Greetings, and welcome to the Eagle Point Income Company first quarter 2025 financial results call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance, please press star zero. As a reminder, this conference is being recorded. It is now my pleasure to introduce Darren Doherty, with Prosek Partners. Please go ahead.

Thank you, operator, and good morning. Welcome to Eagle Point Income Company's earnings conference call for the first quarter of 2025. Speaking on the call today are Thomas Majewski, Chairman and Chief Executive Officer of the company, Dan Ko, Senior Principal and Portfolio Manager for the company's adviser, and Lena Umnova, Chief Accounting Officer for the adviser. Before we begin, I would like to remind everyone that the matters discussed on this call include forward-looking statements or projected financial information that involves risks and uncertainties that may cause the company's actual results to differ materially from such projections. For further information on factors that could impact the company in the statements and projections contained herein, please refer to the company's filings with the Securities and Exchange Commission. Each forward-looking statement or projection of financial information made during this call is based on the information available to us as of the date of this call. We disclaim any obligation to update our forward-looking statements unless required by law. Earlier today, we filed our first quarter 2025 financial statements and investor presentation with the Securities and Exchange Commission. These are also available in the Investor Relations section of the company's website eaglepointincome.com. A replay of this call will also be made available later today. I will now turn the call over to Thomas Majewski, Chairman and Chief Executive Officer of Eagle Point Income Company. Tom?

Thank you, Darren, and welcome everyone to Eagle Point Income Company's first quarter earnings call. We appreciate your interest in Eagle Point Income Company, or EIC. During the first quarter, the company generated net investment income and realized gains of $0.44 per share. This was comprised of $0.40 of net investment income and $0.04 of realized capital gains. This measure is down from $0.54 per share in the fourth quarter. The fourth quarter's total was comprised of $0.46 of NII and $0.08 of realized gains. The quarter-over-quarter decline in NII was principally driven by two factors. First, over the past year, SOFR, which largely tracks short-term interest rates, fell significantly as the Fed cut rates multiple times last year. This principally impacts our CLO debt portfolio as the coupons on our CLO debt positions are directly linked to the SOFR rate. Second, the spreads on many syndicated loans have fallen, something the market refers to as spread compression. This adversely impacted the earnings on our CLO equity portfolio. As of March 31st, our NAV per share stood at $14.16. This compares to $14.99 as of December 31st. While our NAV may decline in volatile environments like these, it's important to remember that the prices of CLO securities will generally move more than the middle market loans held by many BDCs. We view the drawdown in our NAV as a short-term market price fluctuation and not indicative of concerns specific to our portfolio. During the first quarter of 2025, the company received recurring cash flows of $16.5 million or $0.71 per share. This compares to cash flows of $16.1 million or $0.82 per share in the fourth quarter and $10.7 million or $0.88 per share in the first quarter of 2024. Let me also highlight that a number of securities we purchased during the first quarter won't make payments until the second quarter. Earlier today, we declared three monthly distributions of $0.13 per share on our common stock for the third quarter. This is a decline from our previous distribution and we believe is more closely in line with the company's near-term earnings potential in today's lower interest rate environment. Of course, should SOFR increase in the future, that could lead to higher earnings for the company. At the same time, if SOFR falls further, that could reduce our earnings potential. The company's board considers numerous factors when setting the monthly distribution level, including cash flows generated from the company's investment portfolio, GAAP earnings, and the company's requirement to distribute substantially all of its taxable income amongst other considerations. Turning to our investment activity, during the volatility in the latter part of the first quarter, we were able to opportunistically deploy capital into discounted double B CLO debt purchases. In many cases, we were buying at prices that we hadn't seen since the first half of 2024. When we can buy CLO debt at discounts, this gives the potential for what is called convexity, or pull to par when markets eventually normalize. While the market-wide decline in most CLO security prices wasn't helpful for our NAV, our strong liquidity position allowed us to capitalize on the price volatility. Indeed, it was our previous purchases at discounts in 2023 and 2024 that gave rise to the $0.12 per share of gains that we realized over the last two quarters. The first quarter was a strong quarter for capital raising, and through our at-the-market program, or ATM, stock at a handsome premium to NAV, we raised approximately $64 million of common. This generated NAV accretion of $0.08 per share. We also raised an additional $14 million from ATM issuance of preferred stock. Daily average trading volume for our common stock continues to increase with volumes in the first quarter of 2025 more than double the volume of the first quarter of 2024.

