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Date

Thursday, August 7, 2025, at 11 a.m. ET

Call participants

  • Co-Chief Executive Officer and President — Michael A. Reisner
  • Co-Chief Executive Officer and Chief Investment Officer — Gregg J. Bresner
  • Chief Financial Officer and Treasurer — Keith Franz

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Takeaways

  • Net Investment Income (NII)-- $0.32 per share in net investment income for Q2 2025, reflecting a decline from $0.36 per share in the prior quarter (Q1 2025), mainly due to the restructuring of Anthem Entertainment and the exit from several hospital loan positions.
  • Dividend Policy-- The quarterly dividend remained unchanged at $0.36 per share for Q2 2025; management attributed the gap between net investment income and the dividend to the “nonrecurring nature of the impact to our earnings this quarter.”
  • Net Asset Value (NAV)-- Increased 1.5% from $14.28 in the first quarter to $14.50 at June 30, driven primarily by fair value increases in equity positions, especially Longview Power and David’s Bridal.
  • Share Repurchase Activity-- Repurchased approximately 699,000 shares at an average price of $9.37 during Q2 2025; the board authorized a $20 million upsize to the buyback program.
  • Fair Value Portfolio Credit Quality-- Investments risk-rated four or five accounted for less than 2% of the portfolio at fair value as of Q2 2025, consistent with the prior quarter.
  • Nonaccruals-- Rose to 1.37% of the portfolio at fair value in Q2 2025, up from 1.2% in Q1 2025, attributed to a new term loan C in Anthem Sports being placed on nonaccrual status.
  • Total Operating Expenses-- $35.3 million in total operating expenses for Q2 2025, decreasing from $36.8 million in Q1 2025, primarily as a result of lower advisory fees and interest expense, as well as reduced G&A costs.
  • Portfolio Yield-- Weighted average yield on all debt and income-producing investments at amortized cost was 12.4% at June 30, 2025, an increase of 22 basis points from the first quarter
  • Unencumbered Assets and Liquidity-- Over $1 billion in unencumbered assets as of Q2 2025, with $65 million in cash and short-term investments and $100 million available under credit facilities.
  • Portfolio Activity-- $41 million in commitments across 10 existing companies, predominantly first lien loans; $88 million in repayments and sales, leading to a net funded investment decrease of approximately $49 million.
  • Capital Structure-- Net debt to equity ratio was unchanged at 1.39 times for Q2 2025; outstanding debt was $1.1 billion as of June 30, 2025 with a weighted average cost of debt capital of about 7.5%, and approximately 62% comprised unsecured debt as of June 30, 2025.
  • PIK Income and Credit Quality-- 68% of PIK income derived from portfolio companies risk-rated one or two, with roughly 17% of PIK income stemming from litigation finance portfolios secured by first liens.
  • Dividend Yield-- 15.6% trailing twelve-month distribution yield based on quarter-end market price.
  • Repayment and Origination Outlook-- Management expects Q3 repayments to be consistent with or exceed Q2, with deployment into new investments dependent on pipeline timing.

Summary

Cion Investment's (CION 4.66%) board authorized a $20 million increase to the share repurchase program following accelerated buyback activity spurred by market volatility and tariff-driven sentiment shifts. Management noted unrealized NAV gains were largely attributable to improved valuation in key equity positions, particularly Longview Power and David’s Bridal, reflecting sector-specific tailwinds and revised company prospects. PIK income composition favored first lien, higher credit-quality investments, with litigation finance providing significant contributions as COVID-related case delays receded. The company maintained over $1 billion in unencumbered assets, supporting liquidity, balance sheet flexibility, and new deployment capacity. Strategic positioning on portfolio mix and debt structure, including a majority of unsecured, floating-rate obligations, was cited as a hedge against rate volatility and macroeconomic uncertainty.

  • Co-Chief Executive Officer Reisner said, “The first is what we believe is a nonrecurring nature of the impact to our earnings this quarter as a result of the two positions I mentioned. And second, we are currently leading the recapitalization of one of our larger portfolio companies in a transaction that we expect to close in the third quarter, which we believe will be highly accretive to both earnings and NAV.”
  • Co-Chief Executive Officer Bresner emphasized that, “we believe any cut in the SOFR we will see activity, both uptick in fees. And then, there's typically an uptick in spreads.” when discussing sensitivity to interest rate shifts.

