Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellis Capital Investment Corporation's conference call to report financial results for its second fiscal quarter ended June 30, 2026. This conference is being recorded today, August 11, 2026. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellis Capital Investment Corporation. Mr. Ladd, you may begin your conference.

Okay, thank you, Jenny, and good morning, everyone. Thank you for joining the call. Welcome to our conference call covering the quarter ended June 30th, 2026. We have six topics to cover this morning. First, the financial results for the second quarter, portfolio and asset quality, the outlook for , an update on our advisor joining Rich Post Capital, our $20 million share buyback program, and opportunities for growth. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements. Todd, I'll turn it over to you.

Thank you, Ron. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellis Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone number and pen provided in our press release announcing this call. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stalliscapital.com under the Public Investors link, or call us at 713-292-5400. Now I'll cover operating results for the quarter, but would like to start with our life-to-date activity. Since our IPO in November of 2012, we've invested approximately $2.9 billion in more than 225 portfolio companies while navigating multiple market and credit cycles. Over this time, we've received approximately $1.9 billion of repayments while maintaining disciplined credit performance. We believe our track record Our underwriting process and deep sponsor relationships provide us with meaningful competitive advantages, reflecting more than 20 years of working together as an investment team and nearly 14 years of operating as a public BDC. Our focus remains on preserving capital while generating attractive risk-adjusted returns for our shareholders. And we think our long-term credit performance as well as our 14-year track record of return on equity demonstrates the effectiveness of our underwriting process and our portfolio management approach. To that point, we've generated a life-to-date return on equity of 9.5%, which includes all realized and unrealized gains and losses across the portfolio to date. We've also paid $349 million of dividends to our investors since our IPO, representing $18.83 per share over this period. Now turning to operating results. In the second quarter, we generated $0.26 per share of GAAP net investment income and core net investment income, which excludes estimated excise taxes, was also 26 cents per share. Overall for the quarter, net asset value increased by 26 cents per share or 2% sequentially driven by three primary factors. First, net realized and unrealized gains contributed 30 cents per share, primarily driven by write-ups related to company-specific performance. Second, our share repurchase program was accretive to NAV adding approximately 5 cents per share. And finally, dividend payments exceeded earnings by 8 cents per share as we continued distributing the remaining spillover income from 2025. I'd like to note that these figures are in line with the preliminary results we previously reported. With respect to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $968 million across 116 portfolio companies. a decrease from $990 million across 116 portfolio companies as of March 31, 2026. During the second quarter, we invested a total of $18 million, of which $8.7 million was in three new portfolio companies and $9.3 million were add-ons to existing portfolio companies. We also received five full repayments totaling $38.7 million, $500,000 from one equity realization, which resulted in a realized loss of $200,000, and received $10 million of other repayments at par. At June 30th, 100% of our loans were secured and 92% were placed at floating rates. The average loan per company is $8.9 million and the largest overall investment is $26 million, both at fair value. For the 98 companies that comprise our loan portfolio, the weighted average EBITDA level was $15.6 million at quarter end and the weighted average normalized leverage quotient was 4.2 times for the performing loans. Substantially, all of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly below plan. At fair value, 74% of our portfolio is rated a one or two or on or ahead of plan, and 26% of the loan portfolio is marked in an investment category of three or below, meaning not meeting plan or expectations. We removed one loan from non-accrual status during the quarter and did not add any new loans. Currently, we have loans to five portfolio companies on non-accrual, which comprise 8.5% of the total cost and 5.4% of the fair value of the total investment portfolio, respectively, which represent a decrease from the prior quarter at cost and a slight increase at fair value. While the level of non-accruals and risk rate three loans remains higher than we would like, reducing both that number of these investments and Robert Ladd. Okay, thank you, Todd. As we look ahead to the third quarter of 2026, I'll cover four topics.

