Eagle Point Income Company Shows Strong Q2 Performance
Eagle Point Income Company (EIC) has reported a solid financial performance for the second quarter of 2024, continuing the positive momentum seen in the first quarter. The company experienced a quarter-over-quarter increase in gross portfolio cash flows and an uptick in net asset value (NAV), highlighting the strength of its balance sheet. Despite a slight decline in per-share cash flow due to the timing of security payments, the company’s recurring cash flows remained comfortably above its regular distributions and operating expenses. The NAV grew to $15.24 by June 30, marking a 1% increase from the end of the first quarter. Eagle Point Income Company’s common stock also saw a 15% increase in daily average trading volume compared to the previous quarter.
Key Financial Takeaways
- Increase in Gross Portfolio Cash Flows: The company reported strong financial results for the second quarter with a continued increase in gross portfolio cash flows.
- NAV Growth: The company’s NAV increased by about 1% from the previous quarter, reaching $15.24.
- Recurring Cash Flows: Recurring cash flows for the quarter stood at $12.4 million, or $0.87 per share, slightly down from the previous quarter’s per-share amount.
- Series C Term Preferred Shares: The company issued Series C term preferred shares, raising net proceeds of approximately $33.6 million.
- Increase in Trading Volume: Trading volume for EIC’s common stock increased by 15% from the first quarter and nearly quintupled year-over-year.
- Monthly Common Distributions: Monthly common distributions were declared at $0.20 per share through the end of 2024.
Company Outlook
- Monthly Distributions: Eagle Point Income Company has declared monthly common distributions of $0.20 per share through the end of 2024.
- Strong Cash Position: As of July 31, the company has over $41 million in cash and revolver borrowing capacity, providing ample resources for investment and portfolio expansion.
- High CLO BB Coupons: All CLO BB coupons are in the double digits, with potential for higher yields if early calls occur.
Bearish Highlights
- Decline in Per-Share Cash Flow: A minor decline in per-share cash flow due to the timing of security payments was noted, with many securities purchased during the quarter not making payments until the third quarter.
Bullish Highlights
- Robust Portfolio Design: The company’s portfolio is designed to perform well in elevated rate environments and is generating robust cash flows.
- High Effective Yield: The weighted average effective yield of CLO purchases during the quarter was a strong 11.6%.
Misses
- Net Investment Income: Net investment income and realized gains, excluding non-recurring expenses, were $0.54 per share, slightly down from $0.56 per share in the first quarter of 2024.
Q&A Highlights
- No Questions: No questions were asked during the Q&A session, indicating potential satisfaction with the information provided by the company’s executives.
Eagle Point Income Company’s second quarter results demonstrate the company’s ability to maintain a strong balance sheet and generate significant income, despite some minor fluctuations in cash flow per share. The company’s strategic focus on CLO BBs and floating rate debt positions it well for various economic conditions. With a robust cash and borrowing capacity, Eagle Point Income Company is poised to continue its growth trajectory and capitalize on investment opportunities in the CLO market.
InvestingPro Insights
Eagle Point Income Company (EIC) has recently showcased financial resilience and growth, as reflected in their second quarter performance. Key metrics from InvestingPro reveal a robust market capitalization of $195.41 million, an attractive P/E ratio of 3.88, and a significant dividend yield of 15.59%. However, it is important to note that the company’s short-term obligations exceed its liquid assets, indicating potential liquidity challenges.
Full Transcript Highlights
Tom Majewski: Thank you, and welcome, everyone, to Eagle Point Income Company’s second quarter earnings call. We appreciate your interest in Eagle Point Income Company, or EIC. The company’s strong momentum from the first quarter continued into the second quarter with an increase in gross portfolio cash flows and a 1% increase in NAV. Our portfolio, designed for elevated rate environments, continues to generate robust cash flows. Recurring cash flows were again comfortably in excess of our regular common distributions and operating expenses. Net investment income plus realized gains, excluding non-recurring expenses, was $0.54 per share. Our NAV as of June 30 was $15.24, an increase of about 1% from March 31. We continue to strengthen our balance sheet, with net proceeds of about $33.6 million from our Series C term preferred in April, and a 15% increase in daily average trading volume for our common stock compared to the first quarter.
Dan Ko: There continues to be attractive investment opportunities across the CLO market. We believe EIC successfully capitalized on the elevated rate environment by investing in floating rate CLO debt. The weighted average effective yield of CLO purchases during the quarter was 11.6%. Our CLO collateral managers remain focused on building par through relative value trading or by reinvesting part prepayments into discounted loans. The trailing 12-month default rate declined to 0.92% as of quarter end, remaining well below the historical average of 2.65%.
Lena Umnova: During the second quarter, the company recorded net investment income and realized gains of $6.3 million or $0.44 per share. When excluding non-recurring expenses, NII and realized gains were $0.54 per share. GAAP net income was $8.5 million or $0.60 per share. As of June month end, the company’s net asset value was $15.24 per share. The company had over $41 million of cash and revolver capacity available for investment.
Tom Majewski: EIC continues to perform strongly, and our proactive investment strategy continues to generate significant net investment income. We focus on strengthening our balance sheet and believe our portfolio is well positioned for any rate or economic environment. We maintain that CLO BBs are resilient due to their structural protection and floating rate nature. Thank you for your time and interest in Eagle Point Income Company. We are available for any follow-up questions.
Operator: We’re showing no questions in queue at this time. This concludes today’s event.
