Sound Point Meridian Capital, Inc. Q4 FY2025 earnings call

• Q4 2025 results: Net investment income of $13.4 million ($0.66 per share), net realized loss on exited investments $0.08 per share, dividends $0.72 per share. NAV per share $18.78, down due to unrealized losses from tariff and spending uncertainty. Deployed $70.6 million in CLO warehouse investments, purchased 4 CLO equity in primary market, refinanced 3 CLO equity liabilities.
• First year of operations: Deployed $291.8 million in CLO equity across 17 new issue, 19 refinancing, 8 secondary market purchases, participated in 18 CLO warehouses. Recorded NII $2.22 per share vs distributions $2.08 per share. Weighted average GAAP yield on CLO equity portfolio 14.0% vs 15.2% Dec 31. Portfolio diversified across 75 CLOs, 23 managers, 1,500+ loan issuers.
• Balance sheet: Two-year $100 million revolving credit facility, $57.5 million Series A preferred offering, committed equity financing agreement with B. Riley with $113,000 net proceeds as of March 31. Estimated NAV per share as of April 30, 2025 was $17.55. Announced monthly distributions for Q3 2025 $0.25 per share, same as Q2.
• Market environment: Loan market repricing paused, CLO liability spreads tightening, reset activity expected to start again. CLO demand strong in Q1 ($153B creations), tariff volatility in March paused reset/refinancing. Loan market secondary sell-off, 66% at par in Jan, 10% in March. Portfolio positioned in newer CLOs for cash flows and volatility.

For the quarter ended March 31, 2025, Sound Point Meridian Capital generated net investment income (NII) of $13.4 million or $0.66 per share and net realized loss on exited investments of $0.08 per common share, while paying dividends of $0.72 per share. Net asset value per share ended at $18.78, down from $20.52 due to unrealized losses from tariff and spending uncertainty. They deployed approximately $70.6 million in six CLO warehouse investments, purchased four CLO equity investments in the primary market with an amortized cost of $16.9 million and 16.15% weighted average GAAP yield, and refinanced the liabilities of three CLO equity investments. For the year ended March 31, 2025, they deployed $291.8 million in CLO equity investments across various transactions, participated in 18 CLO warehouses, recorded NII of $2.22 per share vs distributions of $2.08 per share, and the weighted average GAAP yield on the CLO equity portfolio was 14.0% vs 15.2% on December 31, driven by loan repricings offset by refinancing and reset activity. The portfolio was diversified across 75 CLO investments managed by 23 managers with an underlying loan portfolio of over 1,500 issuers in 30+ industries.

• Announced monthly distributions for calendar Q3 2025 of $0.25 per share, unchanged from Q2.
• Expect CLO equity investments to continue strong quarterly cash flow distributions, allowing monthly distributions to common shareholders.
• Anticipate reset activity to start again, reducing debt costs in portfolios as liability spreads tighten.

• Uncertainty surrounding new administration's tariff rollout and reduction in government spending led to unrealized losses in portfolio.
• Market volatility, including tariff and geopolitical headlines, affected CLO new issue activity and loan market sentiment.
• Potential impact of changes in healthcare funding and idiosyncratic risks in individual companies within sectors.

Q: Loan repricing near-term finished, opportunity on liability side for refis and resets?

A: Liability spreads tightening, reset activity expected to start again, positions issued in '23 and '24 up for reset this year/next, will reduce debt costs.

Q: Liquidity and deployment opportunities between primary and secondary?

A: Traded portfolio in Jan/Feb, delevered, added risk since end of quarter, secondary active, primary somewhat harder due to market moves, cautiously involved in new issue.

Q: Unrealized losses, market vs company specific?

A: Mainly market related, loan spread compression and general market volatility, no material defaults/stress in portfolio, market sentiment improved in May.

Q: Recurring cash flows for quarter ended March 31?

A: $16.6 million free cash flow for quarter ending March 31.

Q: Portfolio underweight healthcare, view on HHS/CMS funding?

A: No particular view, name-by-name idiosyncratic analysis, focus on loan trading in sectors and stressed exposure.

Q: Issuance of common or preferred shares in quarter?

A: No issuance in Q1, B. Riley facility had $113k raised in March.