Earnings call transcript: CION Investment’s Q3 2025 Earnings Beat Expectations, Stock Rises

CION Investment Corporation reported strong third-quarter 2025 results, significantly surpassing earnings and revenue forecasts. The company achieved an earnings per share (EPS) of $0.69, more than double the expected $0.34, marking a surprise of 102.94%. Revenue reached $78.7 million, exceeding the forecast by 49.47%. The positive earnings news propelled CION’s stock to rise by 6.25% in pre-market trading, reaching $9.69.

Key Takeaways

• CION’s Q3 2025 EPS of $0.69 beat the forecast by 102.94%.
• Revenue increased by 51% quarter-over-quarter, reaching $78.7 million.
• Stock price rose by 6.25% in pre-market trading.
• Net asset value per share increased to $14.86.
• Continued focus on first lien investments and share repurchases.

Company Performance

CION Investment Corporation demonstrated robust performance in Q3 2025, with significant growth in both earnings and revenue. The company’s strategic focus on first lien investments and a defensive portfolio contributed to its success. Compared to previous quarters, CION’s earnings have shown a marked improvement, aligning with broader industry trends of increased investment activity and favorable economic indicators.

Financial Highlights

• Revenue: $78.7 million, a 51% increase quarter-over-quarter.
• Earnings per share: $0.69, exceeding forecasts by 102.94%.
• Net asset value (NAV): $14.86 per share, up 2.5% from $14.50.
• Total assets: $1.9 billion.
• Total equity: $773 million.

Earnings vs. Forecast

CION’s actual EPS of $0.69 significantly exceeded the forecast of $0.34, resulting in a 102.94% surprise. The company’s revenue of $78.7 million also surpassed expectations, beating the forecast by 49.47%. This performance highlights CION’s ability to capitalize on current market conditions and execute its strategic initiatives effectively.

Market Reaction

Following the earnings announcement, CION’s stock price increased by 6.25% in pre-market trading, reaching $9.69. This movement reflects investor confidence in the company’s strong financial performance and strategic direction. The stock’s rise comes as part of a broader trend of positive market sentiment in the private debt sector.

Outlook & Guidance

CION’s management remains optimistic about future growth, citing a robust investment pipeline and increased M&A activity. The company plans to continue focusing on selective investments and monetizing equity positions for growth potential. The guidance for future quarters indicates steady EPS forecasts of $0.34 to $0.35, with revenue projections slightly below current levels, suggesting cautious optimism.

Executive Commentary

Michael Reisner, Co-CEO, stated, "We believe that this was a strong quarter for CION and a reinforcement of our differentiated strategy." Gregg Bresner, President and CIO, emphasized the portfolio’s defensive nature, noting the low non-accrual rate and strong underlying company performance.

Risks and Challenges

• Competitive private debt market with lower coupon spreads.
• Potential macroeconomic pressures impacting investment returns.
• Risk of increased non-accrual rates if economic conditions worsen.
• Dependency on maintaining a robust investment pipeline.
• Fluctuations in interest rates affecting debt investment yields.

Q&A

During the earnings call, analysts inquired about the breakdown of interest income and the structured nature of pick income. Management highlighted the strength of the investment pipeline and traditional middle-market spreads, indicating confidence in sustaining growth.

CION Investment Corporation’s Q3 2025 results underscore its strategic focus and operational resilience, positioning the company well for future challenges and opportunities in the competitive private debt market.

Full transcript - Cion Investment Corp (CION) Q3 2025:

Conference Operator: Greetings. Welcome to CION Investment Corporation’s third-quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Charles Arestia, Managing Director and Head of Investor Relations. Thank you. You may begin.

Charles Arestia, Managing Director and Head of Investor Relations, CION Investment Corporation: Good morning, and welcome to CION Investment Corporation’s third-quarter 2025 earnings conference call. An earnings press release was distributed earlier this morning before market open. A copy of the release, along with the supplemental earnings presentation, is available on the company’s website at www.CIONBDC.com and in the Investor Resources section. It should be reviewed in conjunction with the company’s Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today’s conference call may contain forward-looking statements, which are not guarantees of future performance or results, and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company’s filings with the SEC.