Industry glossary

  • Nonaccrual: A loan status where interest payments are no longer being recorded as income by the lender due to doubt about full collectability, often indicating increased credit risk.
  • PIK Income: Payment-in-kind interest, where income is earned as additional principal or securities rather than cash payments, commonly used in structured and specialized credit.
  • SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated derivatives and loans that reflects the cost of borrowing cash overnight collateralized by U.S. Treasury securities.
  • First Lien Loan: Debt secured by collateral that has the highest priority claim on the assets in case of default.
  • Mark-to-market: The accounting process of valuing an asset or portfolio based on current market prices to reflect real-time changes in value.

Full Conference Call Transcript

Michael Reisner: Thank you, Charlie, and good morning, everyone. Thank you all for joining our call today. This morning, CION reported $0.32 in quarterly net investment income for the second quarter, mainly impacted by two positions, including a restructuring of Anthem Entertainment, which we discussed in the prior quarter, and the exit of our position in several hospital loans, which Gregg will discuss. Excluding this one-time impact, our quarterly net investment income would have exceeded our base dividend level of $0.36 per share. As I will touch upon in a bit, we are keeping our dividend steady at this time.

Our net asset value increased 1.5% quarter over quarter to $14.50, up from $14.28 in the first quarter, driven by fair value increases in our equity positions in Longview Power, David's Bridal, and several other smaller positions. We also continue to repurchase shares in the open market during the quarter, which remains accretive to our NAV. Longview Power is our second-largest equity position and saw improved valuation this quarter due to better-than-expected financial performance and strong capacity auction results. As we have noted on prior calls, we expect some quarterly volatility in the fair value marks of our equity positions in David's Bridal, given the relative size of the position and the nature of its business.

This quarter, our positions in David's were marked higher due to improved trading performance of comparable companies, increased clarity around the potential impact of tariffs, and the continued growth of its higher multiple Pearl digital marketplace. We are pleased with the continued credit performance of our portfolio as underlying fundamentals remain encouraging. We are seeing weighted average adjusted EBITDA growth at the portfolio company level in the mid-single digits on an LTM basis, reflecting sustainable growth and healthy operations. Following our quarterly valuation process, we downgraded investments in seven portfolio companies on our internal risk rating scale and upgraded investments in four portfolio companies.

Several of our rating upgrades were due to anticipated repayments subsequent to the quarter following portfolio company sales or other transactions where we have received notification of a pending payoff. Investments risk-rated four or five represent less than 2% of the portfolio at fair value, similar to the prior quarter. Overall, nonaccruals remain low, at 1.37% of the portfolio at fair value. Capital markets were especially volatile in early Q2, and our share buyback activity accelerated as a result. We repurchased approximately 699,000 shares of our common stock at an average price of $9.37 during the quarter.

We are excited to announce that our Board has authorized a $20 million upsize to our share repurchase program, which was renewed at our quarterly Board meeting earlier this week. We continue to believe that our share buyback preserves strong alignment with our shareholders along with our insider purchasing, remains a prudent use of capital as long as it is accretive to NAV. When we spoke with you last quarter, investors were attempting to digest a whirlwind of macroeconomic challenges, including the initial wave of steep tariff declarations on various trading partners around the globe.

Since then, improved clarity around both the strategy behind the tariffs as well as negotiated deals has led to a broader market rally and stronger sentiment. While it's too soon to say whether this trend will continue into the back half of the year, initial discussions with our portfolio companies remain positive. Repayments accelerated this quarter, and we expect additional repayments in the third quarter, which should allow us to deploy into our forward pipeline while balancing our overall leverage profile. Overall, we are pleased with our growth in NAV and continued steady credit performance in our portfolio. Regarding earnings, I want to share some incremental context around our dividend policy.

Given our net investment income for the period, we are maintaining our dividend at $0.36 per share for a couple of reasons. The first is what we believe is a nonrecurring nature of the impact to our earnings this quarter as a result of the two positions I mentioned. And second, we are currently leading the recapitalization of one of our larger portfolio companies in a transaction that we expect to close in the third quarter, which we believe will be highly accretive to both earnings and NAV.

