Financial Data and Key Metrics Changes - Total revenues for the first quarter reached $632 million, a 6% decrease compared to the previous year, primarily due to a 12% reduction in home deliveries [5][6][7] - Adjusted gross margin was 13.4%, slightly below expectations, while SG&A expenses were 13.3%, better than the low end of guidance [5][6] - Adjusted EBITDA was $63 million, significantly higher than guidance, and adjusted pre-tax income was $31 million, also above forecasted ranges [6][7] - Income from unconsolidated joint ventures totaled $3 million, slightly below expectations, while income from consolidated joint ventures exceeded expectations with a gain of $27 million recorded as other income [6][21] Business Line Data and Key Metrics Changes - The company delivered 12% fewer homes year-over-year, impacting total revenues, but a land sale helped offset some of the decline [6][7] - Incentives accounted for 12.6% of the average sales price, with a significant increase in mortgage rate buydowns contributing to affordability challenges [8][15] - The percentage of Quick Move-in homes (QMIs) in total sales decreased from 79% to 71%, while to-be-built sales increased from 21% to 29% [16][17] Market Data and Key Metrics Changes - Monthly traffic per community increased significantly in five of the six months shown, with January showing a 40% increase year-over-year [11] - Contracts in February 2026 were up 13% compared to the prior year, indicating a positive trend in buyer engagement [12] - The company experienced fluctuations in contracts over the past 12 months, with January showing an 11% year-over-year gain [11][12] Company Strategy and Development Direction - The company is focused on efficiently turning over existing inventory and advancing sales of Quick Move-in homes while preparing for new land opportunities that promise improved margins [10][20] - A shift in land acquisition strategy is underway, moving away from lower-margin entry-level homes to more move-up homes in prime locations and active adult communities [20][27] - The company aims to maintain a disciplined approach to land management, walking away from less attractive opportunities and focusing on higher-margin developments [24][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the housing market, including affordability pressures and economic uncertainties, but expressed confidence in meeting homebuyer demand [36][39] - The expectation for adjusted pre-tax income is to improve in the latter half of 2026, supported by stronger contract activity and the delivery of higher-margin homes [37][39] - The company remains committed to sustainable growth and value for shareholders, with a focus on inventory efficiency and land-light operations [39][40] Other Important Information - The company ended the quarter with $471 million in liquidity, above target, and has seen a significant reduction in net debt [28][30] - The net debt-to-capital ratio improved to 41.4%, a substantial decrease from 146.2% at the start of fiscal 2020 [30] - The company is only providing financial guidance for the next quarter due to current market volatility and challenges in predicting margins [31] Q&A Session Summary Question: On the topic of incentives and their pressure on margins, is there an opportunity to offer less incentives for higher margins? - Management prefers to focus on sales pace rather than price, maintaining incentives to clear lower-margin land and drive liquidity [43] Question: What is the current percentage of Quick Move-in homes versus built-to-order homes? - The percentage of QMIs has dropped to 71%, while demand for built-to-order homes has been increasing, which is beneficial due to higher profit margins [44]

New Mountain Finance (NasdaqGS:NMFC) Q4 2025 Earnings call February 25, 2026 11:30 AM ET Company ParticipantsEthan Kaye - VP of Equity ResearchFinian O'Shea - Director of WFS ResearchJohn Kline - President and CEOKris Corbett - CFO and TreasurerLaura Holson - COOSteven Klinsky - ChairmanOperatorGood day, and welcome to the New Mountain Finance Corporation Fourth Quarter 2025 Earnings Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pr ...

