Eagle Point Income Company Inc. (EIC) Earnings Call Transcript & Summary

Thank you, operator, and good morning. I'd like to welcome everyone to Eagle Point Income Company's earnings conference call for 2026. On the line with us today are Thomas Philip Majewski, who serves as the company's chairman and chief executive officer, Daniel Ko, a senior principal and portfolio manager at the company's adviser, and Lena Umnova, the adviser's chief accounting officer. Before we begin, please be aware that our discussion today will contain forward-looking statements, or projected financial information, that carry risks and uncertainties which might lead the company's actual results to differ materially from those projections. To learn more about the risks that could impact the company, along with the statements and projections we're discussing here, please check our filings with the SEC. Any forward-looking statement or financial projection we present on this call is based on what we know as of today. We're not taking on any duty to revise those forward-looking statements unless the law says we have to. Earlier today, we submitted our Q1 26 financial statements and investor presentation to the Securities and Exchange Commission; those materials are also posted in the Investor Relations area of eaglepointincome.com, our website. You'll be able to access a replay of today's call later on. Darren here is turning things over to Eagle Point Income Company's chairman and chief executive officer, Thomas Philip Majewski.

Tom speaking: Thank you, Darren, and greetings to all of you this morning. It's a pleasure to have each of you joining us for this quarterly earnings call of Eagle Point Income Company. Despite certain headwinds affecting the wider market, EIC turned in a robust first quarter. Compared with the previous quarter, net investment income increased, and the recurring cash flows we generate were enough to fund our distributions as well as all of our company expenses. Throughout much of 2026, the CLO market experienced challenging conditions, and the broader dynamics were something the company also experienced. The basics of our CLO portfolio held up fairly well, yet weaker loan pricing — especially among software names — plus a wary mood in credit markets tied to the war still raging in Ukraine, weighed on our NAV for the quarter. Software became a real focus over those three months, since investors continued to weigh how AI could disrupt particular business models and revenue streams. What matters, though, is that we gain exposure largely via broadly syndicated loans, not the middle market loans that BDCs typically carry. Within our CLOs, the credits are generally bigger, trade more easily, are syndicated across institutions, and have market prices we can observe. That observable pricing can mean more immediate mark to market volatility when markets are turbulent, but it gives investors clarity about how the underlying investments are valued. Although that volatility weighed on quarterly valuations for many CLOs, we think it also opened opportunities for CLO collateral managers to put proceeds from sales and paydowns to work in discounted loans with attractive forward return potential. So although those things caused CLO valuations to fall for a lot of securities in the quarter, we think the market usually prices the reinvestment option inside CLOs too cheaply when volatility is high. Being able to purchase loans at big discounts to par has let CLO equity produce appealing medium and longer term returns, and that's happened many times before. On top of that, we think our portfolio of floating rate CLO junior debt stands to gain from greater income if short term rates move upward; as inflation picks up, which more and more market participants now expect, it looks like the chance of short term rates rising could be more in play than we believed only 3 months back. In the quarter, we put $56 million to work in new investments spanning several credit asset classes, at a weighted average effective yield of 16.0%, as we capitalized on compelling relative value opportunities that a particularly uncertain macro environment had created. All through the quarter, we kept actively managing our CLO portfolio, finishing 4 resets and 2 refinancings of our CLO equity positions, which produced weighted average CLO debt cost savings of 48 basis points for those CLOs. Besides bringing debt costs down, the reset positions pushed their reinvestment periods out to 5 years. Even though junior CLO debt remains central to what EIC does, we look for chances to gain exposure to additional credit categories, including infrastructure credit, regulatory capital relief transactions, portfolio debt securities, and other structured and private credit investments. Across each of these asset classes, Eagle Point's platform includes a dedicated team possessing deep, specialized expertise, which represents a significant platform advantage. That advantage lets EIC reach originated investment opportunities, broaden portfolio diversification, and produce excess returns beyond what traditional CLO securities offer. As of March 31, NAV fell to $11.99 per share, down from $13.31 per share at year end. This decline mostly stems from negative mark to market adjustments affecting the company's CLO debt portfolio. Because spreads widened and demand for CLO junior debt weakened over those three months, our GAAP return on equity came in at negative 7.2%. Even so, April brought a solid recovery, and EIC's NAV actually climbed into a range of $12.48 to $12.58 per share, which works out to a 4.5% gain at the midpoint. Even with NAV falling in the first quarter, net investment income rose compared with the prior quarter, reaching $0.36/share versus $0.35/share in 2025. Each of those figures tops the $0.33/common share we distributed. Now let's look at our capital structure. In Q1, we brought a preferred stock offering to market — our 6.00% Series AA and Series AB convertible perpetual preferred. Through it, the company gains access to capital that is both inexpensive and long-lasting, which adds to our financial flexibility. As far as we know, no other publicly traded company out there focuses its investments mainly on CLO debt while using perpetual financing, and we view that as a meaningful competitive edge for us. Once the quarter had ended, we completed the full redemption of our 8.00% Series C term preferred stock, the priciest of all our debt financings. Taken together, these actions demonstrate that lowering our cost of capital and lengthening our maturity schedule remain priorities, with the goal of strengthening our earnings power over the long term. During this quarter, we repurchased a little less than 390 thousand shares of common stock, and those buybacks came at an average discount of 19.3% relative to NAV, delivering $0.04/share in NAV accretion. Starting in June 2025, when the board initially announced the share repurchase authorization, and running through March 31, we have repurchased $50 million in common stock in total, at an average discount of 13.0% of NAV, which generated $0.26/share of NAV accretion. As market opportunities present themselves, we plan to continue pursuing common share buybacks selectively. The actions we took in the quarter, combined with the current positioning of our portfolio, we believe position us well for the quarters to come. I'd like to pass things along now to Daniel Ko, who serves as Senior Principal and Portfolio Manager, so he can share a market update.

