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    CION
    Earnings call· Jun 2026(Q2 FY26)

    CION Investment Q2 FY26 earnings call CION

    Aug 6, 2026 Source

    Executive summary

    CION Q2 FY26 — Strong NAV Growth and Deleveraging Progress

    CION delivered a strong second quarter, marked by significant NAV appreciation driven by equity portfolio mark-to-market gains and validated asset sales. The company is actively executing a deleveraging plan, targeting a pro forma net debt to equity of 1.35x, and has increased its share repurchase authorization, signaling confidence in its undervalued stock. Management is prioritizing share repurchases over new investments while focusing on portfolio optimization and strategic separations like David's Bridal.

    Highlights

    5

    • Net asset value per share increased 3.5% to $13.57, up from $13.11.

    • Net investment income rose to $0.29 per share, up from $0.25 per share in Q1.

    • Non-accruals at fair value declined to 1.44% from 1.53%, with no new names added.

    • Sold over $64 million in portfolio assets at approximately 99% of par, validating carrying values.

    • Increased share repurchase authorization by $50 million to a total of $130 million.

    Concerns

    3

    • Estimated $0.02 per share NII impact due to timing and carrying excess cash.

    • Risk-rated 3 investments, requiring more engagement, increased to 14.1% from 12.9% QoQ.

    • Stock trades at a significant discount, implying a portfolio loss rate 14x historical annualized rate.

    Guidance & targets

    7
    CategoryTargetConfidence
    Pro forma net debt to equity ratio
    approximately 1.35x
    high materiality
    High
    Net leverage range
    low end of 1.3x to 1.4x
    high materiality
    High
    Deleveraging plan completion
    end of the third or fourth quarter
    high materiality
    High
    Total deleveraging amount
    around $270 million
    high materiality
    High
    Dividend coverage
    further support our distribution for the remainder of the year
    high materiality
    Medium
    New investments
    materially reduce or cease investments in new portfolio companies
    medium materiality
    High
    Unsecured debt mix
    80% of our debt mix will be in unsecured debt
    medium materiality
    High

    Operational metrics

    40
    Net investment income per share
    $0.29up from $0.25 in Q1 FY26
    Q2 FY26

    Essentially at total monthly base distribution level.

    Net investment income
    $14.2 millioncompared to $12.9 million in Q1 FY26
    Q2 FY26

    Estimated $0.02 per share impact due to timing.

    Total investment income
    $49.8 millioncompared to $49.5 million in Q1 FY26
    Q2 FY26

    Driven by increased amortization of purchase discounts, partially offset by lower interest from portfolio reduction.

    Total operating expenses
    $35.6 millioncompared to $36.7 million in Q1 FY26
    Q2 FY26

    Primarily due to lower interest expense and G&A.

    Net asset value per share
    $13.57up from $13.11 at end of March
    Q2 FY26

    Increase of $0.46 per share, or 3.5%, driven by mark-to-market price increases in equity portfolio and accretive share repurchases.

    Net debt to equity ratio
    1.52xdown from 1.62x in Q1 FY26
    Q2 FY26

    Decrease due to sales and repayment activities.

    Weighted average cost of debt capital
    7.5%flat when compared to Q1 FY26
    Q2 FY26
    Monthly base distributions
    $0.30paid monthly at $0.10 per share
    Q2 FY26

    Also declared for Q3 and Q4 FY26.

    Trailing 12-month distribution yield (average NAV)
    9.5%
    Q2 FY26
    Trailing 12-month distribution yield (market price)
    21.2%
    Q2 FY26
    Share repurchase authorization
    $130 millionincreased by $50 million
    Q2 FY26

    Board authorized increase to existing program.

    Cash and short-term investments
    $160 million
    Q2 FY26
    Available under credit facilities
    $25 million
    Q2 FY26
    Unencumbered assets
    $1.3 billion
    Q2 FY26
    Interest coverage ratio
    2x
    Q2 FY26
    Debt repaid (JPMorgan facility)
    $125 million
    Subsequent to Q2 FY26

    Repaid primarily from sale proceeds and ordinary course repayments.

    Total assets
    $1.8 billion
    Q2 FY26
    Total equity
    $668 million
    Q2 FY26
    Total debt outstanding
    $1.17 billion
    Q2 FY26
    Shares outstanding
    49.2 million
    Q2 FY26
    Portfolio at fair value
    $1.65 billion
    Q2 FY26
    Weighted average yield on debt and other income-producing investments
    10.6%up from 10.4% in Q1 FY26
    Q2 FY26
    Debt mix (unsecured)
    75%
    Q2 FY26

    25% in senior secured bank debt.

    Debt mix (floating rate)
    60%
    Q2 FY26

    Aligns with mostly floating rate investment portfolio.

    Non-accrual rate (fair value)
    1.44%declined from 1.53% last quarter
    Q2 FY26

    No new names placed on non-accrual.

    Non-accrual rate (amortized cost)
    4.41%declined from 5.35% last quarter
    Q2 FY26

    No new names placed on non-accrual.

    Portfolio in software sector
    1.8%
    Q2 FY26

    No ARR-based loans.

    Portfolio in first-lien investments
    79%
    Q2 FY26

    Expected to increase over next few quarters with equity monetizations.

    Portfolio risk-rated 3 or better
    98%
    Q2 FY26
    Risk-rated 3 investments
    14.1%increased from 12.9% in Q1 FY26
    Q2 FY26

    Investments where full repayment is expected but require more engagement or have increased risk.

