduction from our previous monthly distribution of $0.13 per share and reflects largely the impact of the Fed rate cuts.

The company's Board considers numerous factors when setting the monthly distribution level, including cash flow generated from the company's investment portfolio, GAAP earnings and the company is required to distribute substantially all of its taxable income. We believe this new distribution level is aligned with the current interest rate environment and the company's near-term earnings potential.

CLO debt is a floating rate asset, so it is expected that our earning power will move around as benchmark rates move just as it increases when rates are rising. That said, we believe junior CLO debt continues to offer compelling risk-adjusted returns compared to comparably rated corporates given its low credit expense and premium yield.

I'll now turn the call over to Senior Principal and Portfolio Manager, Dan Ko, for an update on the market.

Thanks, Tom. I'll provide a quick update on both the loan and CLO markets during the third quarter. The S&P UBS Leveraged Loan Index returned 1.6% for the quarter and continued to perform well through October, returning 0.3% for the month. There were 5 leveraged loan defaults during the quarter. And as of September 30, the trailing 12-month default rate stood at 1.5%, up from 1.1% as of June 30, but well below the long-term average of 2.6%.

The widely reported First Brands default caused most of the increase in the default rate, but had a minimal impact on the broader CLO market. First Brands accounts for only 25 basis points of our portfolio on a look-through basis and we do not view it as an indication of widespread credit weakness. Note that our CLO BBs benefit from par subordination, so the loss from First Brands was borne by the CLO equity.

The company's portfolio default exposure as of September 30 stood at 41 basis points, which is well below broader market levels. With rates expected to fall further, defaults should remain muted as loan issuers will have much lower interest costs. In addition, corporate fundamentals across the loan market remain resilient with issuers generally continuing to grow revenue and EBITDA despite the effects of inflation, tariffs and rates over the past year.

During the quarter, approximately 6.8% of leveraged loans or roughly 27% annualized were prepaid at par. In general, loan issuers continue to be proactive in tackling their near-term maturities and the maturity wall, as we have mentioned on prior calls, continues to be pushed out.

In terms of CLO new issuance, we saw $53 billion of volume during the quarter. This was up slightly from $51 billion in the second quarter. Reset and refinancing activity for the third quarter was $69 billion and $36 billion, respectively, both of which represented significant increases from the prior quarter.

CLO debt spreads remain resilient despite the many bouts of volatility that we have observed in the third quarter. Although lower base rates weigh on the earnings power of our CLO debt portfolio, we view the yield and low credit expense offered by CLO BBs as very attractive relative to comparably rated fixed income instruments.

Meanwhile, our CLO equity exposure provides a partial offset to lower rates as it is less rate sensitive. Returns are largely driven by spreads, not base rates. In many respects, lower rates can be constructive for the asset class, easing interest costs for loan issuers and supporting continued credit stability while also seeing increased LBO activity that contributes to new loan supply and wider loan spreads.

As of September 30, we had $52 million of cash and undrawn revolver capacity available for investment and common stock repurchases, providing ample liquidity to act on the best relative value opportunities and deliver long-term value for our shareholders.

With that, I'll hand it over to our Advisers' Chief Accounting Officer, Lena Umnova, to walk through our financial results.

Thank you, Dan. For the third quarter, the company recorded net investment income less realized losses of $7 million or $0.26 per share. This compares to NII and realized gains of $0.39 per share for the last quarter and NII and realized gains of $0.57 per share for the third quarter of last year.

Including unrealized portfolio gains, GAAP net income was $11 million or $0.43 per share for the third quarter of 2025. The company's third quarter net income was comprised of investment income of $16 million and unrealized gains on investments of $5 million, partially offset by financing and operating expenses of $6 million, realized losses of $3 million and unrealized losses on certain liabilities recorded at fair value of $1 million.

Additionally, other comprehensive income was $1 million for the third quarter. We paid 3 monthly distributions of $0.13 per share during the quarter. And earlier today, we declared 3 monthly distributions of $0.11 per share for the first quarter of next year.

As of September month end, the company had outstanding preferred equity securities, which totaled 35% of total assets less current liabilities. This is at the top end of our long-term target leverage ratio range of 25% to 35%, where we expect to operate the company under normal market conditions.

The company's asset coverage ratio at quarter end for preferred stock calculated in accordance with Investment Company Act requirements was 285%. This is comfortably above the statutory requirements of 200%.

As of September month end, the company's NAV was $356 million or $14.21 per share, an increase versus $14.08 per share as of June month end. During the quarter, we repurchased over 1.5 million shares of our common stock for a total amount of $21 million at the average discount to NAV of 8.3% per share. This has resulted in NAV accretion of $0.07 per share. We would like to highlight that all repurchased shares were retired.