Joining me on today’s call will be Michael Reisner, CION Investment Corporation’s Co-Chief Executive Officer, Gregg Bresner, President and Chief Investment Officer, and Keith Franz, Chief Financial Officer. With that, I would like to now turn the call over to Michael Reisner. Please go ahead, Michael.

Michael Reisner, Co-Chief Executive Officer, CION Investment Corporation: Thank you, Charlie, and good morning, everyone. Overall, we reported a strong third quarter with continued NAV appreciation and significant quarterly earnings. We reported $0.74 a share in net investment income for the third quarter, driven by robust transaction activity involving 20 of our portfolio companies, with several fee events, new investments, and repayments. As in past quarters, increased transaction activity tends to translate into higher earning quarters through increased transaction-related fees and other yield enhancement measures such as MOEX, exit fees, and call protection. During the third quarter, we realized significant transaction-related accretion related to a portfolio company that is part of our opportunistic strategy. As we discussed on our prior call, we expected this transaction to close in the third quarter, which contributed meaningfully to our net investment income.

Excluding the income from this transaction, we still would have covered our base dividend for the quarter, which we believe reflects the ongoing earnings power of our portfolio. Gregg will discuss this transaction in greater detail later on during the call, but I want to reiterate how we view our opportunistic strategy as a differentiated component of our overall earnings potential. While these contributions can appear episodically, we consider these potential earnings to be a strategic component of our portfolio as we manage the business and the dividend over the longer term. We appreciate that the timing of these contributions can be difficult to predict, which is why we provided the additional context on our prior earnings call. Going forward, we plan to provide comparable guidance on any similar anticipated transactional income to help manage investor expectations in the short term, should conditions allow.

As we have mentioned previously, we believe the volatility that these potential returns create tends to skew meaningfully to the upside versus consensus expectations and thus should be evaluated on a longer-term perspective. Our net asset value increased 2.5% quarter over quarter to $14.86, up from $14.50 in the prior quarter, driven largely by fair value increases in our equity portfolio, with significant increases in Longview Power and Palmetto Solar. Following the upsize of our share repurchase program announced in the prior quarter, we were able to take advantage of a meaningful sector-wide sell-off in the BDC space in September to repurchase our shares in the open market, which remains accretive to NAV. Overall, we repurchased approximately 330,000 shares at an average price of $9.86 per share during the quarter and have continued repurchasing shares in the fourth quarter.

So far, in the fourth quarter through last week, we have repurchased approximately 325,000 shares at an average price of $9.33 per share. The largest contributor to our quarterly NAV growth was Longview Power, which continues to see tailwinds from stronger fundamental performance and broader sector growth from AI-driven digital infrastructure demand. Longview is now our largest equity position, and we are pleased with the underlying asset performance so far. Looking ahead, we believe successful monetization of our equity positions will be a significant driver of the growth potential for our stock, and we are encouraged by recent trends on that front. Despite broader headlines about problematic loans in the credit space, we believe our portfolio continues to perform well.

Underlying LTM-adjusted EBITDA growth trends at our portfolio companies in our debt portfolio remain in the mid to high single digits, and our portfolio non-accruals remain relatively low at 1.75% of the portfolio at fair value. We added two names to non-accrual status this quarter, including a relatively small position in one of our very few second lien holdings. Following our quarterly review process, we downgraded three loans, including the two new non-accruals I just mentioned, partially offset by upgrading one loan that was subsequently repaid at par at quarter end. Overall, investments risk-rated four or five comprise approximately 2.4% of the portfolio at fair value. I’m also excited to announce today a shift in our timing of paying base distributions to our shareholders beginning in January 2026. We will be converting to paying base distributions from quarterly to monthly.

We are pleased with the continued performance of our portfolio and believe that shareholders will appreciate the increased frequency of our base distributions going forward. We have also declared a base distribution of $0.36 per share for the fourth quarter of 2025, the same amount as the third quarter, and Keith will discuss this in more detail. In summary, we believe that this was a strong quarter for CION and a reinforcement of our differentiated strategy, which pairs traditional first lien-focused direct lending with an opportunistic capability to enhance overall returns over the longer term. We have seen a noticeable pickup in repayment activity in recent quarters, which allows us to redeploy into our active pipeline and allows us to recapture incremental fee income as the portfolio turns over. I’m especially proud of CION’s performance amidst a highly competitive operating environment.