Financial Data and Key Metrics Changes - Total revenues for Q1 2026 reached $632 million, a 6% decrease compared to the previous year, primarily due to a 12% reduction in home deliveries [8][10] - Adjusted gross margin was 13.4%, slightly below expectations, while SG&A expenses were 13.3%, better than the low end of guidance [5][6] - Adjusted EBITDA for the quarter was $63 million, significantly higher than guidance, and adjusted pre-tax income was $31 million, also above forecast [6][10] Business Line Data and Key Metrics Changes - Income from unconsolidated joint ventures totaled $3 million, slightly below expectations, while income from consolidated joint ventures exceeded expectations with a gain of $27 million recorded as other income [6][22][23] - The company delivered 12% fewer homes year-over-year, impacting overall revenues, but a land sale helped offset some of the decline [8][10] - Incentives accounted for 12.6% of the average sales price, with a significant increase in mortgage rate buydowns contributing to affordability challenges [9][15] Market Data and Key Metrics Changes - Monthly traffic per community increased significantly in 5 of the 6 months leading up to January 2026, with January showing a 40% increase compared to the same month last year [12] - Contracts per community held steady at about 9.5 for the past 3 years, with February 2026 contracts on track to be higher than the same month last year [13][14] - The company experienced fluctuations in contracts over the past 12 months, with January showing an 11% year-over-year gain [12] Company Strategy and Development Direction - The company is focused on efficiently turning over existing inventory and advancing sales of Quick Move-in homes while preparing for new land opportunities that promise improved margins [11][21] - A shift in land acquisition strategy is noted, moving away from lower-margin entry-level homes to more move-up homes in prime locations and active adult communities [21][29] - The company aims to maintain a disciplined approach to land management, walking away from less attractive opportunities and focusing on higher-margin developments [28][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the housing market, including affordability pressures and economic uncertainties, but expressed confidence in meeting homebuyer demand [38][41] - The expectation for adjusted pre-tax income is to improve in the latter half of 2026, supported by stronger contract activity and the delivery of higher-margin homes [40][42] - The company remains committed to sustainable growth and value for shareholders, with a focus on inventory efficiency and land-light operations [42][43] Other Important Information - The company ended Q1 2026 with $471 million in liquidity, above target, despite significant spending on land and stock repurchases [29][30] - The net debt-to-capital ratio improved to 41.4%, a significant reduction from previous years, indicating stronger financial health [32] - The company expects to provide financial guidance for the next quarter only, reflecting the current market volatility [33] Q&A Session Summary Question: On the topic of incentives and their pressure on margins, is there an opportunity to offer less incentives for higher margins? - Management prefers to focus on sales pace rather than price, maintaining incentives to clear lower-margin land and drive liquidity [45][46] Question: What is the current percentage of Quick Move-in homes versus built-to-order homes? - Quick Move-in sales dropped from 79% to 71%, not due to a strategic shift but rather market demand, with built-to-order homes showing higher profit margins [48][49]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 2025 was $0.32 per share, covering the $0.32 per share dividend paid on December 31, 2025 [4] - Net asset value (NAV) declined to $11.52 per share from $12.06 per share, primarily due to lower valuation on Edmentum [5][25] - Total investment income for the quarter was $77 million, a 4% decrease compared to the prior quarter [35] - Total net expenses decreased by 5% to $44 million, including a fee waiver [35] Business Line Data and Key Metrics Changes - Approximately 95% of the loan portfolio is ranked green, with no positions rated red [8][24] - The company sold $477 million of assets, diversifying the portfolio and reducing PIK income [12][18] - Senior-oriented assets now represent 81% of the portfolio, up from 75% in the prior year [19][32] Market Data and Key Metrics Changes - The company expects to see some spread widening and increased pricing dispersion in direct lending [28] - Approximately 41% of pro forma PIK income will be generated by high-performing companies like Benevis and UniTek [20] Company Strategy and Development Direction - The company plans to utilize the full Dividend Protection Program, reducing the