Eagle Point Credit Company Inc. (NYSE:ECC) Q4 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presented mixed signals: strong recurring cash flows and a robust CLO strategy were offset by missed EPS expectations and realized losses. The Q&A revealed some analyst concerns about management's transparency and specific strategies. Despite positive developments like the ECCU notes offering and increased distributions, the unclear guidance and missed EPS likely neutralize the positive effects, resulting in a neutral sentiment.
Key Financial Performance
Earnings Per Share (EPS) $0.24 EPS, down from $0.27 EPS expectations.
Recurring Cash Flows $82 million, or $0.74 per share, up from $68.2 million, or $0.66 per share in the third quarter, driven by first-time equity payments from newly purchased CLOs and on-cycle semi-annual interest payments.
Net Investment Income (NII) less Realized Losses $0.12 per share, down from $0.23 per share in the third quarter and $0.33 per share in the fourth quarter of 2023, impacted by $0.14 per share of realized losses from older CLO equity positions.
GAAP Net Income $0.41 per share, up from $0.04 per share in the third quarter and $0.37 per share in the fourth quarter of 2023, driven by total investment income of $49.5 million and net unrealized appreciation on investments.
Total Distributions $1.92 per common share for 2024, reflecting a total return of 14.7% for common stockholders.
Weighted Average Remaining Reinvestment Period (WARP) 3.4 years, increased from the previous quarter, significantly above the market average of 2.2 years.
Debt and Preferred Securities Outstanding Approximately 38% of total assets, slightly above the target range of 27.5% to 37.5%, driven by the ECCU notes offering.
Cash Flows Received in First Quarter 2025 Approximately $72 million, with some CLOs not making their first payment until April.
New CLO Equity Purchases Weighted average effective yield of 17.8% on $223 million deployed in new investments during the fourth quarter.
Total Investment Income $49.5 million for the fourth quarter.
Net Unrealized Appreciation on Investments $21.8 million for the fourth quarter.
Asset Coverage Ratios 263% for preferred stock and 506% for debt, comfortably above statutory requirements.
Common Stock Issuance Approximately 5.2 million additional common shares issued at a premium to NAV, generating NAV accretion of about $0.05 per share.
ECCU Notes Offering Proceeds Generated net proceeds of $111 million, the largest notes offering to date.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
New CLO Equity Investments: During the quarter, we deployed over $223 million in net capital into new investments. New CLO equity purchased during the fourth quarter had a weighted average effective yield of 17.8%.
CLO Resets: During the quarter, we completed 16 resets, lengthening our portfolios weighted average remaining reinvestment period to 3.4 years.
ECCU Notes Offering: In December, we completed our ECCU 7.75% notes offering, generating net proceeds of $111 million.
CLO Market Positioning: We continue to rotate the CLO debt portion of our portfolio into CLO equity and other investments that we expect to generate additional yield.
CLO Issuance: In the fourth quarter of 2024, we saw $59 billion in new CLO issuance, leading to a record $202 billion for the full year.
Recurring Cash Flows: Recurring cash flows from our portfolio were $82 million, or $0.74 per share, exceeding our quarterly aggregate common distributions and total expenses.
Leverage Ratio Change: We recently decided to change the company’s target leverage ratio to 27.5% to 37.5%, up from the previous 25% to 35% range.
Investment Strategy: We are focused on lengthening our CLO equities weighted average remaining reinvestment period through resets, making new issue investments, and purchasing lightly seasoned CLO positions in the secondary market.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Earnings Miss: Eagle Point Credit Company Inc. reported an EPS of $0.24, missing expectations of $0.27, indicating potential challenges in meeting financial projections.
CLO Payment Fluctuations: Approximately 22% of the CLOs in the equity portfolio did not make payments during the fourth quarter, which could lead to cash flow volatility.
Realized Losses: The company experienced realized losses of $0.12 per share, including a $0.14 per share reclassification of unrealized losses from older CLO equity positions, indicating potential risks in asset valuation.
Leverage Ratio Adjustment: The company increased its target leverage ratio to 27.5%-37.5%, which may introduce additional financial risk if not managed carefully.
Market Volatility: The company is actively managing its portfolio to guard against future market volatility, indicating a recognition of potential economic risks.
Default Rate Concerns: Despite a low default rate of 0.91%, there are forecasts of increased defaults in 2025, which could impact the company's performance.
Cash Flow Variability: Fluctuations in cash flows are expected due to new investing activity and semi-annual payments, which may affect financial stability.
Interest Rate Sensitivity: The majority of assets and liabilities within CLOs are floating rate, suggesting that interest rate changes could impact cash flows.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Total Return for 2024: Holders of common stock had a total return of 14.7% for the year.
GAAP Return on Equity: The company generated a GAAP return on equity of 10.1% during the year.
Distributions: Paid a total of $1.92 per common share in distributions during 2024.
New Investments: Deployed over $223 million in net capital into new investments during the fourth quarter.
