Palmer Square Capital BDC Inc. Q4 FY2025 earnings call

• Fourth quarter deployment: $91.4 million of capital deployed, total and net investment income of $29.8 million and $13.1 million respectively. Net investment income of $0.41 per share, covered $0.36 per share base dividend and paid $0.43 per share total dividend. - January NAV per share $14.48, unique monthly NAV disclosure. - Confidence in software portfolio: software investments in mission-critical enterprise platforms with large moat, incumbency advantage, and data for better AI. - Portfolio diversification: 42 industries represented, 10 largest investments 10.9% of portfolio. - Deal volume: M&A activity improving modestly, but recovery uneven. Spread compression in market, defensive posture maintained but recent volatility may present opportunities. - Portfolio highlights: credit performance solid, First Brands exposure adjusted, refinanced private credit facility with Wells Fargo, $5 million open market share repurchase authorization.

In the fourth quarter, total investment portfolio had a fair value of approx $1.2 billion across 42 industries. Deployed $91.4 million of capital, realized ~$148.3 million through repayments and sales. Weighted average total yield to maturity of debt and income-producing securities at fair value was 11.30% and at amortized cost was 8.15%. Non-accruals were low. Software comprised less than 11% of the overall portfolio, with average position size ~$4.6 million, skewed towards mission-critical enterprise platforms with large private equity sponsors and meaningful equity cushions below senior secured loans.

• Board declared first quarter 2026 base dividend of $0.36 per share, policy of distributing excess earnings as supplemental distribution. - Management looking at all avenues for capital deployment, including share repurchase and new underwriting origination, considering spread opportunities and market dislocations. - Reevaluate distribution framework at Board level as income generation and economic data evolve.

• Uncertain market conditions due to interest rate uncertainty, changing economic conditions. - Volatility and uncertainty in financial markets affecting deal volume and sentiment. - Concerns around AI-driven disruption impacting software sector and market sentiment. - Potential for actual results to differ from forward-looking statements due to inaccurate assumptions.

Q: Looked at leverage levels, capital deployment, and stock trading. Are you going to keep dry powder or buy stock?

A: Management and Board looking at all avenues. Shares attractive at current level, also seeing secondary investing opportunities and better spreads in new underwriting origination, will be prudent across facets.

Q: Where in cycle on credit side, approaching historically attractive pricing?

A: Credit markets bifurcated. Software credit spreads wider, some opportunities there. Outside software sectors, spreads may move slower due to dry powder.

Q: Weighing software loan opportunity vs risk and volatility?

A: Balanced process, not outright increase exposure to sector, but analyzing company-by-company, seeing opportunities through relative value process.

Q: Relative attractiveness between liquid and private side, preference for marginal investment?

A: More balanced. Secondary loan market more attractive now, private credit activity steadier, both sides have good opportunity sets.

Q: Updated outlook on distribution framework?

A: Board continues to evaluate, considering income generation and economic data, will reevaluate at Board level as quarter progresses.