WhiteHorse Finance, Inc. Q3 FY2025 earnings call

• The Board reset the quarterly base distribution to $0.25 per share, with an implied 8.8% annualized yield based on Q3 end NAV. - The adviser reduced the incentive fee on net investment income from 20% to 17.5% for the next 2 fiscal quarters. - The Board approved a $15 million share buyback program. - In Q3, gross deployments were $19.3 million with net repayments of $31.2 million; new originations included 2 deals with average leverage ~3.5x EBITDA. - Net realized and unrealized losses totaled $6.7 million, with markdowns in Alvaria and Camarillo Fitness offset by a markup in Motivational Marketing. - Nonaccrual investments improved to 2.7% of the debt portfolio from 4.9% in the prior quarter. - Lending market conditions: M&A activity slow, competitive, with nonsponsor market less competitive and higher pricing.

In the third quarter of 2025, GAAP net investment income and core NII was $6.1 million or $0.263 per share, compared to $6.6 million or $0.282 per share in Q2. NAV per share at the end of Q3 was $11.41, a approximately 3.6% decrease from the prior quarter. Net realized and unrealized losses in the portfolio totaled $6.7 million or approximately $0.29 per share. The debt portfolio was 99.2% first lien, senior secured, with approximately 65% sponsor and 35% nonsponsor ownership. The weighted average effective yield on income-producing debt investments decreased to 11.6% from 11.9% in Q2, and the overall portfolio yield decreased to 9.5% from 9.8% in Q2.

• The quarterly base distribution was reset to $0.25 per share. - Incentive fee reduced to 17.5% for the next 2 fiscal quarters. - A $15 million share buyback program was authorized. - The fourth quarter base distribution of $0.25 per share was declared, payable January 5, 2026.

• Impact of interest rate cuts and market spread compression. - Material markdowns on some credits. - Uncertainty in turnaround of troubled assets, which may take time. - Competition in the lending market, especially in sponsor markets.

Q: Melissa Wedel asked about the new base dividend and the fee waiver.

A: Stuart Aronson explained the reset was based on earnings power, interest rates, and market conditions; the fee waiver is for 2 quarters with future review based on performance.

Q: Robert Dodd inquired about the track record of sponsor vs. nonsponsor deals.

A: Stuart Aronson noted fewer payment defaults on nonsponsor deals historically, with nonaccrual deals mostly originating from sponsor deals.

Q: Christopher Nolan asked about incentive fee beyond 2 quarters and share repurchases.

A: Stuart Aronson said the Board may extend the fee waiver if underperformance continues; share repurchases are accretive given the discount to NAV