incentive fee from 20% to 15% until the end of 2026 [12] - Following the asset sale, the company aims to redeploy proceeds primarily into first lien assets [19][32] - The company is focused on business building and leveraging its expertise in software loans, particularly in the context of AI [10][22] Management's Comments on Operating Environment and Future Outlook - Management believes NMFC shares should trade back towards book value, citing several positive factors [11] - The company acknowledges increased risks related to AI but sees opportunities for well-informed lenders [22] - Management remains optimistic about the potential for equity appreciation in companies like UniTek [16] Other Important Information - The company repurchased approximately $52 million of shares in 2025 and has authorization to buy an additional $80 million [16] - Nonaccruals remain low at 1.4% of the portfolio at fair value [26] Q&A Session Summary Question: Is the 94% discount on the asset sale inclusive of any advisory fees? - The 94% of par was the purchase price, with expected fees and expenses of about $7 million [41] Question: Did the company try to sell any struggling assets? - The company focused on reducing concentration and PIK income, selling larger positions that were scrutinized by the market [44][45] Question: How were the assets selected for the sale? - The assets were chosen based on concentration and PIK characteristics, aiming to improve portfolio composition [51][52] Question: How does the pricing of the assets compare to internal marks? - The sale was seen as fair for both sides, validating internal marks while reducing concentration [61]

Financial Data and Key Metrics Changes - Q4 revenue grew by 13.7% and Q4 EBITDA increased by 37.6% [4] - Gross margin for the quarter finished at 41.9%, relatively flat compared to Q3 [10] - Net income attributable to stockholders increased by 50.7% to $13.4 million, reflecting an 11% net income margin [22] - EPS for the quarter was $0.48, and for the year, net income attributable to stockholders grew 12.6% to $51.2 million, with a 10.8% net income margin [22] Business Line Data and Key Metrics Changes - Total window film product line grew by 10% in Q4 and 21.7% for the year, driven by market share gains in auto and Windshield Protection Film [19] - Total installation revenue increased by over 17% in the quarter and 17.2% for the year [19] - Corporate store, dealership, service business, and aftermarket all saw growth in their respective segments [5] Market Data and Key Metrics Changes - U.S. region revenue grew by 11% in Q4, despite ongoing market dynamics [4] - Canada experienced a slight revenue decline, with car sales down 13% sequentially in Q4 [9] - Europe showed strong performance with revenue growing by 26.8% in Q4 [9] - China revenue came in at $14 million, higher than expected, marking the first full quarter post-acquisition [8] Company Strategy and Development Direction - The company is focused on investments in manufacturing and supply chain to support growth in key markets [4][16] - A strategic pivot has been made to concentrate on core products and improve sales efficiency [13][14] - The company aims to enhance its DAP platform and integrate it further into customer operations [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, citing increased customer engagement and positive feedback from the dealer conference [17][50] - The company anticipates a rebound in EV sales through its referral channel and expects gross margins to improve as the year progresses [10][11] - Management acknowledged headwinds in Canada and the impact of weather on Q1 performance but remains confident in overall growth prospects [9][31] Other Important Information - The effective tax rate for the quarter was just under 14%, with a future planning assumption of a 21% effective rate [21] - Cash flow from operations was $2.7 million for the quarter and $66.9 million for the year, representing a 40% increase from the previous year [24] Q&A Session Summary Question: What is contemplated in the Q1 revenue guide? - Management acknowledged the impact of weaker auto demand and weather on Q1 performance but indicated that they have factored these elements into their guidance [27][30] Question: How do you see in-house manufacturing playing out over time? - Management indicated that the build-out could be gradual or involve larger chunks depending on decisions made in the coming months [33][35] Question: Can you provide more color on the increase in DSO? - Management noted that the increase in DSO is likely due to new OEM business with longer payment terms, but there is nothing alarming [39][43] Question: What underpins your optimism for 2026? - Management highlighted increased optimism from customers, structural improvements in vehicle affordability, and a positive pipeline of new customer wins as key factors [50][53] Question: How do you expect gross margin to trend this year? - Management expects gross margin headwinds to abate in Q1, with improvements anticipated in Q2 as pricing issues resolve [55][57]