The Outlook for the Quarter and Beyond, an update on our advisor joining Rich Post Capital, our $20 million share buyback program, and again, opportunities for growth. In terms of Outlook, as of today, our portfolio is approximately $960 million across 117 portfolio companies. For the balance of the quarter, we expect repayments to slightly outpace, again, new fundings, thus ending the quarter slightly down from where we are today. However, we have seen a meaningful improvement in the origination pipeline across the SELIC platform since beginning the quarter. While market conditions remain fluid and the timing around future deal closings is never certain, we're hopeful gross origination activity is set to increase toward the end of the year, which should have positive implications on net portfolio growth for the company over the next several quarters. As mentioned on previous calls, we have been reducing the amount of spillover income and have expected that over time our dividend would approximate our net investment income. We have now reached that point, and we have set our dividend to 25 cents per share for the third quarter. To that point, based on the current trajectory of NII, as well as our outlook for short-term rates and spreads, we expect to be well-positioned to earn our 25-cent quarterly dividend or more moving forward. Next about Ridge Post. On June 22nd, our external advisor, Stellis Capital Management, officially joined the Ridge Post Capital platform. As a reminder, Ridge Post Capital is a leading alternative investment manager in the middle and lower middle market, currently managing more than $50 billion of AUM across private equity, private credit, and venture. We're very pleased with how the transition is going and early integration is well underway. We're coordinating in many areas, including investment origination and management, investor relations, fundraising, and operations. Since joining Ridge Post Capital, one of the most promising opportunities has been the ability to leverage the firm's broader sponsor relationships, specifically Ridge Post Capital lower middle market private equity fund to funds business, which is RCP Advisors. RCP has been investing in the lower middle market GPs for 25 years, and the team has relationships with more than 200 lower middle market private equity firms. This aligns well with our direct lending strategy, which is exclusively to private equity, lower middle market private equity backed companies and believe our business is set to benefit from this meaningfully over time. We've been collaborating with the RCP's team to identify financing opportunities with these sponsor relationships While still early, we believe the long-term opportunity could represent significant incremental originations annually across the Stellis platform. And importantly, this incremental deployment opportunity is additive to the strong origination pipeline we've been building over 20 years. Now to share repurchases. Regarding capital allocation, we continue to view share repurchases as an attractive use of capital today, specifically as our stock continues to trade at a significant discount to now. Repurchasing shares is immediately accretive to net asset value and earnings per share, creating value for our shareholders. On March 3rd of this year, our board of directors approved a common stock repurchase program of up to 20 million. I'm pleased to share that since that date, we have repurchased 467,000 shares for approximately $4 million. Given our outlook for the business as well as our remaining future authorization, we continue to view buybacks as a creative and efficient way to improve the return to our shareholders. And now for opportunities for growth. We're pleased to announce that we received approval from the SBA for a third SBIC license. With this new license, we expect to meaningfully increase the size of our investment portfolio. The license will allow us to contribute up to $125 million of equity and access up to $250 million of long-term, low-cost SBA guaranteed debentures. In addition, the SBA recently increased the maximum amount of debentures that a family of funds may have outstanding from $350 million to $475 million, providing us with additional long-term financing capacity as we continue to grow the platform. We believe these developments and changes will ultimately result in the ability to expand the investment portfolio by up to $100 million over time, or 10% of the current portfolio at fair value today. And before opening the line for questions, I'd like to conclude with a few final remarks. First, we've aligned our $0.25 per share quarterly dividend with the current trajectory of NII. Second, while we still have work to do with several underperforming investments, We're actively managing these positions and remain focused on continue to improve overall portfolio quality. Third, the origination backdrop is improving and we're seeing encouraging signs across our pipeline as sponsor activity begins to accelerate. Taken together, we believe these factors position stealth to create meaningful long-term value for shareholders while continue to generate attractive income through the cycles. And Jenny, with that, we'd now be happy to open up for questions.

Thank you very much. At this time we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. And for anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Our first question is coming from Eric Zwick of Lucid Capital Markets. Eric, your line is live.

Thank you. Good morning, guys. I wanted to start with a follow-up on your commentary regarding the pipeline and the outlook for the back half of the year, improving and curious what's driving that That optimism, is it the partnership with Ridge Post and broadening the funnel and potentially improved market activity, a combination of those, or maybe some other factors? I was wondering if you could comment there.

Yeah, sure will, Eric. So I'd say one thing, it's generally true that the deal activity tends to be somewhat seasonal, and therefore the second half of the year is typically busier than the first half. and the fourth quarters, typically the busiest of the four quarters. I think that's part of it. I think a little bit slower activity earlier in the year and I think things have just generally picked up for us. We are seeing pricing in that regard relatively stable. So as an example, if we were less disciplined on pricing, we'd probably be closing more deals, but we try to be disciplined on pricing, of course. And then in terms of the RCP advisors and rich post combination. Still early there, early days there, but we think this will take a few quarters or so, but we're starting to see some commonality of opportunities or sponsors really at a transaction and it turns out that the sponsor is part of the RCP portfolio, if you will. So that's starting, but at this point is coming more from our existing origination capabilities.

Thank you. I appreciate the color there. Just looking at the income statement, the other income line was a little bit lower this quarter or in the second quarter relative to the past three or four. Curious if there was anything kind of noteworthy or specific in the most recent quarter and whether you would expect the 2Q rate to be a good Go Forward rate or return to the more historical level there.

Yeah, Todd, we'll turn that over to you.

Yeah, I would say there's nothing particularly unusual. I mean, one thing is that we didn't carry quite as much cash as we historically have, and so our sweep income is not as high. So that's probably the primary difference. You know, it kind of moves up and down, but I'd say that's probably the only thing that's unique for this quarter.

Got it. And then last one for me, just on the, the unrealized appreciation in the quarter, but what drove the positive marks in the portfolio? Yeah.