CLO Equity Purchases: New CLO equity purchased during the fourth quarter had a weighted average effective yield of 17.8%.
Weighted Average Remaining Reinvestment Period (WARP): Increased to 3.4 years, over 50% above the market average of 2.2 years.
Leverage Ratio: Changed target leverage ratio to 27.5% to 37.5%.
ECCU Notes Offering: Generated net proceeds of $111 million, the largest notes offering to date.
CLO Resets and Refinancing: Completed 16 resets and 2 refinancings during the fourth quarter.
Monthly Common Distributions: Declared common monthly distributions for Q2 2025 of $0.14 per share.
Future Cash Flows: Expect cash flows to fluctuate due to new investing activity and semi-annual payments.
2025 Outlook: Pipeline of new reset and refinancing opportunities remains robust.
CLO Market Performance: Expect CLO equity to outperform broader corporate debt markets over the medium term.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Total Distributions for 2024: $1.92 per common share
Monthly Distribution for Q2 2025: $0.14 per share
Total Return for Common Stock in 2024: 14.7% (assuming reinvestment of distributions)
Total Distributions since IPO: $21.91 per share (nearly 110% of initial investment)
Proceeds from ECCU Notes Offering: $111 million
Proceeds from Preferred Stock Offering: $20 million
Shares Issued through ATM Program: 5.2 million shares at a premium to NAV, generating NAV accretion of about $0.05 per share.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Did you cover the commission expense line in the model?
A:The commission expense would be a combination of commissions paid for the ATM, as well as issuing our perpetual preferred Series AA and AB equity.
Q:Is there a way to address the volume of data and liquidity in the CLO market?
A:We have our own system called [indiscernible], which we use to evaluate every CLO that we’re thinking of buying and things that are in our portfolio that maybe we’re thinking about selling.
Q:How much of the recurring cash flow is paid earlier in the quarter?
A:Approximately two-thirds of those CLOs paid in the first quarter. An additional third would pay in the second quarter.
Q:Can you help me understand the factors that contribute to the differences in yield measures?
A:The expected cash flows would be the same for effective yield and expected yield. The difference is the base, which is amortized cost for effective yield and fair value for expected yield.
Q:How much of the portfolio improvement is related to market opportunity versus your own decisions?
A:The biggest change we’ve consciously been making is rotating from CLO debt over to CLO equity.
Q:Do you feel there’s an opportunity to continue improving the yield on the portfolio?
A:Yes, we are working towards that. We’ve had some headwinds, but we are locking in 5-year reinvestment periods with every reset.
Q:Review of Unclear Management Responses
A:Management did not provide a direct answer to the question about the commission expense line in the model, as the response was somewhat vague and did not clarify the unusual elevation in commission expenses.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AAA
AB stock
CLOs CLO
Credit Inc
Cushion
Leverage Loan
Mr
NII net
Series AA
WARP year
accounting reclassification
advantage
amortization equity
appreciation
asset CLOs
debt CLO
distribution amortization
expectation
fluctuation cash
increase
investment yield
net loss
note offering
period volatility
point reset
portfolio WARP
portion
reclassification loss
reclassification nonrecurring
record issuance
reset opportunity
reset refinancing
rotation
share investment
share loss
stock offering
ECC Transcript
Eagle Point Credit Co LLC (ECC) Q2 2025 Earnings Call Transcript
Unknown8-12
The earnings call summary reflects a balanced view. Positive aspects include strong asset coverage ratios, a strategic focus on new investments, and optimistic guidance on cash flow generation. However, concerns about realized losses, market risk aversion, and spread compression offset these positives. The Q&A highlights management's efforts to address risks but also notes uncertainties, such as the recent sell-off in CLO equity funds. Overall, the sentiment is mixed, with no strong catalysts for significant stock price movement, leading to a neutral rating.
Eagle Point Credit Company Inc. (NYSE:ECC) Q1 2025 Earnings Call Transcript
Unknown5-29
The earnings call reveals mixed signals. Financial performance is slightly positive, with EPS exceeding expectations and net investment income growth. However, concerns arise from a significant NAV decline, a GAAP net loss, and leverage above target due to portfolio value drops. The Q&A highlights stable CLO cash flows but lacks clarity on market recognition. The market strategy and shareholder return plan seem stable, yet economic factors like tariff policy pose risks. Overall, the sentiment is neutral, with both positive and negative elements balancing each other out.
Eagle Point Credit Company Inc. (NYSE:ECC) Q4 2024 Earnings Call Transcript
Unknown2-21
The earnings call summary presented mixed signals: strong recurring cash flows and a robust CLO strategy were offset by missed EPS expectations and realized losses. The Q&A revealed some analyst concerns about management's transparency and specific strategies. Despite positive developments like the ECCU notes offering and increased distributions, the unclear guidance and missed EPS likely neutralize the positive effects, resulting in a neutral sentiment.
Eagle Point Credit Co LLC (ECC) Q3 2024 Earnings Call Transcript
Neutral11-14
ECC Slides
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
