CION Investment Corp Q4 FY2024 earnings call

• Pleased with 2024 results despite elevated competition and changing inflation/interest rate expectations. - Hosted the first Investor Day in January, covering investment strategy, performance, deal case studies, and valuation process. - Q4 net investment income was $0.35 per share, full year $1.79 per share, exceeding total distributions. - Modest decline in quarterly net investment income due to balance sheet repositioning, expected to be mitigated as redeployed into deal pipeline. - Net asset value decline due to equity portfolio fair value marks and year-end special dividend, offset by share repurchase accretion. - Credit performance strong, with 3 loans downgraded and 6 upgraded, 1 loan moved back to accrual status. - Active share repurchasing, seeing shares as undervalued. - Selective in new investments in Q4, effectively at full investment, passed on higher percentage of potential investments based on credit/pricing. - Strategically focus on first lien investing, prefer secured yield enhancement provisions, selective in secondary investments. - Significant increase in PIK income from structured PIK term loan investment in Homer City, returned to accrual status. - Q4 investment activity: ~60% add-on for existing portfolio companies, ~40% new company investments, ~80% direct funding.

CION reported $0.35 in quarterly net investment income per share for the fourth quarter of 2024 and $1.79 per share for the full year. Net asset value decreased quarter-over-quarter to $15.43 from $15.73 in the third quarter, mainly driven by fair value marks in the equity portfolio and the year-end special dividend, partially offset by accretion from share repurchases. The credit performance of the portfolio is strong, with nonaccruals representing 1.41% of the portfolio at fair value. The weighted average yield for total funded first lien debt investments for the quarter was equivalent to SOFR plus 7%, and for direct investments in new companies was approximately SOFR plus 6.1%.

• Anticipate 2024 loan origination cohort may be challenging for total returns. - Declared first quarter base distribution of $0.36 per share, same as fourth quarter. - Expect continued selective investment approach, with focus on portfolio companies over new platforms in upcoming quarters.

• Market competition leading to lower coupon spreads, higher leverage attachment levels, and easing credit terms. - Seasonal volatility in fair value marks for David's Bridal. - Uncertainty around credit restructurings for companies like Sequoia Healthcare and Securus Technologies. - Potential impact of tariffs on portfolio companies, though not a large percentage of the portfolio.

Q: Finian O'Shea asked about the add-on investment in David's Bridal, specifically the strategic transformation and seasonality.

A: Gregg Bresner responded that the add-on was due to the company emerging from bankruptcy in late 2023, making the first full merchandising season larger, and incremental investment in the new digital marketplace which is nonrecurring.

Q: Justin Marca asked about pipeline health, new vs add-on opportunities, competition, and nonaccrual resolutions.

A: Gregg Bresner said ~60% of investments were add-on to existing portfolio companies, expecting that trend to continue, competition remains high so selective, and some nonaccruals may resolve but visibility is early.

Q: Justin Marca also asked about tariffs on portfolio companies.

A: Gregg Bresner said they actively discuss with portfolio companies, like David's Bridal has diverted production from China to other Asian countries to reduce tariff exposure, not a large percentage of the portfolio but a common theme.