Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to Jeremy Golf, Managing Director. You may begin.

Welcome to Palmer Square Capital BDC's Fourth Quarter and Year-end 2025 Earnings Call. Joining me this afternoon are Chris Long, Chairman and Chief Executive Officer; Angie Long, Chief Investment Officer; Matt Bloomfield, President; and Jeff Fox, Chief Financial Officer and Director. Palmer Square Capital BDC's fourth quarter and fiscal year ended 2025 financial results were released earlier today and can also be accessed on Palmer Square's Investor Relations website at palmersquarebdc.com. We have also arranged for a replay of today's event that can be accessed on our website. During this call, I want to remind you that the forward-looking statements we make are based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements including and without limitation, market conditions caused by uncertainty surrounding interest rates, changing economic conditions and other factors we identified in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements made during this call are made as of the date hereof, and Palmer Square Capital BDC assumes no obligation to update the forward-looking statements unless required by law. To obtain copies of SEC related filings, please visit our website at palmersquarebdc.com. With that, I will turn the call over to Chris Long.

Good afternoon, everyone. Thank you for joining us today for Palmer Square Capital BDC's Fourth Quarter and Year-end 2025 Conference Call. On today's call, I will provide an overview of our fourth quarter results and full year highlights, touch on our market outlook and competitive positioning and then turn the call to the team to discuss the current industry dynamics at play, our portfolio activity and financial results. During the fourth quarter, our team deployed $91.4 million of capital and generated total and net investment income of $29.8 million and $13.1 million, respectively. We delivered net investment income of $0.41 per share, covering our $0.36 per share fourth quarter base dividend and paid a $0.43 per share total dividend, which includes a $0.07 supplemental distribution. As we previously emphasized, we follow a distribution strategy that maximizes cash returns to our investors. In that spirit, we continue to aim to pay out nearly all of our excess earnings in the form of a supplemental dividend. Additionally, we recently announced our January NAV per share of $14.48. As the only publicly traded BDC disclosed NAV on a monthly basis, we believe we provide a unique level of transparency and accountability, giving shareholders regular insight into our performance in the evolving market. Throughout 2025, uncertainty was the norm, shaped by tariff policy, evolving geopolitical dynamics and a heightened focus on the trajectory of rate cuts. We also saw reasons to be optimistic toward the end of the year, including an improvement in deal momentum and increasing sponsor engagement, most notably, the $55 billion take private of Electronic Arts, which will require approximately $20 billion in debt financing and the approximately $18 billion take private of Hologic. Before I hand it over to Angie, I want to spend some time discussing why we feel…

Thank you, Chris. We are pleased with PSBD's fourth quarter results and our broader positioning entering the new year. While market activity improved modestly through the end of 2025, January and February of 2026 have served as reminders that volatility and uncertainty remain elevated throughout financial markets. Despite that backdrop, we believe PSBD's portfolio continues to be resilient and deliver strong results across shifting environments. In terms of deal volume, M&A activity is beginning to show signs of the gradual improvement we alluded to last quarter, though the recovery remains uneven. Activity has been much more prevalent at the upper end of the market, while sponsor to sponsor deals and the $1 billion to $5 billion enterprise value range have been slower to reemerge. Spread compression continued through the fourth quarter across many parts of the market. On the private credit side, it appears to be moderating while tightening in the broadly syndicated market has continued. In light of this, we are maintaining our defensive posture while staying invested. However, we believe the recent volatility may present high-quality opportunities at attractive entry points. And in those cases, we would actively look to rotate into those opportunities. As expected, activity slowed entering the first quarter, which is typically the shortest and seasonally weakest period and January has tracked in line with historical patterns. That said, our team's engagement with sponsors and capital market debts continues to increase. And pipelines in both the private credit and broadly syndicated markets feel healthier than earlier in 2025. However, we believe the market is still some distance away from a sustained and meaningful increase in overall transaction volumes. Recent transactions continue to highlight the evolving relationship between the broadly syndicated loan and private credit markets. With the recent Hologic take private serving as a prime…

