Operator: Hello, everyone. Thank you for joining us and welcome to the SoundPoint Meridian Capital Inc. First fiscal quarter ended June thirtieth 26 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Julie Smith, head of investor relations. Julie? Please go ahead. Ladies and gentlemen, thank you for standing by.
Julie Smith: SoundPoint Meridian Capital refers participants on this call to the investor web page at www.soundpointmeridiancap.com. The press release, investor information, and filings with the Securities and Exchange Commission, and for a discussion of the risks that can affect the business. SoundPoint Meridian Capital specifically refers participants to the presentation furnished today on the Form 8-K with the SEC. And to remind listeners that some of the comments today may contain forward looking statements. And as such, be subject to risks and uncertainties, which, if they materialize, could materially affect results. References made to the section titled forward looking statements in the company's earnings press release for the latest quarter end. Which is incorporated herein by reference. We note forward looking statements, whether written or oral, include, but are not limited to, SoundPoint Meridian Capital's expectation or prediction of financial and business performance and conditions, as well as its competitive and industry outlook. Forward looking statements are subject to risks, uncertainties and assumptions which, if they materialize, could materially affect results. And such forward looking statements do not guarantee performance, and SoundPoint Meridian Capital gives no such assurances. SoundPoint Meridian Capital is under no obligation and expressly disclaims any obligation to update, alter, or otherwise revise any forward looking statements. Whether as a result of new information, future events, or otherwise, except as required by law. In addition, historical data pertaining to the operating results and other performance indicators applicable to SoundPoint Meridian Capital are not necessarily indicative of results to be achieved in succeeding periods. I will now turn the call over to Ujjaval Desai, chief executive officer of SoundPoint Meridian Capital.
Ujjaval Desai: Thank you to everyone joining us today, and welcome to the SoundPoint Meridian Capital earnings call for the first fiscal quarter ended 06/30/2026. We would like to invite you to download our investor presentation from our website which provides additional information about the company and our portfolio. With me today is our chief financial officer, Daniel Steven Fabian And after our prepared remarks, we will open the call to your questions. For the first fiscal quarter ended 06/30/2026, we generated net investment income or NII of $5 million or $0.24 a share. And paid distributions of 60¢ per share during the quarter. Despite the successful refinancing of CLO transactions in the portfolio over the past quarter, NII remained below common distributions due to spread tightening and higher modeled loss reserves for AI impacted software loans within our CLO collateral portfolios. Net asset value or NAV per share ended the quarter at $9.88 up from $9.63 as of 03/31/2026. The NAV increase was primarily driven by net unrealized appreciation in the fair value of our CLO equity investments partially offset by distributions paid in excess of NII. As of 0.259.8% versus 9.1% in the prior quarter. Our portfolio remains highly diversified with investments across 108 CLOs managed by 31 different managers, providing exposure to over 1.5 thousand underlying loans spanning more than 30 industries on a look through basis. In an environment characterized by increasing dispersion across sectors, we believe this level of diversification remains an important component of our risk management approach. Subsequent to quarter end, we announced monthly distributions for calendar Q4 26 of 13¢ per share, down from our previously announced Q3 26 monthly distribution of 20¢ per share. In setting the revised distribution level, the board considered a range of factors. Including current and expected portfolio yield, importance of maintaining balance sheet flexibility, and our objective of supporting net asset value over time while earning our distribution through net investment income. Subsequent to quarter end, SoundPoint, the adviser for SPMC, proposed a base management and incentive fee waiver for the 6-month period beginning 07/01/2026 and ending on 12/31/2026. The fee waiver will reduce the annual base management fee from 1.75% to 1.5% and will reduce the annual incentive fee from 20% to 15% of preincentive net investment income. In recognition of the unprecedented income compression faced by the CLO equity asset class, the adviser proposed this fee waiver to help reduce the expense burden on the company, while we work to increase our income through loan spread improvement refinancing of our liabilities, and active trading of our investments. I will now turn the call over to Daniel for a more detailed review of our financial highlights for the quarter before I share thoughts on the overall market.
