WhiteHorse Finance, Inc. Q1 FY2026 earnings call

Core earnings moderated due to a lower portfolio yield. Share repurchases provided NAV accretion. The board expanded the share repurchase program and implemented a 10b-5-1 plan. The advisor extended the temporary voluntary waiver of the incentive fee. In Q1, gross capital deployments were $25.4 million, offset by repayments and sales of $38 million, resulting in net repayments of approximately $12.6 million. The STRS-JV portfolio had an aggregate fair value of $327.1 million and an average effective yield of 9.9%. Shares continued to trade at a significant discount to book value, and management focused on actions to enhance shareholder value like disciplined portfolio positioning and selective capital deployment.

In the first quarter of 2026, net realized and unrealized losses were largely driven by Honors Holding, Outward Hound, and Lumen Latam. Q1 gap net investment income and core NII were $5.6 million or 25.3 cents per share, compared with $6.6 million or 28.7 cents per share in Q4. NAV per share at the end of Q1 was $11.47, down from $11.68 at the end of Q4, a decrease of approximately 1.8%. The change in NAV reflected net realized and unrealized losses of approximately 28.4 cents per share, partially offset by share repurchases accretive to NAV by approximately 8 cents per share. Total investments decreased from the prior quarter by $35.6 million to $543 million. During the quarter, $4.7 million in net realized losses and approximately $1.6 million of net unrealized losses were recognized, totaling $6.3 million in net realized and unrealized losses. 98.8% of the debt portfolio was first lien, senior secured, and non-sponsor investments represented approximately 38% of the portfolio at fair value. The weighted average effective yield on income producing debt investments decreased to 10.8% at the end of Q1 and to 8.7% for the overall portfolio.

M&A market has recovered in the past few weeks. Pricing is higher on deals. Continues to focus on non-sponsor market for good risk return. Currently has 10 mandated deals. Declared a second quarter base distribution of $0.25 per share. BDC has remaining capacity of approximately $15 million for new assets and the balance sheet after reserving for share repurchases, and STRS-JV has remaining capacity of approximately $35 million.

LME risk where borrowers can move assets and subordinate original senior debt, company working to protect against this. Geopolitical and consumer sentiment uncertainty affecting market outlook. Highly conservative credit standards on software-related areas.

Q: On the buybacks, how are you considering repurchasing shares on a go-forward basis?

A: With shares trading at roughly a 35% discount to NAV, will continue to buy back shares as they are accretive, and have plenty of capacity left after increasing allocation last quarter.

Q: What are you expecting for the pipeline for the remainder of the year?

A: Seeing good flow of opportunities in sponsor and non-sponsor market, biased towards mid-market and upper mid-market deals with more conservative structures.

Q: Is there any limit to what you can take the percentage of the total portfolio occupied by the JV?

A: Equity in JV is considered a bad asset vis-a-vis 30% bad asset limit, not near that limit now.

Q: Should we expect the overall size of the BDC investment portfolio to decline in coming quarters?

A: At current share price levels, see buybacks as highly accretive, and there's plenty of capital for buybacks currently