Eagle Point Income Company Inc. (EIC) Earnings

Management highlights

- Portfolio and Market Performance * The 4% Q2 2026 NAV increase was driven by a recovery in leveraged loan prices and CLO valuations after Q1 2026 market volatility, which management attributes to market pricing pressure rather than broad credit deterioration. * Underlying credit fundamentals for held investments remained resilient through the quarter; the trailing 12-month leveraged loan default rate ended Q2 at 1.0%, down from 1.4% at end-Q1 and below the long-term average of 2.5%; EIC's look-through exposure to defaulted loans was just 36 bps, far below market average. * Elevated refinancing, reset, and call activity led to early repayment of discount-priced CLO debt investments at par, allowing the firm to realize embedded convexity gains earlier than expected. - Portfolio Management Activity * Deployed $39 million into new investments during the quarter with a weighted average effective yield of 17.9%, across CLO debt, CLO equity, and complementary credit opportunities. * Repositioned the portfolio by rotating capital away from underperforming CLO collateral managers to higher-conviction CLO and private credit opportunities; realized losses from this rotation were mostly already reflected as prior-period unrealized losses, with minimal incremental impact on Q2 NAV. * Completed 1 reset and 2 refinancings of CLO equity positions, delivering a weighted average 33 bps of debt cost savings and extending the reinvestment period of the reset position to 5 years. * Increased non-core CLO exposure to differentiated private credit opportunities sourced from the broader Eagle Point platform; one realized example, a specialty finance transaction secured by World Cup tickets with Sports Illustrated Tickets, delivered a 1.2x multiple on invested capital over a seven-month holding period. - Capital Structure * Issued $1 million of 6% Series AA convertible perpetual preferred stock during Q2; this fixed-rate long-term capital provides additional deployment flexibility and is a unique competitive advantage for the firm, as management is not aware of any other public CLO-focused fund with a similar program. * As of end-Q2, preferred equity represented 12% of total assets less current liabilities, below the firm's 25-35% target leverage range; leverage is expected to increase over time via continued preferred stock issuance.

Guidance

- The company has declared monthly common share distributions of $0.11 per share for the remainder of 2026, and management states this level reflects the firm's near-term earnings potential in the current interest rate environment. - Management expects CLO refinancing and reset activity to remain robust in coming periods, which will support lower liability costs and extended reinvestment periods for CLO equity holdings, and create additional opportunities to realize embedded gains for discount-priced CLO debt investments. - Management expects leverage will gradually increase toward the 25-35% target range over coming quarters, as the firm continues to issue new 6% Series AA and Series AB convertible perpetual preferred stock. - Management's unaudited estimate of end-July 2026 NAV was between $12.30 and $12.40 per share, representing a 1% decrease from the end of Q2 2026 at the midpoint of the range.

Segment performance

As of June 30, 2026, the company's portfolio is divided into three segments by allocation share: 1) CLO debt: 59% of total portfolio; 2) CLO equity: 19% of total portfolio; 3) Non-CLO investments: 22% of total portfolio. No separate revenue performance figures are provided for individual segments. Aggregate company financial performance for Q2 2026: net investment income (NII) of $0.37 per share; NII less realized investment losses of negative $0.29 per share; including unrealized portfolio gains, GAAP net income totaled $20 million, or $0.84 per share; net asset value (NAV) per share increased 4% quarter-over-quarter to $12.52, from $11.99 at the end of Q1 2026; the company generated a GAAP return on common equity of 7.1% for the quarter; total 33 cents per share in cash distributions were paid to common shareholders during the quarter.

Risks & headwinds

- Forward-looking projections and statements made during the call are inherently uncertain, and actual results may differ materially from projections due to unforeseen risks and market factors. - Market volatility driven by concerns around AI's impact on software sector borrowers and geopolitical developments created near-term pricing pressure on leveraged loans and CLO valuations in Q1 2026, and similar volatility could reoccur. - The firm's share repurchase activity is constrained by low trading liquidity in EIC's common stock, as large-scale repurchases can negatively impact the stock's trading volume and liquidity.

Analyst Q&A

• Q: What are management's current thoughts on share repurchases, given that the NAV has recovered but the share price still trades at a discount, and leverage is well below target? /

  A: Management balances the value of buying discounted stock against the importance of maintaining adequate common share liquidity, after pulling back on prior repurchases due to their negative impact on trading volume. The firm's revolver was fully undrawn at quarter-end, and management considers all available capital allocation levers daily, including repurchases, to align leverage with the firm's target range.

• Q: What is driving the current record high CLO trading volume, and how does this increased liquidity impact EIC and its portfolio management? /

  A: Increased CLO market liquidity comes from far broader market participation and interest in CLOs than 14 years ago when Eagle Point was founded. This liquidity was a major benefit for EIC's Q2 2026 portfolio repositioning, allowing the firm to execute rotations at better price levels than management expected.

• Q: Why is current leverage (12% of assets) well below the 25-35% target range, and how does management plan to return to the target? /

  A: Leverage is lower because the firm retired expensive 8% preferred stock earlier in 2026, and has only just begun issuing new lower-cost 6% convertible perpetual preferred stock. Management expects continued preferred issuance over coming quarters, and the currently undrawn revolver can also be drawn to gradually bring leverage back into the target range over the long term.

• Q: How does EIC's non-CLO diversified investment sleeve compare to the similar sleeve at affiliate Eagle Point Credit Company (ECC)? /

  A: There is substantial overlap in the non-CLO investment positions held by EIC and ECC, as both source opportunities from the broader Eagle Point platform. The primary difference is that EIC is a smaller fund, so its non-CLO positions have less concentration than ECC's larger holdings.