Daniel Steven Fabian: Thanks, Ujjaval, and welcome, everyone. As Ujjaval mentioned, for the quarter ended 06/30/2026, delivered net investment income of $5 million or 24¢ per share. During the quarter, we purchased 13 equity investments in the secondary market with a cost of $16.1 million and a weighted average yield of 20.2%. In addition, we sold 7 equity investments generating $23.3 million in cash proceeds with a weighted average yield of 8.5%. We refinanced the liabilities of 13 CLO equity investments resulting in a weighted average debt cost savings of 37 basis points. For the quarter ended 06/30/2026, we recorded a net realized loss of $12.8 million and an unrealized gain on investments of $25.2 million Total expenses during the quarter were $7.4 million The GAAP net income for the quarter was $17.5 million or $0.83 per share. Moving to our balance sheet, as of June 30, 2026, total assets were $384.7 million net assets were $208.1 million and our net asset value stood at $9.88 per share. The fair value of our investment portfolio stood at $363.2 million while available liquidity, which consisted of cash, was approximately $21 million at the end of the quarter. As of 06/30/2026, company's leverage ratio was 45.7% of total assets. During the quarter, we declared monthly cash distributions of $0.20 per share payable at the end of July, August, and September. Based on our share price as of 06/30/2026, this represents an annualized distribution rate of 24.2%. As of 07/31/2026, our estimated range of the net asset value per common share was between $9.56 and $9.66. I will now turn it back to Ujjaval.
Ujjaval Desai: Thanks, Daniel. Before we move into Q&A, I wanted to take a moment to touch on the recent market backdrop for corporate loans and CLO equity. The second quarter of 26 saw the bifurcation across US credit markets become more pronounced. Coming into the quarter, we had expected some continuation of the pickup in M&A-related activity that began to build up in the first quarter, but that expectation was tempered by a Federal Reserve that has shelved rate cuts and energy driven inflation shock tied to the conflict in the Middle East and continuing concerns around the AI driven disruption in the software sector. Against that backdrop, the new issue leverage loan market proved more resilient than the macro headlines would suggest. As corporate borrowers stepped in to fill the void left by the pullback in sponsor backed activity. US institutional leveraged loan activity totaled about $24 billion in the second quarter, down 7% from the first quarter but still running 17% above the 5 year quarterly average. Most of that decline was driven by a slowdown in private equity deal making, with overall PE deal volume down 38% quarter over quarter, the lowest level in 2.5 years. Sponsors, for their part, remain focused on balance sheet defense, with nearly 75% of first half primary market deals related to extend and amend transactions as sponsors turn their attention to the 2028 maturity wall. Market technicals also remained challenged during the quarter. Investor demand fell to the weakest reading since the fourth quarter of 23 driven almost entirely by broader pullback in CLO issuance, while loan fund flows were insufficient to offset. As a result, the market was left in a rough supply demand equilibrium with a modest $2 billion surplus. While this marks a dramatic improvement from the nearly $60 billion supply shortage in Q1, net new supply is still heavily skewed towards the higher rated lower yielding credits. This compresses the spread differential and makes the arbitrage for CLO equity investment required is difficult to attain. Against this backdrop, spreads widened meaningfully at the bottom of the credit spectrum, while remaining largely unchanged higher up. In the broadly syndicated loan market, b minus spreads widened by 55 basis points since the fourth quarter of 25, to 409 basis points over SOFR, while double b minus spreads and b minus spreads moved by 5 basis points or less. Loan prices told a similar story. The average bid on performing software loan slipped to 85.62, by quarter end down more than 2 points from March levels while the broader loan index moved into positive territory up 1.29% year to date. The divergence reflects continued concerns around AI driven disruption in the software sector, which has reduced new software issuance to just 8.8% of broadly syndicated volume year to date. The lowest share since 2013. CLO issuance slowed further during the quarter with managers pricing $33.3 billion across 72 transactions, the lowest quarterly volume since the fourth quarter of 23, and roughly 20% behind last year's pace. Issuance troughed at $6.2 billion in April, before rebounding to $16.8 billion in May and holding through June. Refinancing and reset activity by contrast remained a bright spot. With combined volume of $93.7 billion well above the $56.2 billion in the first quarter. As managers increasingly rolled maturing deals into refinancing and reset trades rather than fully liquidating structures. Looking ahead, the direction of credit markets in the second half of 26 will likely depend on a recovery in private equity deal making. Which remains the primary engine of net new