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Carlyle Credit Income Fund (CCIF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 results were driven by high cash distributions from CLO equity and active portfolio optimization: Net investment income was $4.1M ($0.26 per share) and core NII was $0.44 per share, supported by $0.70 per-share recurring cash flows and a 25.15% cash yield on CLO payments; NAV ended at $7.44 per share .
  • The fund maintained its $0.105 monthly common dividend through May 2025 and declared $0.1823 monthly preferred dividends, citing strong CLO market fundamentals and accretive resets/refinancings; ATM issuances added $11.0M of net proceeds at a premium to NAV, accreting $0.03 per share to NAV .
  • Unrealized losses (-$3.0M) reflect market-wide loan repricing that compressed underlying spreads and pressured GAAP yields and valuations; management emphasized resets/refis to lower liability costs and extend reinvestment periods as a partial offset .
  • Guidance signals near‑term cash flow normalization from refinancing activity: Q2 2025 recurring cash flows expected at ~$0.49 per share (vs. $0.72 indicated previously for Q1), with dividend sustainability supported by CNII and cash yields; S&P Global sell-side consensus was unavailable for CCIF (closed-end fund coverage is limited) .

What Went Well and What Went Wrong

  • What Went Well
    • Dividend stability and coverage: “We maintained our monthly dividend at $0.105… supported by core net investment income of $0.44 per share and $0.70 of recurring cash flows” .
    • Accretive portfolio actions: Completed multiple resets/refis across 2024 (13 resets/1 refi) and continued into Q1 to reduce liability costs and extend reinvestment periods .
    • Robust cash generation: Cash yield of 25.15% on CLO quarterly payments translated to $0.70 per share recurring cash flows; total portfolio GAAP yield was 17.22% .
  • What Went Wrong
    • Spread compression and repricings: “Weighted average spread in our portfolio declined by 33 bps in calendar 2024… resulted in a decline in the fund's GAAP yield and net asset value” .
    • Unrealized losses: Q1 recorded -$2.967M net realized and unrealized losses due to market-wide repricing, partially offset by resets/refis .
    • Higher interest expense: Analysts flagged $1.7M interest expense; CFO cited accretion from preferred offerings as the driver, expected to amortize over the year and accelerate upon conversion .

Financial Results

MetricQ1 2024Q2 2024Q3 2024Q4 2024Q1 2025
Total Investment Income ($000)$5,339 $7,301 $7,383 $7,901 $8,269
Total Expenses ($000)$2,494 $3,345 $3,386 $3,653 $4,177
Net Investment Income ($000)$2,845 $3,956 $3,997 $4,248 $4,092
Net Realized & Unrealized Gains/Losses ($000)-$4,460 -$1,605 -$2,651 -$763 -$2,967
Net Income ($000)-$1,615 $2,351 $1,346 $3,485 $1,125
NII per Share ($)$0.24 $0.33 $0.32 $0.30 $0.26
CNII per Share ($)$0.26 $0.36 $0.54 $0.45 $0.44
Recurring Cash Flows per Share ($)$0.47 $0.64 $0.81 $0.70 $0.70
NAV per Share ($)$7.99 $7.88 $7.68 $7.64 $7.44
Total Investments at Fair Value ($000)$127,255 $142,100 $138,001 $173,454 $177,907
Number of CLO Holdings52 (as of 12/31/24)——49 52
Portfolio Weighted Avg GAAP Yield (%)———18.63% 17.22%

Segment/Portfolio Mix and KPIs:

  • Portfolio Asset Mix (12/31/24): CLO Equity 99%; Legacy Real Estate Loan 1% .
  • Portfolio Characteristics (12/31/24):
    • Weighted Avg Junior OC Cushion: 4.18%
    • S&P CCC Rated Obligors: 5.35%
    • Obligors Priced <80: 3.40%
    • Weighted Avg Stated Loan Spread: 3.38%
    • Weighted Avg Market Price of Loan Collateral: 97.83
    • Weighted Avg Remaining CLO Reinvestment Period: 2.5 years
    • Last 12-Month Default Rate incl. Distressed Exchanges (Underlying Loans): 1.52% vs. market 4.49%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common Dividend per Share ($0.1050)Mar–May 2025Maintained through Feb 2025 at $0.1050 Maintained through May 2025 at $0.1050 Maintained
Series A Preferred Dividend per Share ($0.1823)Mar–May 2025—Declared $0.1823 monthly New declaration
Recurring Cash Flows per ShareQ1 2025~$0.72 indicated in prior materials Actual $0.70; supports dividend Slightly below prior indication
Recurring Cash Flows per Share (Forward)Q2 2025—~$0.49 expected (temporary impact from resets/refis diverting cash) Lower near term, expected rebound thereafter