Looking at our portfolio activity during the month of October, the company received recurring cash flows on its investment portfolio of $17 million. I would like to highlight that some of the company's investments are still expected to make payments later in the quarter.

As of October month end, net of pending investment transactions and settlement, the company had $55 million of cash and revolver capacity available for investment and other purposes. Management's unaudited estimate of the company's NAV as of October month end was between $13.94 and $14.04 per share.

I will now turn the call back over to Tom, who will provide closing remarks before we take your questions.

Thanks, Lena. The third quarter demonstrated our focus on actively managing our portfolio and executing our strategy across shifting market conditions. We were selective in finding the best relative value opportunities between CLO debt and equity. We also remained active with our share repurchase program, aggressively buying back stock, which we believe is undervalued.

The Board increased the program, giving us more flexibility to keep buying our own stock at a discount. It's a great investment for the company. Periods like this often reward patient, well-capitalized investors. And we believe the company is well positioned to continue generating solid risk-adjusted returns and building long-term value for our shareholders. We appreciate your continued support. Thank you for your time and interest in Eagle Point Income Company.

Lena, Dan and I will now open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Eric Zwick with Lucid Capital Markets LLC.

I wanted to start just looking at Slide 26, and it seems in the most recent data for revenue and EBITDA change for below investment-grade companies that we've seen a little bit of a pickup here. And then if we kind of take the Fed cuts and reductions and so forth that we've already seen and maybe extrapolate the futures curve a little bit, it seems like kind of profits for companies are trending in a positive direction. So just curious what that means for your expectations in terms of credit quality going forward. There certainly are some concerns in the market today and some unknowns with the macroeconomic, but wonder if you kind of put that together and kind of relay some thoughts on future credit quality.

Yes, very good question. And on this page, which is -- looks like Page 26 in the deck, you can see data going back over a decade going back to 2012. And generically, below investment-grade companies should be growing at a faster rate than the economy. That's just kind of the nature of the beast. They're levered, they're growth-oriented, in many cases, sponsor-backed.

If you look at the last few quarters, in general, you can see a positive revenue trend and a positive-ish EBITDA trend, not as good as the revenue trend. There's a little bit of a spread there. But overall, that's what we like to see. This goes through Q2, which does include some of the tariff-related behavior. Q3 data is still kind of being finalized right now. But overall, we view this as directionally credit positive.

These numbers, I don't want to say they can never be big enough. If they were both -- if the 6.3 and 4.3 were double, we wouldn't object for sure. If they were triple, we might wonder what's going on. But overall, the growth of these companies is very much moving back into the right direction. We certainly had a little bit of shock earlier in the year. But the takeaway here, if top line and bottom line are growing, those are credit positives broadly for the companies we deal with.

Yes. And if I might add, this is Dan Ko speaking. I mean as long as these kind of companies continue to grow revenue and EBITDA, we haven't seen defaults pick up materially. And if anything, as kind of maybe the growth rate increases, we'll likely see, I guess, defaults start to slow down, which we've seen in some of the kind of the research that we're seeing, the outlooks for next year kind of seeing default rates come down. We've seen the percentage of kind of LMEs relative to last year kind of come down. And so generally, with lower rates should lower the interest cost for a lot of these companies. So from a credit standpoint, should be at least some tailwinds going into next year.

That's all great to hear. And then on the next slide, Slide 27, there's been a noticeable increase in annual trading volume really since 2020, maybe notwithstanding 2021. And it looks like '25 is on pace to be a record if I just extrapolate into fourth quarter from the first 3 quarters.

So one -- I guess, maybe a 2-part question. One, what has driven that increase over the past, call it, 5-plus years? And two, what does that has or what does it mean for your business in managing Eagle Point Income Company?

Sure. So in terms of kind of trading volumes, I think some of that has to do with the fact that there are just more eyes on CLOs. I think people have recognized just the premium yields that you can receive as well as the low credit expense for CLO debt relative to kind of other fixed income asset classes, rated fixed income asset classes that are out there.

So I think people have seen just the data on how well it's performed. And so we're seeing a lot more activity within the CLO space. There are more entrants kind of looking at buying CLO debt as well as equity, which has kind of increased the competitive landscape of being kind of the established player in the space certainly helps in that we're a top counterparty for nearly all the desks that are out there, both on our debt and equity standpoint.

And then for your second part of your question, some of that, I guess, the increase is really due to, I guess, the advent of ETFs that have come along kind of over the past couple of years or so. So a lot of the -- I think the investment-grade trading activity is probably related to ETFs, some of the non-investment-grade as well.

But ultimately, we think that the additional liquidity that we're seeing within the market, I think, is good. In that, it allows us to be able to take kind of views on certain investments to buy and sell. And the bid-ask typically for a lot of these tranches has kind of tightened. So just an easier way for us to kind of express views on our positions.