Thank you, Angie. Turning to our portfolio and investment activity for the fourth quarter. Our total investment portfolio as of December 31, 2025, had a fair value of approximately $1.2 billion across 42 industries that demonstrate strong credit quality, industry and company-specific tailwinds and a diverse mix of end markets. This compares to a fair value of $1.26 billion at the end of the third quarter of 2025, reflecting a decrease of approximately 4.4%. In the fourth quarter, we invested $91.4 million of capital, which included 24 new investment commitments at an average value of approximately $3.4 million. During the same period, we realized approximately $148.3 million through repayments and sales. As you will notice, we continue to think about diversification as we allocate new capital in the portfolio. To recap key portfolio highlights, at the end of the fourth quarter, our weighted average total yield to maturity of debt and income-producing securities at fair value was 11.30% and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 8.15%. We believe our focus on first lien loans and diversification by industry and size contribute to a strong credit profile, with 42 different industries represented in our investment mix. Further, our 10 largest investments account for just 10.9% of the overall portfolio, and our portfolio is 95% senior secured, with an average hold size of approximately $4.7 million. Again, we believe this position sizing is an important risk management tool for PSBD. On a fair valuated basis, our first lien borrowers have a weighted average EBITDA of $436 million, senior secured leverage of 5.5x and interest coverage of 2.6x. Additionally, new private credit loans comprised 14.7% of overall new investments and were funded at a weighted average spread of 453 basis points over…

Thank you, Matt. Total investment income was $29.8 million for the fourth quarter of 2025, down 14.5% from $34.9 million for the comparable prior year period. Income generation during the quarter reflected a mix of contractual interest income, paydown related income and select fee income from the new deal activity. Total net expenses for the fourth quarter were $16.8 million compared to $20.1 million in the prior year period. Net investment income for the fourth quarter of 2025 was $13.1 million or $0.41 per share compared to $14.8 million or $0.45 per share for the comparable period last year. During the fourth quarter of 2025, the company had total net realized and unrealized losses of $18.4 million compared to the total net and unrealized losses of $2.9 million in the fourth quarter of 2024. This consisted of net unrealized depreciation of $20 million related to the existing portfolio investments and net unrealized appreciation of $2 million related to exited portfolio investments. At the end of the fourth quarter, NAV per share was $14.85 compared to $15.39 at the end of the third quarter of 2025. Moving to our balance sheet. Total assets were $1.2 billion and total net assets were $464.1 million as of December 31, 2025. At the end of the fourth quarter, our debt-to-equity ratio was 1.54x, very slightly up from the 1.53x at the end of the third quarter of 2025. Available liquidity, consisting of cash and undrawn capacity on our credit facilities was approximately $311.3 million. This compares to approximately $252.8 million at the end of the third quarter of 2025. Finally, on February 26, the Board of Directors declared a first quarter 2026 base dividend of $0.36 per share, in line with our formalized dividend policy. Furthermore, our policy continues to be distributing excess earnings in the form of a quarterly supplemental distribution. With that, I'd now like to open the call up for questions.

[Operator Instructions] Our first question will come from the line of Rick Shane with JPMorgan.

Look, you've alluded to the purchase. I'm looking at the leverage levels. As you think about capital deployment, and again, you've indicated, hey, we see some marginal -- the margin we see potentially some opportunity. Are you going to keep dry powder or given where the stock is trading, does it just make sense to buy stock given it's probably hard to find something that generates comparable return?