Capital and Funding:

  • ATM common shares: 1.37M sold, $11.0M net proceeds, $0.03 per-share NAV accretion in Q1 .
  • 7.50% Series C Convertible Preferred: ~$18.6M net proceeds; quarterly dividends; convertibility after Jul 31, 2025; redemption Jan 2030 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Dividend sustainabilityCNII $0.54 in Q3; $0.45 in Q4; recurring cash flows $0.81 (Q3), $0.70 (Q4) supported dividend CNII $0.44; recurring $0.70; dividend maintained through May Stable; covered by cash CNII
CLO resets/refisActive optimization; reinvestment periods extended Continued; 2024: 13 resets/1 refi; ongoing in Q1 Ongoing, accretive to cash flows
Loan repricing impactHeavy repricing in late 2024, tightening asset spreads Spread compression persists; portfolio weighted spread down 33 bps in 2024; repricing drove unrealized losses Headwind easing as volatility halts repricings
Credit quality/defaultsUnderlying LTM defaults ~1.5%; CCC ~6% LTM default 1.52%; CCC 5.35%; OC cushions healthy at 4.18% Resilient
Market rates/macro2024 rate cuts benefited FCF; stable backdrop Higher-for-longer expectations; CLO investor demand strong; record issuance in 2024 ($200B) Supportive CLO backdrop

Management Commentary

  • Strategy and momentum: “Our first quarter results reflect strong momentum… Fundamentals in the CLO market remain strong and our private placement… provides the fund with net proceeds to fuel a strong year of investment activity.” — CEO Lauren Basmadjian .
  • Portfolio optimization: “We completed 13 accretive resets and 1 refinancing in 2024… We continue to work with CLO managers to optimize… through refinancings or resets.” — CEO Lauren Basmadjian .
  • Spread compression and NAV: “Weighted average spread… declined by 33 bps in 2024. The spread compression resulted in a decline in the fund's GAAP yield and net asset value… partially offset by resets/refis.” — President Nishil Mehta .
  • Cash generation and dividend coverage: “Cash-on-cash yield of 25.15%… resulted in $0.70 of recurring cash flows per share.” — CFO Nelson Joseph .

Q&A Highlights

  • Interest expense uptick: CFO attributed ~$1.7M interest expense to accretion from the new preferred offering; expected another quarter of accretion before conversion; amortization continues over the year .
  • Unrealized losses driver: Market-wide loan repricings reduced expected returns for CLO equity, lowering fair values; resets/refis at tighter debt spreads are the mitigation path .
  • Primary vs. secondary CLO equity: Primary is more attractive than a year ago (lock in low-cost financing for ~12 years); secondary remains active given tight capital structures .
  • Credit watchpoints: Elevated distressed exchanges (out‑of‑court restructurings) versus low bankruptcy rates; importance of manager capability to navigate LMEs for recoveries .

Estimates Context

  • S&P Global sell-side consensus for Q1 2025 EPS/revenue and target price was unavailable for CCIF, which is typical for externally managed closed-end funds with limited analyst coverage. As a result, we cannot provide vs-consensus comparisons for this quarter [GetEstimates error noted; consensus unavailable].

Key Takeaways for Investors

  • Dividend looks supported near term: CNII ($0.44) and recurring cash flows ($0.70) covered Q1 dividend ($0.315 quarterly), and management extended $0.105 monthly through May 2025 .
  • NAV sensitivity to repricings: Expect NAV volatility tied to repricing waves and asset spreads; resets/refis are the lever to reduce liability costs and rebuild expected returns .
  • Cash yields remain robust: 25.15% cash yield on CLO payments and $0.70 recurring cash per share highlight the income engine, though temporary dips can occur during refinancing cycles .
  • Funding optionality: ATM and convertible preferred proceeds ($11.0M and ~$18.6M) enable scaling and opportunistic deployment during periods of volatility .
  • Portfolio quality defensive: Healthy OC cushions (4.18%), CCC exposure below limits (5.35%), and low LTM default rates (1.52%) support durability amid macro shifts .
  • Near-term watch: Track loan repricing pace (slowing is constructive), asset spreads, and cadence of resets/refis; these drive CNII and NAV trajectory .
  • Medium-term thesis: If spreads normalize and resets continue to reduce liability costs, CLO equity cash flows should remain attractive with dividend sustainability and potential NAV recovery over time .

Appendix: Additional Data Points

  • Q1 2025 per-share metrics snapshot: NII $0.26; CNII $0.44; recurring cash flows $0.70; cash yield 25.15%; NAV $7.44 .
  • Investment activity: $12.0M new CLO investments at 16.83% GAAP yield; total portfolio fair value $177.9M; ATM accretion $0.03/share .