Eagle Point Income Company Inc. Q4 FY2024 earnings call

• 2024 was an excellent year with GAAP return on equity of 21% and total return on common stock of 24.8% assuming reinvested distributions. Paid $2.40 per share in cash distributions, about 15.2% of average stock price. Received $3.30 per share in recurring cash flows for the year.
• Fourth quarter had recurring cash flows of $16.1 million ($0.82 per share), net investment income and realized gains of $0.54 per share. NAV was $14.99 per share. Declared $0.20 per share monthly distributions through June 2025.
• Deployed $91 million into new CLO investments in Q4 with 11% weighted average effective yield. New CLO issuance reached record levels in 2024. Default rate for EIC's portfolio was 0.4% as of Dec 31, 2024, remaining low.
• Strengthened balance sheet through at-the-market program and committed equity finance program, issuing ~2.5 million common shares at a premium to NAV.

For the fourth quarter, the company received recurring cash flows of $16.1 million or $0.82 per share, compared to $13.1 million or $0.76 per share in the prior quarter. The NAV as of December 31st was $14.99 per share, a 1% increase from September 30th and a 4% increase from the start of 2024. The company deployed approximately $91 million of gross capital into new CLO investments during the quarter with a weighted average effective yield of 11%. CLO debt investments contributed to strong cash flows, and CLO equity exposure enhanced earnings ability.

• Declared monthly distributions of $0.20 per share through June 2025.
• Continue to monitor short-term rates and consider deploying additional capital into CLO equity, which is less rate sensitive than CLO double B's.
• Portfolio is constructed to succeed in any rate or economic environment.

• Reinvestment risk as CLO debt investments are called and paid off at par, requiring reinvestment at tighter spreads.
• While default risk is expected to remain low for the foreseeable future, there is a risk that significant loan defaults above historical averages could impact the portfolio.

Q: Live CLO liability spreads have tightened dramatically with lack of M&A limiting new CLO creation. How do you see CLO debt liability spreads trending over the next couple of years?

A: Tom Majewski stated CLO debt tranches have performed well, spreads should continue to trend tighter, but there's reinvestment risk as investments are called and paid off at par, requiring reinvestment at tighter spreads.

Q: Risks in CFOs compared to CLOs and how high are you willing to go with allocation to CFO and CLO equity?

A: Tom Majewski said CLO equity could potentially go up to 30% of the portfolio (with a hard minimum of 65% CLO debt). CFOs are a small portion of the portfolio, with higher subordination risk but attractive risk-adjusted yields.

Q: How do you see the delta between cash yields and weighted average effective yields in CLO equity developing?

A: Dan Ko explained CLO equity effective yields factor in not getting 100 cents on the dollar back, and they counteract spread compression on loans with refinancing and reset activity to balance liability costs. Tom Majewski added they reset CLOs to lock in lower costs and benefit from locked-in cheap triple A's if loan spreads widen.