There is certainly no shortage of press out there today on the headwinds of spread compression, looser lender protections, and credit concerns driven by recent high-profile bankruptcies. We have no direct exposure to these names or sectors. We believe that our results today validate the diligent work of our team in continuing to source and execute on differentiated opportunities in a challenging environment. With that, I will now turn the call over to Gregg to discuss our portfolio and investment activity during the quarter.

Gregg Bresner, President and Chief Investment Officer, CION Investment Corporation: Thank you, Michael, and good morning, everyone. We’ve remained highly selective with new portfolio company investments in Q3 as we were highly active and focused on transaction opportunities within our portfolio companies. We were also effectively at full investment during most of the quarter and worked to maintain our targeted net leverage range of 1.25-1.3 times while simultaneously balancing the timing of expected investment pipeline investments versus repayment amounts. Most of our exiting repayments occurred towards the end of the quarter. 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 in the market.

As Michael discussed in his remarks, market conditions continued to rebound in Q3 as stronger economic indicators and reduced concerns regarding tariffs have boosted overall economic sentiment in equity markets. We focused our Q3 activities on incremental opportunities with our own portfolio companies as we had significant transaction and fee events with over 20 of our portfolio companies this quarter. 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 yields for our funded first lien investments for the quarter based on our investment cost were the equivalent of SOFR plus 7% for our direct strategy and SOFR plus 14% for our opportunistic strategy investments.

As we discussed in previous quarters, the majority of our annual pick income is strategically derived from highly structured first lien investments or where pick income is incremental to our cash coupon. Together, these categories represented approximately 71% of our total pick investments in Q3. Approximately 67% of our pick investments are in portfolio companies risk-rated either one or two, and 98% risk-rated three or better. As a result, we believe this pick income may not compare to restructured pick driven by a deterioration in credit. Turning now to our Q3 investment and portfolio activity. Our Q3 investment activity consisted of a co-lead investment in one new portfolio company, Metric, and incremental add-on investments and secondary purchases in existing portfolio companies, including Abbott & Young, Senix, CommunityTree Services, David’s Bridal, Invisible Boats, INW, ID Hill, LabGear, Juice Plus, Precision Medical, StatenMed, and Tactical Air Support.

During Q3, we made a total of approximately $73 million in investment commitments across one new and 12 existing portfolio companies, of which $65 million was funded. We also funded a total of $8 million of previously unfunded commitments. We had sales and repayments totaling $151 million for the quarter, which consisted of the full repayment of the first lien loans for American Family Care, Health E-commerce, H.W. Lochner, Key Impact, LeMonds, Nova Compression, and Rogers Mechanical. As a result of all these activities, our net funded investments decreased by approximately $69 million during the quarter. As Michael referenced, our NAV increase during the quarter was driven primarily by net increase 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.

Four notable portfolio companies for the quarter were Longview Power, Palmetto Solar, Juice Plus, and Anthem Sports. The value of our equity investments in Longview Power and Palmetto Solar increased due to the strong fundamental performance and projected financial outlook for these companies. As Michael mentioned, CION co-led the consensual restructuring and refinancing of Juice Plus during the quarter, which resulted in significant realized earnings for CION and repositioned Juice Plus to fuel product growth and strategic investments. Our investment in Juice Plus represents an illustrative example of our opportunistic first lien investment strategy, where we acquire lightly syndicated first lien loan tranches in quality companies at significant discounts to par due to technical reasons where we expect to have active roles in the processes that drive the refinancing or restructuring of the investments.

Historically, we have been able to realize healthy earnings on our first lien restructured and recapitalized transactions, as our realized weighted average total recoveries have been in excess of the amortized cost of these investments at the time of the restructuring. Additional examples include our investments in Longview Power, Yak Mat, Heritage Power, and Dayton Superior. We experienced a mark-to-market decline in our first lien debt investments in Anthem Sports, which were driven primarily by the less-than-expected ramping of their revenue for the quarter. The company continues to transition from a subscription base to an advertising-driven revenue model, as in the process of integrating a recent strategic acquisition completed in the second quarter. From a portfolio credit perspective, our non-accruals increased from 1.3% of fair value in Q2 to 1.75% in the third quarter.