Financial Data and Key Metrics Changes - In Q4 2025, the company earned $0.13 per share, compared to a loss of $0.06 in Q4 2024, reflecting strong operational execution and cost management [12] - For the full year 2025, earnings were $5.05 per share, down from $5.24 per share in 2024, primarily due to weather impacts, with a $0.71 drag from weather normalization [13] - Weather-normalized sales growth for Q4 was 6.8%, contributing to a full-year growth of 5%, including 2% residential growth and 7.5% commercial and industrial growth [13][14] Business Line Data and Key Metrics Changes - The company achieved a new system peak of 8,648 megawatts in August 2025, exceeding the previous year's peak by over 400 megawatts [6] - Customer satisfaction metrics improved, with the company ranking in the top quartile nationally for residential customer satisfaction and in the second quartile for business customers [8] Market Data and Key Metrics Changes - The customer base grew by 2.4% in 2025, driven by new businesses and residents in Arizona, indicating a strong economic environment [14] - The semiconductor sector, particularly with TSMC's expansion, is expected to drive significant economic activity, with agreements anticipated to spur at least $250 billion in additional investments [8][9] Company Strategy and Development Direction - The company is focused on processing its rate case, executing grid expansion plans, and maintaining affordable rates for customers while finalizing commercial opportunities with large customers [5][11] - The capital program emphasizes reliability, grid resiliency, and meeting customer needs, with a rate-based growth guidance of 7%-9% through 2028 [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet rising demand and create long-term value, emphasizing the importance of safety and operational excellence [5][11] - The company aims to achieve a more linear earnings trajectory through the implementation of a formula rate, which would provide more consistent cost recovery [87][93] Other Important Information - The company successfully reduced O&M per megawatt hour by 3.3% year-over-year in 2025 and aims for further reductions in 2026 [15] - The company is actively engaged in discussions regarding potential new nuclear projects, although these are viewed as medium to long-term opportunities [61] Q&A Session Summary Question: Update on capacity growth and IRP planning - The company plans to file an updated 15-year integrated resource plan mid-year, focusing on load forecasts and resource planning [19][20] Question: Credit metric update and holdco debt - The holdco debt percentage at year-end was approximately 17%, within the targeted range [22] Question: Future sales growth and assumptions - The sales growth forecast of 5%-7% is based on existing demand and projects with high confidence, with potential upside from uncommitted load [27][28] Question: Implications from the UNS case - The UNS case was viewed as generally constructive, with differences noted between UNS and APS situations [41][43] Question: Breakdown of committed versus uncommitted load - The majority of the 4.5GW committed load is from high load factor customers, primarily data centers, with ongoing negotiations for uncommitted load [50][51] Question: FFO to debt ratio and future outlook - The FFO to debt ratio is expected to remain above 14%, with a focus on maintaining a cushion for credit metrics [84][86] Question: TSMC expansions and clarity on future plans - The company is in active discussions with TSMC regarding their expansion plans, with readiness to articulate utility infrastructure needs once solidified [104]

Financial Data and Key Metrics Changes - Fiscal 2025 non-GAAP diluted earnings per share for the legacy business was $3.74, a 22% increase from 2024 levels, marking the fourth consecutive year of double-digit earnings growth [11] - Total net sales for the year increased by 12% overall and 6% on an organic basis, with full-year adjusted operating margin expanding by 80 basis points to 9.4% [11][12] - The company expects a fifth year of double-digit non-GAAP EPS growth in 2026, with revenue growth anticipated to continue while driving bottom-line improvement [15][19] Business Line Data and Key Metrics Changes - In the legacy Workplace Furnishings business, full-year organic net sales increased by 6% year-over-year, with non-GAAP operating profit margin expanding by 100 basis points to 10.5% [12][13] - The Residential Building Products segment saw fourth-quarter revenue grow more than 10% compared to the same period in 2024, with full-year revenue increasing nearly 