loan supply. As well as on how interest rates, geopolitical developments, and AI driven disruption concerns evolve from here. Post quarter end energy markets have begun to stabilize, with a tentative US Iran peace deal bringing oil prices back below $80 a barrel. However, a lasting resolution to the conflict has yet to be reached. Although pricing around the software space has not meaningfully improved from the beginning of the quarter, we believe that certain CLO managers and portfolios are better positioned than others to manage the risks presented by the increasing impact of AI. On loans with shorter maturities, we are beginning to see positive signs of amend and extend activity which has the potential to increase yield in underlying CLO collateral portfolios. And to improve the arbitrage available to CLO equity. Companies have begun tapping both public and private markets to fund artificial intelligence spending, which we believe will increase loan supply for CLO portfolios in the second half of 26 and beyond. On the other side of the CLO balance sheet, funding costs remained broadly stable during the quarter, with average AAA coupons around a 124 basis points over SOFR, though top tier managers continue to price meaningfully inside bottom tier managers. We believe this continues to support the refinancing and reset optionality across our portfolio as we move through the remainder of 2026. From a portfolio management perspective, we continue to sell CLO equity with limited near term optionality and greater downside risk while adding better quality secondary investments. This portfolio rotation is expected to increase our risk adjusted yield. The secondary equity market continues to offer much better investment opportunities than the primary, due to compressed arbitrage in that market. We feel the arbitrage for primary equity will improve over time and we remain ready to participate in that space given our strength in sourcing, structuring, and credit underwriting. While we expect the volatility to continue in our space, we are seeing some improvement in market sentiment around CLO equity, prospects for increased cash flow from loan spread improvement and liability refinancings. With that, we thank you for your time today, and we will now open the call up to questions. Operator?
Operator: We will now begin the question-and-answer session. If you would like to ask a question please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. You are muted locally, please remember to unmute your device. Please standby while we compile the Q and A roster. Your first question comes from the line of Gaurav Mehta with Alliance Global Partners. Your line is open. Please go ahead.
Gaurav Mehta: Thank you. Good morning. I wanted to ask you on the new dividend rate of $0.13 per month. When you got to that number, I guess, you know, what kind of factors you consider given that number is still higher than the NII that you guys reported for this quarter?
Ujjaval Desai: Hi, Gaurav. So, yes, in terms of the distribution rate of $0.13 per share, factors go into that. As I mentioned in my remarks, some of the factors that are quite important there include the portfolio mix today, kind of our expected yields going forward. As well as, portfolio rotation that we are doing in the portfolio already. So just to give you the different components of that, as I mentioned, you know, we are seeing some signs of loan spreads improving. Which is very helpful because that obviously, goes straight to the bottom line for CLO equity. Also, we continue to do resets and refis of our portfolio. As I mentioned, we have done 13 transactions in this last quarter. And, you know, we have a table in our presentation that you have seen, which outlines the existing mix of our portfolio in terms of, you know, how many deals can be reset, refinanced over the next few quarters. And, there is a substantial portion of the portfolio that can be refinanced tighter. That also helps improve the portfolio yield going forward. And lastly, the trading activity we mentioned. Just to put some numbers around that, we have traded year to date in this in SPMC. Portfolio. We have sold around $50 million. Sorry. We have sold about $35 million and purchased around 50 million of secondary positions. And that rotation has been very accretive. We have added about 100 basis points of yield through that rotation. So, you know, those are the 3 components that we considered in figuring out what the go forward portfolio yield would be. You have already seen some uptick in the portfolio yield as we reported we had about 9.1% in the previous quarter, The yield is now 9.8%. And then for Julie, we are seeing current go forward yields around 10.1% in the portfolio. So there is some improvement in the yield, which, over time, we think will result in higher, NII for the portfolio, and that is what we considered in coming up with a number Obviously, there are a lot of variables that go into that, but those are some of the key variables we looked at. Alright. Thanks for those details.
Gaurav Mehta: Second question, can you maybe provide some color on how much exposure do you guys have to the software sector that is impacted by AI And how do you plan to manage that exposure?
