Sound Point Meridian Capital, Inc. Q3 FY2026 earnings call

• Net investment income for the quarter was $9 million or 44¢ per share, with a net realized loss of $1.1 million and an unrealized loss on investments of $51.8 million. GAAP net loss was $43.9 million or $2.14 per share.
• Total assets were $474.7 million as of December 31, 2025, with net assets of $287.9 million and NAV of $14.02 per share.
• Deployed $6.8 million in warehouse investments, purchased new equity positions, sold equity investments, and refinanced liabilities of 10 equity investments.
• Portfolio is highly diversified with 97 CLOs across 30 managers, exposing over 1,500 loan issuers in over 30 industries.
• Monthly distributions for calendar Q2 2026 were reduced to 20¢ per share from 25¢ per share due to loan spread compression and repricing activity.

For the third fiscal quarter ended December 31, 2025, SoundPoint Meridian Capital generated net investment income (NII) of $9 million or 44¢ per share and recorded a net realized loss of 5¢ per share on exited investments. Net asset value (NAV) per share ended the quarter at $14.02, down from $16.91 as of September 30, 2025. During the quarter, the company deployed approximately $6.8 million in two warehouse investments, purchased three new issue equity positions with an amortized cost of $11.29 million and a weighted average cap yield of 9.31%, and a secondary market equity investment with an amortized cost of $5.23 million and a yield of 15.6%. It also sold $8.1 million in equity investments with an average yield of 15.6% and refinanced liabilities of 10 equity investments. The CLO equity portfolio's weighted average gap yield was 11% versus 12% in the prior quarter, driven by a 7 basis point weighted average spread loss in underlying portfolios. Revenue contribution is primarily from CLO equity investments.

• Announced monthly distributions for Q2 2026 at 20¢ per share, down from Q1's 25¢ per share. The board considered current and expected portfolio yield, balance sheet flexibility, and NAV support in setting the distribution.
• Believes CLO equity investments have refinancing optionality in 2026 but the pace of loan repricing over the past two years led to the distribution decrease.
• Committed to distributing at least the required portion of taxable income while evaluating distributions as earnings, market conditions, and portfolio positioning evolve.

• Persistent loan spread compression and elevated CLO liability costs impacting NII and distributions.
• Mark-to-market pressure in CLO equity valuations due to buyer pullback late in the year.
• Increasing dispersion across sectors, credits, and managers posing risk management challenges.
• Idiosyncratic credit events and policy volatility affecting market conditions and investor caution.

Q: Mickey Schiff Schleien asked about CLO captive funds and their behavior.

A: Ujjaval Desai discussed that captive funds drove new issue CLOs in 2025, are long-term focused, and it's hard to predict their behavior as they can justify returns with various assumptions.

Q: Eric Zwick inquired about the change in estimated savings from refinancing.

A: Ujjaval Desai explained it's due to rolling down higher cost liability deals completed in the prior quarter.

Q: Tim D'Agostino asked about portfolio yield trend in 2026.

A: Ujjaval Desai mentioned the portfolio gap yield was 11.4% in January, ticked up due to refinancing activity.

Q: Gaurav Mehta asked about primary market yields and dividend coverage.

A: Ujjaval Desai discussed the combined yield of warehouse income and equity positions, and the goal to cover the dividend over time based on portfolio rotation and market changes.