6% [13] - Segment non-GAAP operating profit margin in Residential Building Products expanded by 60 basis points year-over-year to 18.1% [13] Market Data and Key Metrics Changes - The company reported strong activity in the contract side of the business, with bid counts in the high teens, indicating healthy demand [28] - The macroeconomic picture for Workplace Furnishings is improving, with office leasing activity up more than 5% for the full year 2025 [19][20] - The new construction market remains weak, but the company expects continued outperformance in the remodel-retrofit segment [20][21] Company Strategy and Development Direction - The acquisition of Steelcase is expected to transform the company and the Workplace Furnishings industry, with anticipated synergies of $120 million and a focus on operational enhancements and digital transformation [8][9][21] - The company is committed to maintaining dealer partnerships and brand distribution, ensuring continuity for customers and dealers [10] - Investments are being made to drive top-line growth in Residential Building Products, focusing on customer engagement and go-to-market strategies [7][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand dynamics for Workplace Furnishings, driven by a return to office trends and positive net absorption of office space [19][20] - The company acknowledges ongoing challenges in the new construction market but expects to outperform due to structural changes and growth investments [20][21] - Management remains optimistic about the integration of Steelcase and the potential for revenue synergies, although it is still early in the process [21][72] Other Important Information - The company ended the year with a net debt to EBITDA ratio of 2 times, with expectations for cash flow strength to continue and leverage to return to pre-deal levels in the next 18-24 months [17] - The company remains committed to its long-standing dividend while continuing to invest in business growth [18] Q&A Session Summary Question: Clarification on the outlook for the year regarding revenue and earnings growth - Management clarified that the double-digit growth for 2026 is based on the adjusted EPS of $3.53, excluding purchase accounting and the Steelcase stub period [25][26] Question: Confidence in the acceleration of Workplace Furnishings in the first quarter - Management noted strong bid counts and healthy activity in both legacy and Steelcase businesses, contributing to confidence in mid-single-digit growth for the full year [28][29] Question: Insights from the Steelcase acquisition - Management reported positive feedback from customers and dealers regarding the Steelcase integration, reinforcing confidence in the transaction [30][31] Question: Synergy expectations and potential upside - Management confirmed that the $120 million synergy target remains unchanged, with a focus on execution and potential for modest accretion in the first year [42][44] Question: Residential growth investments and margin expectations - Management indicated that margins in the Residential Building Products segment are expected to remain stable while pursuing growth investments [46][48] Question: Profit headwinds in the first quarter - Management explained that timing of revenue recognition and expenses related to the Steelcase acquisition are contributing to short-term pressure, but they expect double-digit EPS growth to accelerate in subsequent quarters [54][55] Question: Demand for design support and pipeline activity - Management acknowledged increased demand for design support and noted that many projects are in the pipeline but not yet in the order backlog, with efforts underway to facilitate conversions [61][63]

Financial Data and Key Metrics Changes - In Q4 2025, the company earned $0.13 per share, compared to a loss of $0.06 in Q4 2024, reflecting strong operational execution and cost management [12] - For the full year 2025, earnings were $5.05 per share, down from $5.24 in 2024, primarily due to weather impacts, with a $0.71 drag from weather normalization [13][15] - Weather-normalized sales growth for Q4 was 6.8%, contributing to a full-year growth of 5%, including 2% residential growth and 7.5% commercial and industrial growth [14][15] Business Line Data and Key Metrics Changes - The company achieved a new system peak of 8,648 megawatts in August 2025, exceeding the previous year's peak by over 400 megawatts [6] - Customer satisfaction metrics improved, with the company ranking in the top quartile nationally for residential customer satisfaction and in the second quartile for business customers [8] Market Data and Key Metrics Changes - The company noted strong growth among commercial and industrial customers, particularly in chip manufacturing and data centers, with long-term sales growth projected at 5%-7% through 2030 [8][9] - The