Palmer Square Capital BDC Inc. Q2 FY2025 earnings call

• Chris Long introduced the call, discussing the deployment of $92.4 million of capital, total and net investment income, dividend payment, and the company's platform and strategy, emphasizing transparency, fee structure, and shareholder-driven approach.
• Angie Long highlighted PSBD's durable results through market volatility, portfolio positioning, credit market dynamics, nonaccruals decline, and attractive yield compared to other market indices.
• Matt Bloomfield discussed portfolio and investment activity: $92.4 million capital deployed, $133.3 million realized, portfolio diversification, Europe investments, private credit loans, nonaccruals, and internal rating.
• Jeff Fox reviewed financial results: investment income decrease, net expenses, NAV, balance sheet, stock repurchase, and dividend declaration, including base dividend and plan for supplemental dividend.

In the second quarter, Palmer Square Capital BDC's flagship BDC, PSBD, had total investment income of $31.7 million, down 13.3% from the prior year period. Net investment income was $13.8 million ($0.43 per share). The portfolio fair value as of June 30, 2025 was approximately $1.28 billion, down 4% from the first quarter. PSBD had a yield of 12.12% as of July 31, and the NAV per share was $15.68 at the end of the second quarter.

• Board declared a third quarter 2025 base dividend of $0.36 per share.
• Plan to announce supplemental dividend in September based on undistributed net investment income.
• During Q2, 315,045 shares were purchased under the stock repurchase plan at an average price of $13.43.

• Forward-looking statements subject to uncertainties including interest rate market conditions, changing economic conditions, policy, and geopolitical risk as identified in SEC filings.

Q: You've talked about the benefit of the liquid nature of your portfolio. I was wondering if you could give us some examples of that during the second quarter and how that might have been put to use.

A: Doug, it's Matt. Thanks for the question. Yes, April was quite volatile. When spreads widen, liquid loan prices decline. We put some capital to work where we felt comfortable with underlying business fundamentals of specific companies. We didn't get over our skis but did buy loans at discounts to par that we think are attractive and will pay out at par, with benefit from acceleration of discount supporting earnings.

Q: That makes sense. And then just, I guess, along those lines, how did you manage leverage during that period of volatility? How willing are you to kind of let it to float up or kind of how just your thoughts on how you manage leverage during that period of time?

A: Yes. We have the benefit of seeing loan price movements daily. We were comfortable letting it float for most of April but wanted to protect the capital base. We maintain excess liquidity in cash and can pay down parts of credit facilities to manage leverage. At quarter end, leverage was flat to prior quarter.

Q: I wanted to start on the income statement, really top line interest income. Noticed that stable or slightly higher quarter-over-quarter despite there being a decent number of exits or repayments during the quarter and what I assume is sort of a lower average earning asset base in 2Q versus 1Q. I was wondering if that's driven by some -- some acceleration of OID on some repayments or anything else that we should be aware of?

A: Melissa, it's Matt. Thanks for the question. Yes, we had refinancing activity during the quarter which helped with income acceleration. When looking at yields on new investments versus prior quarter, we built spread into the portfolio, finding value in Europe with U.S. dollar loans sourced from our European effort. Partly from paydowns and portfolio rotation capabilities.