Appreciate that, Tom. Let me give you a quick rundown on where things stand in the loan and CLO markets. During Q1, the S&P UBS Leveraged Loan Index dropped 0.5%. Then it came back with a gain of 1.2% in April. Even with that uneven pattern in loan returns, the fundamentals of the borrowers underneath have held steady, since corporate revenue along with EBITDA growth are still positive. That's propping up credit performance generally throughout the broadly syndicated loan market. The trailing 12-month default rate closed out the period at 1.4%, a bit above where we ended the year, yet far under the 2.5% long term average. Although weaker loan prices have weighed on CLO valuations near term, they're simultaneously producing a better setup for reinvestment; given that a lot of loans are trading below par and repricing activity slowed down in the first quarter, we identified more room for par build, wider spreads on fresh investments, and stronger forward returns; when it comes to junior CLO debt securities, our view is that this rate environment is constructive. As intermediate and long term rates move higher, we anticipate short term rates, SOFR included, which is what CLO debt floats off of, will move up as well. In fact, the market is pricing in possible Fed rate hikes over the coming year. Given the possibility of rising short term rates, junior CLO debt investments keep providing appealing floating rate income potential, which we'd anticipate would drive higher income on the portfolio down the road; on top of that, stretches of market volatility may open up chances to buy CLO debt at discounts. That gives you possible pull to par as markets normalize. Our view is that income generation, structural protection, and potential convexity together make junior CLO debt especially attractive right now. On the CLO new issuance side, we recorded $47 billion of volume in the quarter, a slight decline from $55 billion in 2025. Reset activity during the first quarter came to $32 billion, lower than $54 billion in the prior quarter. Meanwhile, refinancing activity reached $24 billion, an increase from $20 billion in the prior quarter. As the broader markets normalize entering the second quarter, we anticipate CLO volumes will stay robust moving forward; with that, I'll pass things over to our advisor's Chief Accounting Officer, Lena Umnova, to take you through our financial results.

Thanks, Daniel. In Q1, our net investment income, or NII, came to $0.36 per share, while NII after subtracting realized losses was $0.34 per share. That's versus NII minus realized losses of $0.03 per share in the prior quarter, and NII plus realized gains of $0.44 per share for 2025. Once unrealized portfolio losses are factored in, GAAP net loss equaled $22 million, or $0.95 per share, for 2026. That compares with a GAAP net loss of $0.60 per share in the previous quarter and a GAAP net loss of $0.46 per share for 2025. Recurring cash flows generated by our investment portfolio reached $40 million, or $0.62 per share, in the quarter, and they topped the company's common stock distributions plus expenses. In the quarter, we made 3 monthly common stock distributions at $0.11 per share, and last week we declared 3 monthly common stock distributions at $0.11 per share. For 2026. At March month end, outstanding preferred equity securities held by the company amounted to 34% of total assets less current liabilities. That sits inside our target range of 25% to 35%, which is where we anticipate running the company when market conditions are normal. Turning to portfolio activity in April, the company collected recurring cash flows of $11 million on its investment portfolio. Keep in mind that certain company investments are still anticipated to make payments later in the quarter. At February month end, after accounting for pending investment transactions and settlements, the company had $15 million in cash and revolver capacity on hand for investment and other purposes. Management's unaudited estimate of NAV at April month end ranged from $12.48 to $12.58 per share. At the midpoint, that represented a 4.5% rise from March month end. I'll hand the call back to Tom now so he can give closing remarks ahead of your questions.

