CION Investment Corporation 2026 Q2 Earnings Call

Good morning, everyone. I want to start this morning with a simple observation of CION's quarter two results. This was a good quarter based on our key metrics. Net asset value per share was up. Net investment income was up. Non-accruals were down. No new names were placed on non-accrual. No new internal risk rating downgrades. Subsequent to quarter end, management undertook a series of capital actions that strengthens our balance sheet and we believe may further demonstrate to the market our conviction that CION is able to remain durable amongst broader market factors and continue to provide value to shareholders. We reported net investment income of $0.29 per share for the second quarter, up from $0.25 in the first quarter, and essentially at our $0.30 per share total monthly base distribution level for the quarter.

We estimate that our earnings this quarter were impacted by our $0.02 per share solely due to timing. As we carried excess cash, we were able to pay down one of our secured credit facilities without incurring a minimum utilization penalty. Our net asset value increased 3.5% quarter-over-quarter to $13.57 per share, up from $13.11 at the end of March, driven primarily by mark-to-market price increases in our equity portfolio. On the dividend, at $0.29 per share in NII, we are essentially at our total distribution level for the quarter on the base portfolio loan. Subsequent to quarter end, Longview Power, our largest equity position, entered into a purchase and sale agreement with a publicly traded company.

Although the acquisition consideration has not been publicly disclosed, we do expect that if the transaction closes, it may generate a meaningful amount of net investment income for CION over the next few quarters that may further support our distribution for the remainder of the year. As a result, we feel good about where we are headed on dividend coverage for the remainder of 2026. Let me turn to what I believe is a consequential development for the quarter, the validation of our portfolio marks. During the second quarter, we sold more than $54 million in portfolio assets at 99% of par, which was very close to our carrying values. Subsequent to quarter end, we sold an additional $10 million in portfolio assets, again at approximately 99% of par, in line with our fair value marks.

That is more than $64 million in real transactions with real counterparties that have independently underwritten these assets and concluded they are worth what we believe they were worth. We have always had confidence in our valuation process. Four independent third-party providers, continuous back testing, and rigorous quarterly reviews. We have the market confirming these specific fair value marks in real time. There is more on valuation. The expected proceeds from the Longview Power transaction, an investment we acquired prior to COVID, and that has been a meaningful contributor to the NAV appreciation that I just alluded to, should represent a significant premium to our cost basis and consistent with the value at which we carry the position in quarter one.

A third party has independently underwritten this asset's fair value and concluded it is worth basically the same, if not slightly more than our valuation, further validating our marks. We also believe this is a powerful validation of our special situation strategy, our ability to identify, structure, and hold investments that generate differentiated returns over time. Gregg will speak further to this. Beyond validating our mark on this equity position, this transaction is expected to generate substantial cash proceeds that should allow us to continue to support our base dividend, continue to deleverage as necessary, and increase our share repurchase activity. To that end, our board has authorized a $50 million increase to our existing share repurchase program to a total of $130 million. We have always been active buyers of our own stock. By our own analysis, our fund has been among the most active in the BDC sector.

The fund intends to be aggressive going forward within permissible regulations and depending on available cash. We continue to believe our stock is significantly undervalued relative to our NAV, and we are prepared to continue acting on that conviction. The pace and amount of repurchases will depend in part on the timing of when the Longview transaction closes, the intent is firmly in place. Further, to assist us with having cash available for repurchases, other than investments that are follow-on investments to our existing portfolio companies, we are prioritizing repurchases over new deals and intend for the time being to materially reduce or cease investments in new portfolio companies while we execute share repurchases. Turning to leverage. This is an area where the story is changing quickly, and I want to make sure investors have the full picture.

At quarter end, we stood at 1.52 times net debt to equity, down from 1.62 times in the first quarter. More important is the plan that management has in place. Towards the end of this month, we intend to repay our $115 million public Israeli bonds in full. Subsequent to quarter end, we have already repaid $125 million on our JPMorgan secured credit facility, primarily from sale proceeds and ordinary course repayments. We are in the late stages of negotiating and documenting additional transactions with third-party investors who have been conducting their own independent due diligence on our portfolio and have chosen to partner with us at scale. If the transactions close as expected this month, we expect them to increase our percentage of unsecured versus secured debt, further reduce our on-balance sheet exposure, and contribute meaningfully to the further leverage reduction.

Considering all of this activity, including the new unsecured debt we issued subsequent to the second quarter, we are targeting a pro forma leverage of approximately 1.35 times, a level that is squarely within our historical operating range and well within our comfort zone, given our higher mix of unsecured to secured debt. We are quickly executing on our de-leveraging commitment, Keith will walk through the specifics. On credit quality, our non-accrual rate at fair value declined to 1.44% from 1.53 last quarter. Our non-accrual rate at amortized cost declined as well, from 5.35% last quarter to 4.41. Weighted average interest coverage and leverage across our debt portfolio remained essentially stable. The core first lien book, which represents approximately 79% of our portfolio, is expected to increase assuming the monetization of the equity investment in Longview continues to perform mostly in line with our expectations.

I want to touch briefly on our PIK income. We believe the quality of our PIK is often misunderstood. 85% of our PIK income is structured by design from inception, meaning it was underwritten that way from the moment we made the investment as part of a deliberate yield enhancement strategy, not as a consequence of borrower distress. 100% of our PIK income is in portfolio companies risk rated 3 or better. We believe this PIK income should decline in the coming quarters. We want investors to understand clearly that it primarily reflects portfolio construction, not credit stress.

On David's Bridal, we continue to be encouraged by the trajectory of the Pearl AI digital media network listings and marketplace platform, which has now scaled to the point where the business is increasingly functioning as 2 distinct operations, a legacy retail business, and a high growth digital platform that we intend to separate as its own entity. As Pearl continues to demonstrate its growth profile, we believe it will create an opportunity for us to manage and ultimately reduce our exposure on terms that reflect the underlying value of what has been built. Gregg will provide more details on that front. In conclusion, I want to say that we emphatically believe CION is significantly undervalued today.

At a time when media hysteria about private credit has caused the median BDC to trade approximately 30% off where it traded last year at this time, we have unfairly been punished even further. Our portfolio is predominantly senior secured first lien debt with less than 2% software exposure, supported by a tested and rigorous valuation process. That process has now been validated with respect to more than $66 million in recent third-party asset sales. When we look at where our stock trades today, we can only conclude that the market is either skeptical of our marks, which we believe the evidence simply does not support. Is doubtful of our ability to de-lever, which we are systematically doing. Fearful of an immediate dividend cut, which we believe is a low probability given the Longview transaction. Or afraid of software exposure generally in private credit, which we do not have.

Our stock trades at a price that assumes a portfolio loss rate that is more than 14 times our historical annualized loss rate dating back to our inception in 2012. We believe that the narrative around CION does not reflect the underlying reality. We are working hard to change that. Now, let me turn the call over to Gregg.