So we had two, right. And we related to two, you know, two of the positions that, that were kind of working. So, you know, one of them was, was a sale of a unit, a division. And so that improved the mark there. And the other one, was in restructuring and taking out another lender at a low price and a low value, the other lenders. It increased enterprise value for both those businesses and resulted in kind of uplifts for both of those. So I'd say that was probably half of it. And the other half of it is simply a reversal for the realized loss that we had on one of our positions, which as you know, Eric, we have a realized loss if we've marked it. And typically we've marked it in roughly the same Thank you very much. And our next question is coming from Christopher Nolan of the Laden Bag Salmon.

Christopher, your line is live. Hey, guys. The hookup with Ridge Post

Do you anticipate you're just going to have a much larger pipeline of deals that you're going to be reviewing? You know, I think, Chris, I think that's definitely right over time.

And I would say that, you know, it starts with where we've been calling on someone and for a while maybe doing business with them and and Ridge Post is already an LP in their funds. So this is very helpful. The next would be in situations where RCP is an LP in a fund and we don't have a previous relationship with them. And this will take time, but a nice warm introduction from RCP to that private equity firm. So that's how it will progress from here, but we definitely think this will Thank you, Rob. And also,

The non-accruals have been elevated for some time. If and when those come down, is the anticipation to keep the leverage ratios at the current levels or if the non-accruals come down and stay down to increase leverage going forward? What are the thoughts around that?

I think that we're operating less than one-to-one leverage. Our target leverage is one-to-one on a regulatory basis. two to one or so on a GAAP basis. So I think you certainly could see our leverage increase. As the third license, SBIC license gets up and running, you know, that will be helpful. Of course, that will be total GAAP leverage, which again, we'd use, you know, say if it's long, long dated. So I think you will see leverage increase. And I think too, it's a, Your question is a good reminder that if you think about our portfolio today, we have roughly 50 million of non-accruing assets at fair value and roughly 90 million of equity co-invest at fair value, neither of which have a return to them. Now, the equity portfolio is appreciating and we get a return from it over time, but imagine being able to recycle what is in total $140 million into earning assets. Some will be equity, new equity co-invest, but others will be performing loans. So this should help with earnings capacity. This will take time as they get recycled. And then back to your original question is that we'll, you know, would expect leverage to get closer to one-to-one and two-to-one on a gap basis than it is today. Great. Thanks, Rob. Thank you, Chris.

Thank you very much. And our next question is coming from Robert Dodd of Raymond James. Robert, your line is live.

Hi, guys. Just going back to RCP for a second, if I can, Rob. In the relationships and the preliminary discussions you've had with them and the PE funds, are there any niches where the funds maybe have particularly strong industry expertise where you haven't historically been a significant participant. I mean, is that one of the ways as well? Because obviously it can expand the pipeline, but can it expand kind of like industry and sector diversification as well?

That's a really interesting point. I would say in the lower middle market, what we found is that many of the firms cover a variety of areas. Some are more specialized. As an example, industrial services would be a category. Some would be in technology or digital marketing. But I think our history of investing really transcends all industry's except for the two that we've not been active in at all, which is real estate and the pure oil and gas industry. So I think what we found is one, we have kind of touched probably most every industry sector. Two, I would say, and haven't studied it carefully, but they would therefore, and their portfolio of experience is 200 plus funds. would cover a variety. So I think together we'll have touched everything, but it could certainly provide access to some areas where we don't have as much exposure to or that would be new and that we would find attractive. So I think it's a really good illuminating point that not only should it be in volume, but it could be interesting in terms of industry sector, given the breadth of what it is.

on the remaining non-accords can you give us any qualitative do you think those non-accords can come back to performing are the primary factors operational that can be fixed over time or are there other issues where it may need a material restructuring and the sponsor may have to approve of that or is this just Operational improvements to get them back or something is needed in order to deal with those remaining assets?

Yeah, yeah. So on the non-performing situations, I'm trying to think here. All or but one of them, let me say this, that most of them, we and the other lenders now control them. So we're no longer relying upon a private equity firm to do something. And so we're now working with the management and the other lenders with the management teams to affect, one, we've probably already done a restructuring, and two, now how to improve the business operationally. In some cases, we have to provide a little bit more capital. And So from here, it's a matter of getting the companies in a position for an exit. If it's helpful, we would be glad to convert that fair value today into cash and reinvest it. So we're not trying to achieve two times our money from here, but rather position the companies where they can be sold and so all do as well as possible. And you're working closely with the management teams. So I think it's that category of were basically at that point where we don't have any obstacles. They've been restructured. We've, with the lenders, taken, restructured the capital stack, providing capital if needed, and we try to be very limited in that way, but also try to be smart in that way, too. So that's the state of the non-existence.

Yeah, appreciate that, Carla. Thank you.

Yeah, thank you, Robert.

Thank you very much. While we appear to have reached the end of our question and answer session, I will now hand back over to Mr. Ladd for any closing comments.

Okay. Thank you, Jenny, very much. And we thank everyone for joining the call and for the support from our shareholders. And we look forward to giving you a further update as we review the third quarter in early November. Thank you very much.

Thank you everybody. This does conclude today's conference and you may disconnect your phone lines at this time. We thank you for your participation.