Appreciate that, Lena. From where we sit, the way lower loan prices have cut down on repricing activity, together with the possibility of short term rates moving higher, is making our earnings power prospects look better. Add in how carefully we allocate capital and the fact that we can draw on the entire Eagle Point origination platform, and we think we're in a strong spot to turn these conditions into better outcomes for shareholders as time goes on. Thank you for sticking with us, and we're grateful for the time and attention you've given to Eagle Point Income Company. Lena, Daniel, and I are ready to take your questions now. Operator?

Q (Analyst (Erik Zwick)): Thanks. Morning once more. I'd like to begin with something about software. You brought it up in what you said, and clearly it's been a hot topic recently in the leveraged loan space. And if I look at — I believe it's Slide 22, perhaps — where, you know, you sort of display how concentrated various industries are. Within the portfolio, technology and software is, as I understand it, at minimum twice the size of the next biggest one at 12%, 12.5%. So I'm wondering what you think about — I suppose this is a broader question — it's a broader question. Do you believe the effect might be, is it probable to bring about shifts in how much leveraged loan issuance there is, since possibly, you know, there would be fewer IPOs in software, or do you believe it, you know, causes more defaults and problems with credit quality? And perhaps even more significantly, what's your thinking on this, and you know, what kind of target exposure to software do you want in the portfolio?

There are quite a few questions bundled into that one. But on the whole, yes, it's clear that software and services is the biggest, you know, category, exceeding the runner-up by a multiple greater than 2. I suppose one of the initial things we consider generally is that software companies aren't all the same in quality. You know, at a broad level, there are figures showing that 70% of Fortune 500 companies continue to rely on mainframes. Never mind, you know, Blades or SaaS or similar things. The dangers are greater in certain parts of software than in others. For instance, something like an airline reservation system would be so essential that it won't be sassed away any time soon. Here at Eagle Point, our internal books and records, such as the official custodian records, that's a long way off before we'd see that happen. Meanwhile, the way we monitor vacation time and similar matters, you know, I'm certain that for some trivial thing we could likely just build it ourselves and do it more cheaply. So in general, how critical a tool is matters a lot when it comes to its SaaS vulnerability. That's the first point. And then second, you know, I'll draw a comparison to ecommerce and amazon.com's IPO, which I believe took place back in 2000, roughly. One thing we discussed back then — you could probably locate Bloomberg articles and other mass media pieces — you know, the end of retail as we know it. And true enough, Amazon has dramatically transformed retail. We're approaching 29 years since that IPO occurred, and there are still lots of stores, and one statistic I came across lately actually said retail had the highest occupancy rate of any category in CMBS in the CMBS market, so the lowest vacancy. So even though forecasts of doom are always wonderful in the credit market, in my view and from my experience, they tend to be exaggerated. Even so, there are hazards hiding in plain sight, and dangers do exist. You also have, you know, software loans in the syndicated market that are, you know, being traded in the 50s, maybe a few even below that right now. That is the outlier. That is not most of them; but it is definitely more than 0. When we examine our portfolios, we are not purchasing or offloading particular loans in any CLOs. The collateral managers are the parties doing that. Even so, the software industry is a sector of major concentration for us. Both in our oversight and continuing due diligence of current investments on the ground including the choices potentially to divest investments, as well as a key element of our judgment when we are picking a new security to put money into. So we do not sit here and claim we have a target software exposure All else equal, I would aim to reduce it; even so, because of activity in the underlying portfolios, it is possible it moves the opposite way too. On the whole, I believe that trend is going to head lower. But I do I emphasize, and I really stress the speed of change. Although it is likely quicker now than it was with ecommerce 29 years ago, We are not in a right-now situation. There are a limited number of watch names Even so, I think plenty of companies have a decent amount of runway remaining. So it is something we are closely monitoring; we are in ongoing discussions with our collateral managers, and it is affecting our investment choices. But it is in no way the sole factor we weigh when we are deciding to buy, sell, or hold a security.

Q (Analyst (Erik Zwick)): Thank you, Tom. That insight is helpful, and this will be my final question before I hand things over. Considering in particular the April NAV update, and with the stock still changing hands below NAV, would it be reasonable to say that from where you sit, buybacks continue to look appealing and will probably keep happening in the near term?