[Management View]
Eagle Point Credit Company reported a strong start to 2025, with significant new investments and portfolio rotations. Key metrics include net investment income of $0.33 per share and a net asset value (NAV) of $7.23 per share, reflecting a 13.7% decline due to market volatility. The company emphasized the resilience of CLO cash flows and the strategic advantage of their weighted average remaining reinvestment period (WARP) of 3.5 years.

[Outlook]
Management provided guidance on future performance, highlighting ongoing refinancing and reset activities to capture value. They expect continued strong cash flows and emphasized the potential for reinvestment opportunities at current market prices. The company plans to maintain its focus on CLO equity investments and leverage its capital structure flexibility.

[Financial Performance]
Eagle Point Credit reported net investment income and realized gains of $0.33 per share for Q1 2025, compared to $0.12 per share in Q4 2024 and $0.29 per share in Q1 2024. The NAV decreased by 13.7% to $7.23 per share, primarily due to market price drops in CLO securities. Recurring cash flows collected totaled $79.9 million, exceeding distributions paid to common stockholders.

[Q&A Highlights]
Question 1: Tom, you mentioned that the dislocation in the markets feels temporary. But CLO NAVs have been weak now for several quarters, which is obviously disheartening. Meanwhile, I see that your estimated yields at fair value are almost 20% and they're even higher in terms of cash yields. So other than some clarity on the administration's tariff policy, what do you think it's gonna take for the market to recognize what's seems to be relatively stable background for CLO cash flows.
Answer: The cash flows have been stable for CLO equity for over twenty-five years. The cash just keeps coming, even during crises like COVID and the financial crisis. The market prices of CLO securities move more than their real fair value suggests. We view the current situation as an opportunity to buy cheaper assets and capitalize on reinvestment optionality within CLOs.

Question 2: I had a couple, but, yeah, I obviously appreciate the commentary and the solid result. The first is on the resets and refis, I initially, I thought that was, you know, like, nine resets and seven refis was a lot. But I think I heard in your commentary that it could kinda keep that pace for the next couple of quarters. So just wondering if we get a little more color there on if that level of activity is something we should kinda plan on in this, you know, given moving in the market and interest rates are what's driving that?
Answer: Nine resets and seven refis were actually a late quarter number. We expect single-digit, maybe double-digit resets per quarter in current market conditions. The market's a little slower now compared to the first quarter, but we will continue to focus on reducing costs and creating value on the right side of our balance sheet.

Question 3: On deployments. In the press release, you indicate since April 30th, deployed $4.2 million of net capital. Which seems like a relatively slower pace compared to the ninety-five that was just referenced in the first quarter, and I realized April was a fairly volatile month in the market. So curious if that slower pace of deployment grows into the net numbers, so maybe the gross number was larger. But just curious kind of what you saw in April that resulted in the slower net deployment and if it was market related, has that maybe not resolved yet, but lessened so that deployment in May and June will potentially be at a higher level.
Answer: The market saw a significant drop in prices and volume in April, leading to slower deployment. However, activity began to recover in late May. We are keenly looking to expand the portfolio in discounted areas and expect a pickup in deployment in the coming months.

Question 4: Looking at the seventy-five and a half million of recurring cash distributions that you received since April 30th. And I think you mentioned in your prepared comments here that additional cash flow is expected in May and June. Curious if you could just quantify that to any degree because I guess as I understand it, you know, the majority of the cash flow you're seeing is usually front-end weighted in the quarter.
Answer: The majority of cash flow is front-end weighted, with a few million dollars more expected in May and June. Some resets and new investments will make their initial payments in subsequent quarters, bolstering future cash flows.

Question 5: You talked about the spread compression that you're battling over the past fifteen months or so. And if I look at slide nineteen, your deck that's certainly apparent. However, when I look like, the longer-term trend, you know, your slide points out that over the past ten years and maybe a little bit more, the average spread has been higher about fifty-five basis points over that longer-term average. So wondering if you could just, from a bigger picture perspective, talk about you know, what's happened, I guess, really kinda looking at that chart from kind of you know, post-GFC to today that has resulted in the higher spreads relative to that pre-GFC period.
Answer: The long-term average spread of 315 bps increased to 370 bps over the past ten years due to changes in funding costs and market dynamics. Pre-GFC, funding was cheaper, and loan spreads were lower. Post-GFC, CLO debt costs increased, leading to higher loan spreads. We expect the ten-year average to remain stable unless there is a significant change in CLO debt costs.

Question 6: All of us who are income investors love your dividend, your distribution at twenty plus percent. And, you know, in our wildest dreams, we'd love to think that your total returns are gonna be that much over time as well. But what I'm curious about is you know, in a real bank I mean, you know, I could say CLOs are virtual banks, but in at JPMorgan and other places, they can reserve in advance. You know, for projected loan losses I don't think CLOs can do that, and I don't think you can do that as a closed-end fund. So you're if I'm right, you're required to pay ninety percent or so of your taxable income as you move along. But I assume since you can't create a reserve for loan loss in that, like a like banks can, And a lot of the losses creep up probably when individual CLOs are actually you know, when they wind down. Is there a permanent sort of back ending of loan loss that you can't pay you know, you can't consider in calculating your required distributions that's gonna sort of continually make it almost seem like a bit of an annuity as opposed you know what I'm asking?
Answer: For GAAP, we do have a loan loss reserve through effective yields, which assume future losses. For tax purposes, there is no reserve for losses, and taxable income is based on cash. We focus on generating cash, which supports our distributions. The difference between cash income and GAAP income represents our reserve for loan losses.

[Sentiment Analysis]
The tone of the analysts was inquisitive and focused on understanding the impact of market volatility and spread compression on the company's performance. Management remained confident and emphasized the resilience of their cash flows and strategic positioning.

[Quarterly Comparison]
| Metric | Q1 2025 | Q4 2024 | Q1 2024 |
|-------------------------------|---------------|---------------|---------------|
| Net Investment Income | $0.33/share | $0.12/share | $0.29/share |
| Net Asset Value (NAV) | $7.23/share | $8.38/share | N/A |
| Recurring Cash Flows | $79.9 million | $82 million | N/A |
| New Investments Deployed | $190 million | N/A | N/A |
| Distributions Paid | $0.42/share | N/A | N/A |

[Risks and Concerns]
1. Net Asset Value Decline: A 13.7% decrease in NAV due to market price drops in CLO securities.
2. Leverage Above Target: Debt and preferred securities totaled 41% of total assets, above the target range of 27.5% to 37.5%.
3. Spread Compression: Continued impact on CLO equity market, though management expects this pressure to moderate.

[Final Takeaway]
Eagle Point Credit Company demonstrated strong performance in Q1 2025 despite market volatility, with significant new investments and portfolio rotations. Management emphasized the resilience of CLO cash flows and the strategic advantage of their weighted average remaining reinvestment period. While NAV declined due to market price drops, the company remains well-positioned for future growth and value capture through ongoing refinancing and reset activities. Investors should note the potential risks related to NAV decline, leverage, and spread compression, but can take confidence in the company's proactive investment approach and strong cash flow generation.