As we have mentioned in the past, we encourage investors not to overly focus on any particular ninety-day window when evaluating our performance, as this does not reflect how we manage our investment and portfolio management processes. As we outlined at our Investor Day earlier this year, we see our opportunistic investing strategy as a strong complement to our core direct lending strategy, allowing CION to enhance shareholder returns while remaining focused on a conservative first lien position. While we acknowledge that this can introduce some volatility into our earnings on a quarter-to-quarter basis, we believe this volatility tends to skew meaningfully to the upside and thus should be evaluated on a longer-term perspective.

With that, I'll now turn the call over to Gregg to discuss our portfolio and investment activity during the quarter.

Gregg Bresner: Thank you, Michael, and good morning, everyone. We've remained highly selective with new investments in Q2. We were effectively at full investment during most of the quarter and worked to maintain our targeted net leverage level as we balanced the timing of expected investment pipeline investments versus repayment amounts. During the quarter, we passed on a historically higher percentage of potential investments in new portfolio companies based on credit and pricing considerations, as the continued hangover of record 2024 private debt fundraising still translated into lower coupon spreads, higher leverage levels, and looser credit documents for potential transactions.

As Michael discussed in his remarks, market conditions rebounded in Q2 as stronger economic indicators and reduced concerns regarding tariffs have boosted overall economic sentiment and equity markets. We focused our Q2 activities on incremental investments with our portfolio companies, particularly for strategic add-on acquisitions, business development, and other corporate initiatives. We believe our continued investment selectivity and proportional deployment levels helped us to invest in first lien loans at higher spreads when compared to the overall private and public loan markets during the quarter. The weighted average yield for our total funded first lien debt investments for the quarter, based on our investment costs, was the equivalent of SOFR plus 6.96%.

As we discussed in previous quarters, the majority of our annual PIK income is strategically derived from highly structured first lien investments, or where PIK income is incremental to our cash coupon. For example, we invest in litigation finance portfolios where we are the first lien lender against a diverse mix of thousands of mass tort or single event cases. We are able to attain higher yields with attractive loan-to-value structures by matching flexible PIK timing features with strict cash flow sweeps upon collections from settlements. These investments represent approximately 17% of our PIK income.

We have begun to experience increasing repayments from our litigation portfolios as the long court docket delays from COVID are starting to thaw and cases are being resolved, settled, and distributed. Recent higher-profile cases that have settled include Gilead, Zantac, and AstroWorld. Approximately 68% of our PIK investments are in portfolio companies risk-rated either one or two, and 96% risk-rated three or better. As a result, we believe this PIK income may not compare to restructured PIK driven by a deterioration in credit. Turning now to our Q2 investment and portfolio activity.

Our Q2 investment activity consisted of add-on investment commitments and secondary purchases in existing portfolio companies, including American Clinical, Anthem Sports, Aspira, Avison Young, Berlitz, Carestream Health, Humanity Tree Services, David's Bridal, Juice Plus, and Securus Eventive. During Q2, we made a total of approximately $41 million in investment commitments across 10 existing portfolio companies, of which $29 million was funded. Over 99% of the investment commitments were in the form of first lien loans. We also funded a total of $10 million of previously unfunded commitments. We had sales and repayments totaling $88 million for the quarter, which consisted of the full repayment of the first lien loans for American Lawyer Media, Manas Bio, and Vimeo.

We expect Q3 repayment activity to be consistent with or greater than the level we received in Q2, as we have already received the full repayments of HW Lochter and Rogers Mechanical in early Q3 and expect several other companies to fully repay prior to the end of Q3. As a result of all of these activities, our net funded investments decreased by approximately $49 million during the quarter. As Michael referenced, our NAV increased during the quarter, driven primarily by net increases in the unrealized mark-to-market value of the portfolio as improved market conditions and reduced tariff concerns positively impacted comparable public company valuations and the overall projected macroeconomic outlook.

Our equity investment in Longview Power increased primarily due to a strong financial outlook, higher baseload capacity auction pricing, and a projected stronger multiyear demand outlook for power production driven by data centers, AI, and other consumer consumption. As we mentioned on previous quarterly calls, we expect to see significant quarter-to-quarter volatility in the marks of David's Bridal equity due to the larger overall relative size of our investment as well as the highly seasonal nature of the company's operations. The mark-to-market increase in David's Bridal for the quarter was driven primarily by improved comparable public trading multiples and the continued growth in David's Pearl Marketplace business as a percentage of the total business mix.