    Sales and repayments
    $157 million
    Q2 FY26

    Loan repayment activity returned to pre-2024 levels.

    Net funded investments decrease
    $90 million
    Q2 FY26

    Result of investment activities, sales, and repayments.

    Investment commitments
    $57 million
    Q2 FY26

    Across 10 existing portfolio companies and 1 new borrower.

    Funded investments
    $54 million
    Q2 FY26

    Part of Q2 commitments.

    Previously unfunded commitments funded
    $13 million
    Q2 FY26
    Weighted average yield for new direct first-lien investments
    SOFR plus 8.1%
    Q2 FY26
    PIK income structured by design
    85%
    Q2 FY26

    Not a consequence of borrower distress.

    PIK income from risk-rated 3 or better companies
    100%
    Q2 FY26
    Portfolio asset sales
    $54 million
    Q2 FY26

    Validated carrying values.

    Portfolio asset sales
    $10 million
    Subsequent to Q2 FY26

    Validated carrying values.

    Industry KPIs

    1
    MetricValueDetails
    Deployment realizations$157 million realized proceeds; $67 million capital investedUSD

    Deals & partnerships

    1
    publicly traded companyLongview Power, CION's largest equity position, entered into a purchase and sale agreement with a publicly traded company.

    A third party has independently underwritten this asset's fair value and concluded it is worth basically the same, if not slightly more than our valuation, further validating our marks.

    Risks & headwinds

    4
    Market skepticism of portfolio marksCurrent

    Stock trades at a price that assumes a portfolio loss rate that is more than 14x our historical annualized loss rate dating back to our inception in 2012.

    Mitigation: Validated marks through over $64 million in asset sales at 99% of par; independent third-party validation of Longview Power's fair value.

    Impact of timing on NIIQ2 FY26

    $0.02 per share

    Mitigation: Carried excess cash to pay down secured credit facilities without minimum utilization penalty.

    Increased engagement for risk-rated 3 investmentsQ2 FY26

    Risk-rated 3 investments increased from 12.9% in Q1 to 14.1% in Q2.

    Mitigation: These investments are still expected to achieve full repayment, but require more active management.

    Media hysteria about private credit and software exposureCurrent

    Median BDC trading approximately 30% off last year's levels; CION punished even further.

    Mitigation: CION has less than 2% software exposure and no ARR-based loans; portfolio predominantly senior secured, first-lien debt.

    What to watch in Q3 FY26

    5

    Deleveraging plan completion

    End of Q3 or Q4 FY26
    CurrentNet debt to equity 1.52x; $125M JPMorgan facility repaid; $115M Israeli bonds to be repaid.
    TargetCompletion of $270M deleveraging plan; pro forma net debt to equity ~1.35x.

    Why it matters

    Successful deleveraging is key to improving financial flexibility and reducing perceived risk, potentially impacting valuation.

    We expect our deleveraging plan to be completed by the end of the third or fourth quarter.

    Q&A highlights

    4

    Who were the buyers of the Q2/Q3 loan sales, and how were these transactions structured (auction vs. negotiated)?

    The buyers were a diversified mix, either co-investors or members of the loan syndicate. Transactions were negotiated on a loan-by-loan basis, straightforward due to sales being close to par, and often involved pieces of deals CION still holds.

    “So it was a diversified mix of buyers, and it was either a combination of somebody we generally deal with as a co-investor in transactions at large or somebody within the syndicate of those names.”

    asked by Erik Zwick · answered by Gregg Bresner

    2 min read6 chapters

    Detailed Narrative

    01

    Portfolio Valuation Validation

    Management highlighted the validation of its portfolio marks through recent asset sales. Over $64 million in assets were sold at approximately 99% of par, aligning closely with carrying values. This was further supported by an independent third-party valuation of the Longview Power transaction, which confirmed CION's valuation, providing market confirmation of specific fair value marks in real time.

    02

    Strategic Deleveraging and Capital Actions

    CION is actively executing a deleveraging plan, targeting a pro forma net debt to equity of approximately 1.35x, down from 1.52x. This includes repaying $115 million in Israeli bonds and $125 million on a JPMorgan credit facility. The board also authorized a $50 million increase to the share repurchase program, bringing the total to $130 million, with management prioritizing repurchases over new investments.

    03

    Longview Power Transaction

    Longview Power, CION's largest equity position, entered a purchase and sale agreement with a publicly traded company. This transaction is expected to generate significant cash proceeds and meaningful net investment income, which should support the base dividend for the remainder of 2026 and further enable deleveraging and share repurchases.

    04

    David's Bridal Strategic Separation

    The company plans to separate David's Bridal into two distinct entities: a legacy retail business and the high-growth Pearl digital media network. This separation aims to fuel future growth and position both businesses for strategic transaction opportunities, with the retail segment managed for cash flow and Pearl for high organic growth.

    05

    Credit Quality and PIK Income

    Non-accruals at fair value declined to 1.44% and at amortized cost to 4.41%, with no new non-accruals added. Management clarified that 85% of PIK income is structured by design as a yield enhancement strategy, not due to borrower distress, and 100% is from risk-rated 3 or better companies. PIK income is expected to decline in coming quarters.

    06

    Investment Activity and Portfolio Mix

    Q2 investment activity focused on add-on investments in existing portfolio companies, with $54 million funded out of $57 million committed. Loan repayment activity returned to pre-2024 levels, totaling $157 million. The portfolio remains defensive, with approximately 79% in first-lien investments, expected to increase after equity monetizations.

    AI-generated summary of the company’s earnings call. Not investment advice.