Ujjaval Desai: Yeah. So that is obviously a very topical question, and, you know, we have been you know, very focused on AI exposure, since the, you know, the concerns came up earlier this year. Roughly, I would say about, you know, 10 to 12% of the portfolio is going to be sort of software credits. This is on the look-through basis. And, you know but the reality is that not all these credits are the same. You have to really go into and look at the underlying portfolio, the underlying credits, and try to figure out which subsector they are in. We mentioned in our previous on our previous call, you know, we will conduct extensive analysis, sort of credit by credit re underwriting of our portfolio to identify which names, are likely to be impacted going forward. And we have used that sort of credit underwriting results to then make, trades in the portfolio to try to reduce risk to the most impacted AI names. So as an overall sector, at the sector level, you know, we are more concerned about the individual names not the sector exposure itself. So the sector exposure might still stay in that 10% to 12% range, but the goal has been to reduce the tougher names within that sector so that we have less tail risk in the portfolio going forward.
Gaurav Mehta: Alright. Thanks for those details. that is all I had. Thanks.
Operator: Your next question comes from Eric Zwick with Lucid Markets. Your line is open. Please go ahead.
Eric Zwick: Thank you. Good morning. Let me first start with a bit of a follow-up on Gaurav's on software. Ujjaval, you mentioned in your comments that, I think here year to date, for new CLO issuance, the share of software was, I think, 8.8 if I got that number down right, 8.8%. Lowest level since 2013. Just to put that into context, you know, what was that percentage, you know, over the past, like, 2 or 2 or 3 years? You know, how much how much higher was that?
Ujjaval Desai: Hi, Eric. I will have to get that number for you. In the previous year. So I will I will follow-up with that with that answer. But it is it is obviously significant here. Right? I mean, just yeah. I mean, yeah, just looking at sort of, you know, look looking at the you know, typical portfolios kind of, you know, 10% to 15%, software exposure. So my guess is you know, the new issue market was probably in that 15% to 20% range, but we will have to get back to you with the exact number.
Eric Zwick: Yep. That makes sense. Yeah. That ballpark is good. Thank you. And just thinking about your priorities going forward, you mentioned, you know, the secondary market continues to offer some opportunities, although volume is a little bit lower. Your cash position has built up a little bit, I think $21 million at the end of the quarter. So Mhmm. You know, how are you just thinking about the opportunity between, you know, new investments in additional CLOs, you know, for relative value, opportunities versus maybe paying down the revolver a little bit? Just kind of curious how you are thinking about capital deployment here in near term.
Ujjaval Desai: Yeah. I think the that is a great question. We are, you know, very much focused on this rotation trade, trying to reduce risk in the portfolio and also boost yields going forward. So the first leg of that is obviously doing the actual sales, of deals that we wanna sell out of the portfolio. And then, you know, we line up purchases that make sense. So there is usually a delay in deploying that capital. We wanna be careful around the deployment, so we will take the time needed to do that. And you are right. We have about $21 million of cash And depending on market opportunity, going forward, we, you know, we will deploy that in better quality, higher yielding investments. And we are seeing plenty of opportunities in the secondary market right now. at sort of, you know, mid to high teens type of yields. These are sort of good you know, strong equity positions, you know, tier 1 managers, managers we like And so there is plenty available, and we are being very careful. But, you know, we are looking at the market, every day to try to find the best opportunities there. I think the focus again, has been exclusively on secondary investments. Primary equity returns are still not that great, because the arbitrage does not look very healthy in new issue equity. We think new issue equity returns are probably in the kinda high single-digit level, sort of 8-9% type of returns, while secondary equity, as I mentioned, can be kinda high teens. And so there is a significant pickup in yield in secondary versus primary. And so that is really the focus. In terms of the your question on liability management, you know, we are obviously watching that very carefully, and we will evaluate sort of, you know, how much leverage we can sustain. And, you know, as you know, we have this, revolver at the top. Which can be paid down and then reused, drawn when we need to. And so we are, you know, carefully managing that.
Eric Zwick: Thank you. I appreciate, all the detail there. And just last question for me. You know, looking at the realized losses in the quarter, I think you mentioned the investments that you chose to sell had, I guess, you know, lower optionality kind of going forward and less attractive. You know, maybe you could kind of just describe those that have you know, that the reinvestment periods were kind of nearing their end, or was there other factors? Maybe just to try a little bit more color there would be helpful.