Thank you, Tom. We continue to find attractive investment opportunities across the CLO market in junior CLO debt and CLO equity. The recent market volatility that began in the latter part of the first quarter created buying opportunities for EIC, which capitalized on this by investing in both high-yielding CLO debt and equity. During the first quarter, we deployed approximately $120 million of gross capital across 27 CLO debt purchases and nine CLO equity purchases. As the market turned in the second half of the quarter, we observed convexity returning to the CLO BB market with the drawdown in CLO BB prices, making the secondary market more attractive. As we've consistently noted, CLO BBs have performed well through numerous economic cycles in the past, experiencing very low long-term default rates. We believe it would take a significant amount of loan defaults well above the long-term average coupled with limited loan price volatility for EIC's portfolio to be significantly impacted by a default wave. The S&P UBS Leveraged Loan Index generated a total return of 60 basis points during the first quarter. After two positive months, during March, the index experienced its first negative monthly return since 2023. Along with broader markets, the decline in the leveraged loan index reversed, and as of May 23rd, the index is now up 1.8% for the year. During the first quarter, approximately 5% of leveraged loans, or roughly 20% annualized, prepaid at par. Many loan issuers have been proactively tackling their near-term maturities, and the maturity wall of the market continues to be pushed out further and further. As part of many of these repayments, borrowers issued new loans at tighter spreads. This has been driving the spread compression in our CLO equity portfolio. Spread compression has been a meaningful headwind to CLO equity over the past year. While a significant majority of the loan market was trading at a premium to par on January 31st, 2025, as of May 23rd, only 19.6% of the loan market is trading at a premium. For now, while spread compression will likely return at some point in the future, spread compression is largely behind us. Indeed, we are starting to see increases in the weighted average loan spreads of some of our CLO equity portfolios. The trailing twelve-month default rate decreased slightly to 80 basis points as of March 31st, remaining well below the historical average of 2.6% and below most dealer forecasts. EIC's portfolio default exposure as of March 31st stood at 50 basis points. From a CLO issuance standpoint, 2025 started strong with $49 billion of new issuance in the first quarter, mostly in the beginning of the quarter, down slightly from the $59 billion of volume in the fourth quarter of 2024, but still healthy by historical standards. This new issue volume in the first quarter was complemented by $64 billion of reset activity and $41 billion of refinancing for a total issuance volume of $153 billion, again, mostly in the beginning of the quarter before the drawdown in loan prices and widening of CLO debt spreads. During the first quarter of 2025, EIC completed one refinance and three resets of our CLO equity positions, lowering its debt cost by 45 basis points in the refinancing and extending the reinvestment to five years in the resets. We continue to remain focused on extending the weighted average remaining reinvestment period of our CLO equity portfolio as much as possible and will continue to seek longer reinvestment period, new issues, secondary and reset opportunities across our portfolio. Moving forward, the company has ample liquidity to capitalize in volatile markets. As of April 30th, with $33 million of cash and undrawn revolver capacity, we will continue deploying capital into additional investments that offer compelling risk-adjusted returns.

Thank you, Dan. During the first quarter of 2025, the company recorded NII and realized gains of $10.2 million or $0.44 per share. This compares to NII and realized gains of $0.54 per share recorded for the fourth quarter of 2024 and NII and realized gains of $0.56 per share for the first quarter of 2024. When unrealized portfolio depreciation is included, for the first quarter of 2025, the company recorded a GAAP net loss of $10.6 million or $0.46 per share. The company's first quarter net loss was comprised of total investment income of $14.1 million and a net realized gain on investments of $1.0 million. This was offset by financing costs and operating expenses of $4.9 million, net unrealized depreciation on investments of $18.9 million, and net unrealized appreciation on certain liabilities recorded at the fair value of $1.9 million. Additionally, the company recorded other comprehensive income of $1.3 million for the first quarter. During the first quarter of 2025, we paid three monthly distributions of $0.20 per share. Earlier today, we declared three separate monthly distributions of $0.13 per share for the third quarter of 2025. As of March 31st, the company had outstanding preferred equity securities which totaled 29% of total assets less current liabilities. This is within our long-term target leverage ratio range of 25% to 35%, which we expect to upgrade the company on market conditions. The company's asset coverage ratio at the quarter end for preferred stock calculated in accordance with investment company act requirements was 345%, comfortably above the required minimum of 200%. As of quarter end, our revolving credit facility was fully undrawn. As of March month-end, the company's NAV was $260 million or $14.16 per share, a 5.5% decrease compared to $14.99 per share as of the year-end. Moving on to our portfolio activity for the month of April. The company received recurring cash flows on its investments of $16.7 million. Note that some of the company's investments are still expected to make payments later in the quarter. As of April month-end, net of pending investment transactions and settlements, the company had over $33 million of cash and revolver capacity available for investment. Management's unaudited estimate of the company's NAV as of April month-end was between $13.73 and $13.83 per share.