Rick, it's Matt. Thanks for the question. I think from the management team's perspective and the Board, we're certainly looking at all avenues in front of us. To your point, it's certainly accretive from a stockholder standpoint, given where the discount is trading. Undoubtedly. We also mentioned some of the dislocations in the market that we've seen are likely going to provide some great opportunities in the secondary investing side as well. All that being said, we do think from a new underwriting origination standpoint, spreads should be more conducive than they've been in quite some time. So we're really trying to look across all the avenues of opportunity set in front of us and maybe not just the best near term but obviously the best long-term decision for shareholders. So taking a look at everything that's on the table and there's certainly a lot to investigate at this stage. So I think we'll try to be as prudent as we can across all those facets. But undoubtedly, to your point, the shares look really attractive to us at this level.

Got it. And look, obviously, in the equity markets, we're seeing similar dislocations. In some ways, what we've seen is sectors move from being potentially at the high end of their valuation range potentially into a more normal sort of average range. Generally speaking, things don't just sort of mean revert, they typically overcorrect and we're thinking about that in terms of stocks more broadly. Where do you think we are in the cycle on the credit side? And if we're just sort of moving back to normal pricing as opposed to really, really tight spreads. Is it really the time to weigh in? Or do you actually think we're approaching historically attractive pricing?

Another really fair point. I think it's certainly -- in credit depends on sector. Undoubtedly, the focus right over the past several weeks has been specifically on software and in AI-related risks across certain industries. I think the credit markets are definitely bifurcated amongst those. And so you haven't really seen much in the way of spread widening outside of AI worried industries. And on the public credit side versus the private credit side, private credit obviously moved slower from a spread reaction. So I don't know that, to your point, that we're going to see this massive opportunity set of much wider spreads just across all credit. I don't think that's going to occur barring some more broad-based macro uncertainty. I don't think anybody would argue that in the software credit space that spreads aren't meaningfully wider. So I think there'll be interesting opportunity sets within there, right? As we look across some of these kind of deeply embedded software companies where I think in the past couple of days, maybe the narrative has changed a little bit as you've seen some of the NVIDIA CEO comments about layering those type of AI products on top of embedded software, which I think is what most people have been trying to communicate on the credit side as of late. So I think we're definitely going to see some opportunities in some of those impacted where things have just gotten to levels that I think a lot of people would agree just don't make sense. And so we want to be prudent about getting over our skis there. But I do think there's some interesting opportunities there. And then outside of those type of sectors. I hope we start to see some more normalized spreads. I think it makes sense with all the -- just macro uncertainty in general. But I think those will move a little bit slower because there's still a lot of dry powder on the sidelines that wants to be deployed. So I think it's going to take a little bit more for spreads to widen holistically at levels where we're kind of through longer-term averages per se.

Our next question will come from the line of Doug Harter with UBS.

Just kind of piggybacking on Rick's question. How do you weigh kind of the opportunity to maybe buy some of those software loans where you might feel comfortable in it versus, obviously, the perception of increasing risk and the potential volatility that comes with that before kind of markets settle down?

Yes. It's a balanced process. I think we definitely don't necessarily just want to outright increase exposure holistically to the sector. There's just obviously enough noise going on. And quite frankly, I think we just need to be really fundamentally sound and kind of how we're analyzing these specific businesses on a company-by-company basis. But I think we've done enough work and have had enough conversations with management teams, with sponsors with others in the industry where we do think there's going to be some opportunities. And our whole relative value process within PSBD, being differentiated from just kind of traditional private credit BDCs. We do want to be able to take advantage of those opportunities in the liquid secondary market. It's something we've done really well historically across a lot of different strategies. So we're not going to be scared per se, just because something's labeled software, if we think it exhibits a very strong total return opportunities, but also want to be cognizant of, and I think everybody needs to be somewhat humble in that AI is moving very, very quickly. And there's a lot of unknown, unknowns 3, 5, 10 years down the road. So we want to make the best decisions we can, but definitely I think there's some interesting opportunity sets that we're taking a look at.

And then if I could get your perspective on -- you talked about deal activity. Do you think that this market volatility and as you just said, the unknown, unknowns, does that have the potential to kind of limit deal activity, lending activity and kind of keep people on the sidelines? Or do you think the market is kind of finding the ability to work through that?