And last one for me, just making sure I'm following your thoughts correctly. With reducing the dividend going into 1Q of next year, safe to assume -- I think you mentioned it's primarily due to the Fed rate cuts that we've seen and maybe some more coming. Safe to kind of assume that you feel the earnings power of the portfolio is likely to trend down somewhat here from this level that you reported in the most recent quarter?

Yes. I mean it has something to do. Obviously, the rates is a driver of that for the CLO debt portfolio, but we are making some rotations within the CLO equity portfolio to kind of increase earnings and to offset some of that as well as some other higher-yielding investments.

So we do -- we changed the dividend rate to what we see as kind of the near-term kind of rate that can be supported. But obviously, many factors kind of go into determining that each quarter along with the Board. But at least for Q1, we think that that's kind of the appropriate level.

Our next question comes from the line of Timothy D'Agostino with B. Riley Securities.

Kind of piggybacking off that last question in terms of asset rotation. It seems quarter-over-quarter CLO debt decreased that kind of breaks the trend of the past 4 quarters of like more CLO debt assets. It also seems like you're holding a lot more cash. I was just kind of wondering if you could provide some color around that activity.

Yes, sure. So thanks, Tim, for your question. I mean there was a lot of refis and resets that have been happening in the CLO market as kind of the spreads for some of the older seasoned kind of positions were in the money for the equity to kind of refinance. And so we saw a lot of paydowns in those investments. So it's obviously sad to see kind of the higher yields go away, but it's also good to get par back a lot sooner than we had anticipated, certainly when we bought some of these at discounts.

And so we have seen a little bit of a build-up in cash. As we announced, some of that cash is going to be used to pay down the EICBs later this quarter. So that's kind of, I guess, why we have a little bit of -- a little more cash than usual. But also, it's kind of finding the right kind of relative value in investments.

CLO BBs are by no means kind of a sector that we're trying to exit, but trying to pick our spots given that most of the paper that we think that's interesting today is actually less new issue, but probably more refis and resets. But they do come with a little bit of kind of hair in the portfolio. They're not as squeaky clean as new issue is. But you can pick up 50 to 100 basis points potentially. So kind of picking our spots and then also kind of try to pick our spots for CLO equity as well as kind of other sort of higher-yielding investments.

Okay, great. And then just as a follow-up to that on the cash component. You mentioned paying down the Bs. Is that the primary focus to pay down the Bs with the cash or will you also be looking to buy back common shares? Just trying to understand like where we can see the cash go more towards? Is it going to be paying down the Bs 100% and taking -- buying back some common or will you really just be focused on paying down the Bs?

Yes. I mean it's really to focus on the Bs, and we haven't publicly announced any sort of share buyback. I'm sorry, I'm sorry. We have announced a share buyback. I apologize. Yes, I mean, so we'll be using it for both so that we'll pay back the Bs. And then I think we've said in the script that we'll aggressively -- look to buy back the common. So we'll be using it for -- ultimately for both.

Our next question comes from the line of Christopher Nolan with Ladenburg Thalmann.

On Page 22, you have the largest industry concentration of software and technology. How much of that might be AI or data center-related, please?

Not a ton, to be honest. Most of this is kind of enterprise software, so kind of software that's really embedded in a lot of companies' operations. And so it's stickier credits. It's harder for companies to pull out kind of software that they're using on a daily basis because it's just the replacement -- or the cost of replacing, meaning both just the actual cost, but also just the time and effort that goes into replacing the software is very costly. So it's been generally one of the higher industry concentrations within the loan market and has generally performed well over the past several cycles.

Great. As a follow-up, just following up to the most recent question talking about investing in the BBs. When you're looking at deals to invest in, is there particular industries that you're looking to get more exposure on or does each CLO seem to have a broad-based industry composition?

Yes. I mean most CLOs have very similar industry concentrations to the loan market and that CLO managers are generally buying kind of what the market has put before them. You might see a little bit of tweaks here and there and maybe a certain manager decides not to buy any kind of oil and gas names because they've been burned in the past. But it's kind of hard to avoid some of the higher -- like technology and healthcare. Those are typically the 2 highest concentrations within the loan market. So -- but most people are not materially kind of off index, if you will.

And we have reached the end of the question-and-answer session. Therefore, I'll now turn the call back over to Thomas Majewski for closing comments.

Great. Thank you very much, everyone. We appreciate your interest in Eagle Point Income Company. We'll continue to work very hard for shareholders. The biggest thing continuing to aggressively buy back our stock using the buyback program. Good to get the call of the preferred at the highest rate. We'll get that done this year and continue to optimize the company's balance sheet and continue to look for the best investments for the company. So we appreciate your time and effort and the time and interest, and we appreciate joining us today. Thank you very much.

Thank you. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.