Thank you, Lena. The company's decline in net investment income was driven in large part by the drop in short-term rates over the past year. While we were able to offset some of the decline through realizing gains on our portfolio for a period of time, the company's new distribution rate reflects our current view of the company's earnings potential in the current rate environment. We believe the recent market volatility will prove to be our friend over time, as we've been able to buy CLO debt and equity at discounted prices. Further, our CLO equity strategy has typically done well over the medium term during periods of volatility, as the CLO's ability to reinvest par paydowns into new loans, in our view, is significantly undervalued by the market. Looking forward, we believe the company is well-positioned to continue generating strong returns for our shareholders. We thank you for your time and interest in Eagle Point Income Company. Lena, Dan, and I will now open the call to your questions.

Thank you. We will now be conducting a question and answer session. One moment please while we poll for questions. Our first question is from Randy Binner with B. Riley Securities.

Hey. Good morning. I just wanted to ask a quick one about the reduction in the dividend distribution. And I guess in light of the recurring cash flows continuing to be kind of adequate to cover the prior $0.60 per quarter versus $0.39 now. Is it a stated policy that the core earnings need to cover it? I just want to understand that dynamic a little bit better.

Hey, Randy. Good morning again. Let me just address that from a high-level perspective. Indeed, the cash has been covering with no problem. The recurring cash flow. The vast majority of that is driven somewhat by the nuances that we have a little bit of CLO equity in the portfolio, about a quarter give or take. The vast majority of the portfolio is CLO double B's, which does fluctuate kind of directly in line with SOFR. So back when we went public in 2019, oddly, our distribution rate was roughly a quarter penny less than the original distribution rate in 2019. What we said was that as rates move up and down, the distribution rate on EIC is going to move around. If we were all CLO debt, let's just take it to the extreme, and rates moved down a hundred basis points, we'd be in a shortfall situation. So here we have the benefit of the CLO equity generating some excess cash for us, allowing us to be proactive. But in general, you should expect the net investment income to move around as rates move up and down. Rates move up a hundred basis points tomorrow, we would celebrate. If they drop another hundred basis points tomorrow, it would be an unfortunate day for the company, but our securities just float up and down with rates. So that's the broad thought. We've assessed the situation as we are not of the view that rates are going to go down a hundred basis points anytime soon. We think this is reflective of the company's near-to-medium-term earnings potential. We've been able to bridge it a little bit with all the gains we're realizing, which helps some of it. We have about $0.12 of gains over the last two quarters, which is a significant amount. However, this kind of feels in line with where the GAAP earnings for the company will be. As we discussed on the last call, there is some variability of taxable income. Taxable income from CLO debt is straightforward; it's primarily driven by the coupon, plus a little amortization of the discount. However, having about a quarter of the portfolio in CLO equity introduces a level of tax uncertainty. If we were to have a significant increase in taxable income that exceeds the distribution coverage, we would manage that, but it's not something we're predicting. With this distribution, to the extent short-term rates were to go down again, you would expect a decrease in the company’s earnings power concurrently.

Alright. That's helpful. I appreciate it.

Thank you. Our next question is from Steven Bavaria with Inside the Income Factory.

Hello again, Tom. Just to clarify something that I think is obvious to a lot of people, but maybe not to every one of your retail investors. So I'll just ask it. We think of CLOs in general as being kind of bets on default rates, on credit loss over time. The lower the default rate, the lower the credit loss after principal repayments, and everything, you know, the safer you are. When you move up in the balance sheet to the double B's and the other debt, nothing that's happened to your dividend reflects any kind of capital losses at all. I mean, with equity performing as well as it is and default rates being low, the drop in dividend rate is solely due to just interest rate movements, right?

Indeed, the change in the distribution rate is principally driven by the change in SOFR. Short-term rates have come down over the past year by a significant margin, which is reflected in this. The long-term default rate on CLO double B securities over the last thirty years is about four basis points per annum. We feel very confident in the CLO double B securities in our portfolio. This is not a credit-related move on our part. It is purely related to interest rate changes. When rates go down, these bonds earn less because they're floating rate bonds, and correspondingly, when rates go up, they earn more.

Gotcha. Thanks very much for clarifying that.

Good question. The decline is purely interest rate-driven and not connected to anything else. Thank you.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks.

Great. Thank you very much everyone for joining the call. We have now doubled the number of questions we've had on an EIC call. We appreciate the participation. For others who have questions that we didn't get to, please feel free to give us a call. We're around most of the day today. We appreciate your interest in Eagle Point Income Company, and look forward to speaking with you again. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.