We experienced a mark-to-market decline in our first lien debt investment in Four Wall Entertainment, a leading full-service lighting, video, and rigging company to the live entertainment and TV film production sectors. The decline was driven primarily by lower trailing earnings performance from the far-reaching industry effects of the 2023 Writers Guild strike and LA fire activity that greatly impacted TV and film production activities. The company expects rebound in trends to continue into 2026. Lastly, we exited our residual secured loans to two hospitals within the CarePoint system.

In conjunction with CarePoint's bankruptcy process, our lender group agreed to forward sell our remaining first lien interest at a discount to par plus accrued interest in exchange for an expedited cash payment as opposed to restructuring into new relatively small tranches with long-term maturities. From a portfolio credit perspective, our nonaccruals increased from 1.2% of fair value in Q1 to 1.37% in Q2. This increase was due to the initial classification of our new term loan C investment in the Anthem Sports to nonaccrual this quarter. During the quarter, Anthem Sports completed a significant acquisition where CION co-led a new financing tranche.

In conjunction with the acquisition, Anthem recapitalized its debt structure by the exchange and bifurcation of its previous term loans into new B and C tranches. The contractual interest component of the new tranche C consists of a nominal PIK payment and a MOA to be paid upon exit or refinance. Given the deferred payment profile of the tranche C, we have elected to initially place the investment on nonaccrual immediately at the closing of the transaction and intend to reevaluate based on the accreted value level of the tranche over time.

On an absolute basis, nonaccruals continue to be largely in line with historical experience, and we are pleased with the continued credit performance of our portfolio, particularly in the current interest rate environment. Overall, our portfolio remains defensive in nature, with over 98% of our portfolio risk-rated three or better. Our risk-rated three investments, which are investments where we expect full repayment but are either spending more engagement time and/or have seen increased risk to the initial asset purchase, increased from approximately 10.3% in Q1 to 11.6% in Q2, driven primarily by increased engagement time in several names due to transaction-related activity. I will now turn the call over to Keith.

Keith Franz: Thank you, Gregg, and good morning, everyone. During the second quarter, net investment income was $16.9 million or $0.32 per share compared to $19.3 million or $0.36 per share reported in the first quarter. Total investment income was $52.2 million during the second quarter compared to $56.1 million reported during the first quarter. This is a decrease of $3.9 million or a decrease of about 7% quarter over quarter. The decrease in total investment income was driven primarily by a decrease in interest income as a result of certain investments being restructured during the quarter as well as lower transaction fees earned from origination amendment activity when compared to the prior quarter.

On the expense side, total operating expenses were $35.3 million compared to $36.8 million reported in the first quarter. The decrease in operating expenses was primarily driven by lower advisory fees, a decrease in interest expense on our debt due to the benefits of repositioning our debt capital during the prior quarters, and slightly lower G&A costs during the second quarter. At June 30, we had total assets of approximately $1.9 billion and total equity or net assets of $759 million, with total debt outstanding of $1.1 billion and 52.3 million shares outstanding.

Our portfolio at fair value ended the quarter at $1.8 billion, and the weighted average yield on our debt and other income-producing investments at amortized cost was 12.4% at June 30, which is up 22 basis points from the first quarter. At June 30, our NAV was $14.50 per share compared to $14.28 per share at the end of March. The increase of $0.22 per share or 1.5% was primarily due to mark-to-market price increases in our portfolio, mostly due to price volatility from our equity book, and the accretive nature of our share repurchase program during the quarter.

We ended the second quarter with a strong and flexible balance sheet with over $1 billion in unencumbered assets, a strong debt servicing capacity, an interest coverage ratio of about two times, and solid liquidity. We had over $65 million in cash and short-term investments and over $100 million available under our credit facilities to further finance our investment pipeline and continue to support our existing portfolio companies. At June 30, we continue to have a healthy debt mix with about 62% in unsecured debt and 38% in senior secured, with about 75% in floating rate.