Ujjaval Desai: Yeah. Sure. No. So as you know, if you look at our, weighted average investment period, in our portfolio, is pretty long. it is among the longest in the market. So we do not have too many investments that are nearing the end of the reinvestment period. You know, these are still deals that have, you know, 3 years or so left in their investment period. So that was not the concern. it is really just the it is now 2 types of deals. it is gonna be either deals that we think you know, are too tight from a yield perspective, you know, based on the cash flow generation on a go forward basis, if we feel that, you know, the price at which we can sell it is pretty strong, then we would we would do that and rotate into you know, higher yielding investments. The second, type of trade would be deals where we are concerned about the portfolio quality deteriorating from here. And if, you know, and that could be a combination of reasons. It could be you know, manager underperformance. We very carefully evaluate managers on a monthly basis. And so if you start to get concerned, it could be that. It could be, you know, our view on the underlying credits, maybe it is some of the software names, and if we have a negative view on some of them, And if that has a material impact on future cash flows, then certainly, that is another reason why we would want to sell some business. So those are the 2 reasons. And on the flip side, when we are looking to buy something, again, we are trying to find the, you know, the best quality candidates we can get. And in almost all cases, we are able to pick up on the base yield in our in our base case scenario. But significantly protect on the downside scenario. In case defaults pick up, you know, what we are buying now is going to do extremely well compared to what the stuff we are selling. And that rotation, that pickup of value in sort of the tail scenarios is also very important, consideration as we think about the relative value trades here.
Eric Zwick: Very helpful. that is all for me. Thanks for taking my questions. Of course. Thanks, Eric.
Operator: Your next question comes from the line of Tim D'Agostino with B. Riley Securities. Your line is open. Please go ahead.
Tim D'Agostino: Yeah. Hi. Thanks for taking the questions. Helpful commentary on primary versus secondary market. And then, you know, on software. It seems that you are going to keep the industry exposure to, like, 10 to 12% and just trim exposure to individual names. I guess stepping away from software and just looking at other underlying industries, is there anything you are leaning into or you see value, that is worth going after?
Ujjaval Desai: Yes. You know, I think you know, we certainly prefer defensive sectors. right? So less cyclical sectors where there is better kind of value going forward. So I think when we look at that, you know, we talk to all our all our managers. Try to identify those sectors. And that sort of the sector makes changes all the time. So, you know, things like, you know, sort of, you know, if it is, cable or health care, things like that, those tend to do quite well. You know, the tougher sectors being the cyclical ones, you know, retail, it is going to be, you know, oil and gas, is a concern these days. And then, you know, you got the software sector as well. So there is some of the, some consumer sectors as well, which we are trying to stay away from. But I think, again, at the end of the day, you know, it is really, you know, for us, you know, talking to all these managers that we invested with, keeping track of kind of where they are seeing value and where they are seeing concerns, and then managing our portfolio accordingly. So that is really, the approach we take.
Tim D'Agostino: Okay. Understood. And this is the second 1 from my end. Regarding the fee waiver, you know, in the press release, it talked about it going to the end of calendar year 2026. I guess, you know, looking at 2027, is there a possibility of that agreement to be extended, or is it really just for that set period? Thank you.
Ujjaval Desai: Well, yeah. I mean, I obviously, we cannot predict where things are going to be. I think the main thing here is the reason for that fee waiver. Right? it is really about us being proactive in trying to signal to our investors that, look, we are fully aligned We appreciate that, you know, the market has been very difficult over the last year, year and a half. Probably the worst it is been for CLO equity you know, as far as I can remember, away from real credit cycles like, you know, the 2008 or 2009 financial crisis. And so we recognize that, you know, there is spec compression, which has resulted in significantly lower cash flows on CLO equity. And as a result, our income has gone down as well. So our focus right now you know, is really on reducing expenses in the structure. While we work to improve the income. Of the portfolio. And so as we do that, we thought the best way to get ourselves kind of in a stronger position would be to cut our fees for the 6-month period We think that is how long it could take for us to finish our rotation, obviously, market conditions permitting. And if we can do that, and we can sort of get to the goal is to get to a position where we can earn our dividend, right? So the NII of the portfolio kind of needs to get to that 13¢ type of level, which is what we are trying to do. And so that is why we have said this time frame for the waiver. We will review it at the end of the year and see where we go from there. But I think that is just, again, trying to be proactive and not just focused on fees, but also other expenses as well and trying to make sure that we tighten the belt as much as possible so that we can have the most amount flowing to our shareholders.
Tim D'Agostino: Okay. Thank you so much for the color. I appreciate taking the questions of course. Thank you.
Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.