U.S. Department of Commerce and Taiwan announced agreements expected to spur at least $250 billion in additional semiconductor investment in the U.S., benefiting the company's market position [8] Company Strategy and Development Direction - The company plans to focus on processing its rate case, executing grid expansion plans, and maintaining affordable rates for customers in 2026 [5][11] - Investments in infrastructure are aimed at supporting Arizona's economic growth and maintaining grid reliability, with a capital program focused on reliability and resiliency [10][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet rising demand and create long-term value, emphasizing a commitment to safety and operational excellence [5][11] - The company is focused on cost efficiencies, with a goal of reducing O&M per megawatt hour, achieving a 3.3% decrease in 2025 [16] Other Important Information - The company is actively engaged in discussions regarding its integrated resource plan (IRP), which will reflect known and committed customer demand over a 15-year period [20][50] - The company is exploring financing options for transmission build-out, including potential customer financing and federal grants [84] Q&A Session Summary Question: Update on capacity growth and IRP planning - The company plans to file an updated 15-year integrated resource plan mid-year, detailing load forecasts and resource plans [20] Question: Credit metric update and holdco debt - Holdco debt was at 17% at year-end 2025, within the target range, with plans to maintain modest levels in 2026 [24] Question: Future sales growth and assumptions - The sales growth forecast of 5%-7% is based on existing demand and projects with high confidence, with potential upside from uncommitted load [30] Question: Implications from the UNS case and formula rate decision - The UNS case was seen as generally constructive, with differences noted between UNS and APS, particularly regarding growth and regulatory lag [44] Question: Breakdown of committed versus uncommitted load - The majority of committed load is from high load factor customers, including TSMC, with ongoing negotiations for uncommitted load [53] Question: FFO to debt basis and forecast period - The company aims to maintain an FFO to debt ratio of 14%-16%, focusing on improving credit metrics through regulatory dialogue [90] Question: Transparency and earnings trajectory with formula rate - The company aims for more consistent and linear earnings trajectories post-formula rate implementation, improving visibility for investors [92]

Financial Data and Key Metrics Changes - The company reported a Core FFO per share improvement of $0.05 to $0.70, representing an 8% increase year-over-year, and Core FAD per share improved by $0.07 to $0.73, reflecting an 11% increase [17] - The debt to annualized adjusted EBITDA for real estate was 4.5x, with an annualized adjusted Fixed Charge Coverage Ratio of 4.4x, well within the stated leverage target of 4-5x [17] Business Line Data and Key Metrics Changes - The SHOP portfolio grew to 25% of the investment portfolio by year-end 2025, with expectations to reach 45% by the end of 2026 [4] - The original 13 properties converted to SHOP grew NOI by 22% over 2024 pro forma NOI, generating $16.2 million in combined rent and NOI in 2025 [8] - The company anticipates 14% NOI growth at the midpoint for the full year 2026 over pro forma 2025 [8] Market Data and Key Metrics Changes - The company expects occupancy to grow by approximately 150 basis points in 2026, with RevPAR projected to increase by about 5% [9] - The company is in a competitive senior housing acquisitions environment, leveraging its smaller asset base and relationship-driven strategy to find opportunities [12] Company Strategy and Development Direction - The company is transforming from a lower growth triple net REIT into a faster-growing SHOP-focused REIT, with a guidance of $600 million in acquisitions for 2026, nearly 70% higher than 2025 [3] - The strategic portfolio transformation aims to reduce skilled nursing investments to less than 30% by the end of 2026, focusing on SHOP growth [5] - The company plans to continue investing in newer SHOP communities that are best positioned to compete against future developments [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the financial strength to support SHOP growth, with liquidity standing at $810 million on a pro forma basis [16] - The company anticipates continued accelerated internal and external growth powered by SHOP in 2027, following the completion of its transformation at the end of 2026 [5] - Management highlighted the importance of operator relationships in driving future growth and emphasized the potential for organic NOI growth to double by the end of 2026 compared to pre-transformation levels [20] Other Important Information - The company has an acquisition pipeline of over $500 million in deals under review, all focused on SHOP [13] - The company expects to sell five skilled nursing properties and has certain loan payoffs totaling $90 million in the next 60 days [10] Q&A Session Summary Question: What are the greatest threats to SNFs today? - Management noted that private capital driving prices in skilled nursing could change, and there is inherent risk in the skilled nursing sector [26] Question: Is the 14% same-store growth sustainable? - Management indicated that the pro forma occupancy of 89.7% is close to stabilized levels, and they are comfortable with the guidance for growth [27] Question: What are the year one yields for SHOP investments? - The company is underwriting year one yields at about 7%, with good growth headroom beyond that [40] Question: How competitive is the landscape for seniors housing deals? - Management acknowledged the competitive landscape but emphasized their ability to find transactions that meet their underwriting criteria [51] Question: What is the expected CapEx burden for LTC going forward? - Management stated that the current CapEx guidance is based on a $1,500 per unit assumption, which is appropriate given the age of the assets [75]

Financial Data and Key Metrics Changes - Total investment income for Q4 2025 was $67 million, consistent with the prior quarter, as an increase in average portfolio size was offset by a decrease in total portfolio yields due to lower base rates and spreads [21] - Net investment income for Q4 was $24 million, or $0.33 per share on a GAAP basis, and $0.36 per share after adjustments [22] - The net asset value as of December 31 was $16.26 per share, down from $16.36 per share as of September 30 [12] Business Line Data and Key Metrics Changes - CGBD deployed over $1.2 billion and closed over $7 billion of commitments at the platform level in 2025, with Q4 being a record quarter for CGBD with over $400 million of investment fundings [11] - Total investments at CGBD increased from $2.4 billion to $2.5 billion during the quarter, while total investments at the MMCF joint venture increased to over $950 million [11] Market Data and Key Metrics Changes - The company reported that 94% of investments were in senior secured loans, with a median EBITDA across the portfolio of $97 million [17] - The average exposure to any single portfolio company was less than 1% of total investments, indicating strong diversification [17] Company Strategy and Development Direction - The core investment strategy remains focused on stable, high-quality credits in the core and upper middle market, with an emphasis on enhancing origination capabilities [10] - The formation of a new joint venture, Structured Credit Partners, aims to increase diversification and portfolio yield, focusing on broadly syndicated first lien, senior secured loans [18] Management's Comments on Operating Environment and Future Outlook - Management expects earnings to trough in the first half of 2026 due to base rate cuts, with an anticipated increase in earnings thereafter as portfolios ramp up [23] - The company remains confident in the quality and stability of its portfolio despite market volatility, particularly in the software sector, which has shown exemplary performance with no defaults over the last five years [12][13] Other Important Information - The board declared a first-quarter 2026 dividend of $0.40 per share, with an estimated $0.74 per share of spillover income to support the dividend [22] - The company repurchased $14 million of shares at an average discount of nearly 23% during Q4, resulting in $0.06 of accretion to NAV per share [23] Q&A Session Summary Question: Who will the company take market share from? - The company plans to focus on high-quality companies in the core and upper middle market, leveraging its strong credit culture and industry expertise [33] Question: What is driving borrowing demand and contributing to the strong pipeline flow? - The company is seeing a consistent flow of opportunities in the middle market, with increased activity in sectors like industrials and healthcare [36] Question: What is the rationale for the SCP joint venture? - The SCP joint venture aims to maximize the utilization of non-qualifying asset buckets and leverage the broader Carlyle network for strong expected returns [39] Question: How significant is interest expense in borrowers' overall expense load? - Interest coverage ratios are improving, and borrowers are taking a more conservative approach to leverage, which is beneficial for credit quality [56][58] Question: Is the best incremental dollar the next investment or repurchasing stock? - The company believes in a balanced approach, continuing share repurchases while also investing in joint ventures that are expected to be accretive [61]