At the end of the quarter, our net debt to equity ratio was unchanged at 1.39 times, and the weighted average cost of our debt capital was about 7.5%, which is also unchanged from the first quarter. As SOFR rates remained relatively flat, the benefits of repositioning our debt capital during the prior quarters and the increase in the unsecured debt mix to over 60% of our total debt capital, with about 75% in floating rate, continues to bring additional strength and flexibility to our balance sheet while also creating a natural hedge to our overall market interest rate risk.

Now turning to distributions, during the second quarter, we paid a base distribution to our shareholders of $0.36 per share, which is the same as the first quarter base distribution. The trailing twelve-month distribution yield through the second quarter based on the average NAV was about 10%. And the trailing twelve-month distribution yield based on the quarter-end market price was 15.6%. As announced this morning, we declared our third quarter base distribution of $0.36 per share, which is the same as the second quarter. The third quarter base distribution will be paid on September 16 to shareholders of record as of September 2.

With that, I will now turn the call back to the operator who will open the line for questions.

Operator: Thank you, sir. We will now be conducting a question and answer session. And the first question comes from the line of Eric Zwick with Lucid Capital Markets. Please proceed with your question.

Eric Zwick: Thanks. Good morning, everyone. Wanted to start with a question, I guess, on the pipeline and your expectation for originations in 3Q and kind of really matching that up against just your commentary that repayments in 3Q could be equal or greater to 2Q. So just trying to get a sense of whether we might see the portfolio, you know, move a little bit lower in the 3Q or if you have some insight that, you know, potential for originations could offset those repayments.

Gregg Bresner: Hi, Eric. It's Gregg. I would say it's too early to tell, but we have, you know, a number of investment opportunities in the pipeline. I think it's a question of whether some of that slips over into Q4. It's always hard to judge when we're gonna close things. But we are seeing, you know, some significant opportunity pipeline. So it will depend on the timing of both sides of the repayments plus the new investments. So it's hard to give you an exact estimate right now.

Eric Zwick: No. I appreciate that, and I know it's hard to have 100% clarity. So maybe kind of given that and just to kind of be looking at the earnings run rate here in 2Q and I know you mentioned expect some positive benefits in 3Q from the restructuring. But there are some, I guess, headwinds from the smaller investment portfolio. If we look at the SOFR curve, it would suggest, you know, 100 basis points of compression from the rate environment over the next twelve months or so. And I believe about 90, 91% of your portfolio is subject to floating rate.

So maybe just kind of help me understand the path back to NII per share covering the declared dividend rate.

Gregg Bresner: Sure. So it's a couple of things. When you see SOFR, working at the same curves, I think in an environment where SOFR is going down, we typically see spreads widen. They usually run inverse to each other. And also, when there is more activity, so if there are more refinancings or more M&A activity picks up, we tend to generate significantly more income upfront in the form of fees and transaction fees and origination fees. So, you know, in the past, those two have historically offset each other, at least in the directions they run. So, you know, we believe any cut in the SOFR we will see activity, both uptick in fees.

And then, there's typically an uptick in spreads.

Eric Zwick: Got it. So then it sounds like it may be, you know, kind of a maybe a multi-quarter path to get back to NII covering the dividend, or you think you can get back there in 3Q?

Gregg Bresner: Yeah. I think, you know, based on my prepared comments, the activity we're doing in Q3, we're hopeful we can get there this quarter. There comes a time that we don't think we're going to get back there, that's when we would consider cutting the dividends.

Eric Zwick: Thanks. And one last one, I'll step aside and jump back in the queue. Just in terms of the share repurchase, the activity was quite a bit stronger in 2Q than we had seen previously. And I know you've got the increased authorization. So just how should I think about your appetite or the pace of buyback over the next quarter or two?

Michael Reisner: Yeah. I think as alluded to, this was a big quarter because of what we saw after tariffs were announced. I think, listen, the programmatic buyback we have in place is meant to support the stock, and we buy more the more accretive it is as it trades down. We are hopeful that as we get our story out there, the stock will start to gain momentum. And you hopefully will not see as much buyback this quarter. But that just depends on the market.

Eric Zwick: Thanks for taking my questions today.

Michael Reisner: Thank you, Eric.

Operator: Thank you. There are no further questions at this time. And I would like to turn the floor back over to Michael Reisner for any closing remarks.

Michael Reisner: Great. We just hope to thank everyone for joining us today. Everyone enjoys the rest of the summer. We look forward to coming back to you next quarter. Thank you, everyone.

Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.