Yes. I mean, volatility never helps dealmaking in general, whether that's M&A, IPO activity, which obviously all those things felt like they were starting the year off on the right foot finally. And I think we all were kind of thinking the same thing that to start 2025 and then we had the tariff issues. A couple of years back with some of the regional banking issues. So it doesn't take a lot for, I think, at least things to slow down. But I do think we're far enough along in a prolonged M&A drought. We've had 175 basis points of rate cuts over the past 1.5 years. So I think there's still a lot of those reasons why we felt M&A was going to pick up, still exist. And maybe in the software sector, that's probably going to slow down. So I think it will be maybe a near-term slowdown, but we're still having conversations still seeing deals, talked about it early to middle stages. So maybe we don't see an acceleration from here per se, but it definitely feels like there's still appetite for things to get done. And certainly outside of software AI-related issues, other industries are still, I think, pretty ripe for transacting. And just in general, in the sponsor private equity-backed community, I think it's been a dry patch for so long. And I think naturally, you're just going to see transaction activity pick up. All that being said, I would be surprised, too, if we don't see some transactions in the software space, as valuations have rerated immensely in the public markets. I'll be surprised if we don't see some sponsor activity to take advantage of some of these levels that, quite frankly, from evaluation, just haven't been seen in quite some time. So that was a long-winded way of saying we'll see. But I think it will continue, maybe just not at the pace people were anticipating coming out of 2025 and into early 2026.

[Operator Instructions] And our next question will come from the line of Kenneth Lee with RBC Capital Markets.

Just given the prepared remarks around spreads, timing within the liquids side versus being a little bit more steep on the private side. How do you view the relative attractiveness between the liquid and the private side? And what's your preference for the marginal investment go forward more in the private or more on the liquid side?

Ken, it's Matt. Thanks for the question. I think it's more balanced than we've seen. I think there definitely was some of the volatility in the broadly syndicated market. Probably the opportunity set there, specifically on the secondary loan side is more attractive than it has been in quite some time. Our comments around spread tightening in that market, were certainly true through the end of 2025 and to start 2026, I do think just in the past few weeks with the broader volatility in software that that's going to negate any spread tightening on new issue loans coming to the market, at least for a little while. We'll see if that's a meaningful widening or not, but I think there's definitely still a big appetite in capital to deploy in liquid credit. And on the private credit side, I think that activity is a little steadier. I think spreads to our comment earlier, move a little bit slower there. But as you've seen this quarter, we deployed another 14.5-plus percent into private credit transactions. And I think it's been a good way for us to kind of defend spread in the portfolio and a spread tightening environment in general. So I think the opportunity set is going to be good on both sides of the fence, but I definitely think there's more opportunity now in the secondary loan market than we've seen in quite some time.

Got you. Very helpful there. And just one follow-up, if I may. In terms of distributions, any updated outlook around the distribution framework and how you think about dividends going forward?

Yes. Like we have in the past, the Board kind of continues to evaluate, what we're seeing from income generation and other facets of the business, certainly, we've absorbed 175 basis points of base rate reductions, so those have flown through NII here as of late. We'll see where the Fed goes from here. Obviously, we can see what the forward curve is saying, but that tends to move around quite a bit, which is the economic data that comes out. So as of now, we've continued to put out the base dividend that we've had, and we'll continue to reevaluate at the Board level as we move through, through this quarter and beyond. But again, hopeful on our conversations on spread that we've -- that tightening we've seen on the spreads versus base rates, feels a little bit better than it has in some time.

At this time, I'd like to turn the call back to Chris Long for closing remarks.

Thank you, operator. Thank you all for your time and thoughtful questions. We look forward to updating you on our first quarter 2026 financial results in May. Have a good rest of your day.

This concludes today's call. Thank you all for joining. You may now disconnect.