This increase was driven by the addition of two new names to non-accrual: our first lien investment in Trademark Global and second lien investment in Aspira. Trademark Global’s operations have been materially impacted by tariffs in 2025 as the company continues to diversify its sourcing away from China. While the company is executing a comprehensive plan to rebuild its earnings, we have placed our non-accrual and will reassess based on the company’s execution of that plan. Aspira is rolling out a new generation of subscription products to its customers, which has impacted short-term performance. During the quarter, we sold our second lien investment, Securus, which removed the name from non-accrual. On an absolute basis, non-accruals continue to be 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 approximately 80% in first lien investments. Approximately 98% of our portfolio remains 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 or have seen increased risk since the initial asset purchase, decreased from approximately 11.6% in Q2 to 10.4% in Q3. I’ll now turn the call over to Keith.

Keith Franz, Chief Financial Officer, CION Investment Corporation: Okay. Thank you, Gregg, and good morning, everyone. During the third quarter, net investment income was $38.6 million, or $0.74 per share, compared to $16.9 million, or $0.32 per share, reported in the second quarter. Total investment income was $78.7 million during the third quarter, as compared to $52.2 million reported during the second quarter. This is an increase of $26.5 million, or an increase of about 51% quarter over quarter. The increase in total investment income was driven primarily by higher interest income earned as a result of certain investments being restructured and other yield-enhancing prepayment fees recorded during the quarter, as well as higher transaction fees earned from origination and amendment activity when compared to the prior quarter. On the expense side, total operating expenses were $40.1 million, compared to $35.3 million reported in the second quarter.

The increase in operating expenses was primarily driven by higher advisory fees due to higher investment income earned during the quarter. At September 30, we had total assets of approximately $1.9 billion and total equity, or net assets, of $773 million, with total debt outstanding of about $1.1 billion and 52 million shares outstanding. Our portfolio at fair value ended the quarter at $1.7 billion, and the weighted average yield on our debt and other income-producing investments at amortized cost was 10.9% at September 30. Our pick income for the third quarter was largely impacted by one of our portfolio companies in connection with its amended loan facility. The amount capitalized was about $5 million for the quarter, and excluding this transaction, our pick as a percentage of total income for the third quarter would have been lower and in the mid-teens level.

At September 30th, our NAV was $14.86 per share, as compared to $14.50 per share at the end of June. The increase of 36 cents per share, or 2.5%, was due to mark-to-market price increases in our portfolio, mostly due to price increases from our equity book and the creative nature of a share repurchase program during the quarter. We ended the third 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 $105 million in cash and short-term investments and another $100 million available under our credit facilities to further finance our investment pipeline and continue to support our existing portfolio companies.

At September 30th, we continue to have a healthy debt mix, with about 63% in unsecured debt and 37% in senior secured bank debt. About 75% of our debt capital is in floating rate, which aligns well and creates a natural hedge with our mostly floating rate investment portfolio. Our well-diversified debt structure is focused on unsecured debt in order to maximize our balance sheet flexibility and, at the same time, creates a strong buffer for our financial covenants. At the end of the quarter, our net debt to equity ratio decreased to 1.28 times from 1.39 times at the end of June, and the weighted average cost of our debt capital was about 7.5%, which is unchanged from the second quarter. We currently manage our portfolio and leverage levels on a net of cash basis, as all of our outstanding debt is currently non-callable and at their minimums.

Now, turning to distributions, during the third quarter, we paid a base distribution to our shareholders of $0.36 per share, which is the same as the second quarter distribution. The trailing 12-month distribution yield through the third quarter, based on the average NAV, was about 10%. The trailing 12-month distribution yield, based on the quarter-end market price, was about 15.7%. As announced this morning, we declared our fourth quarter base distribution of $0.36 per share, which is the same as the third quarter. The fourth quarter base distribution will be paid on December 15th to shareholders of record as of December 1st. Finally, we also announced this morning that we will be changing the timing of paying base distributions to our shareholders from quarterly to monthly, beginning in January 2026, to better align with our shareholder base.

Monthly base distributions will continue to be declared quarterly in advance. Okay. With that, I will now turn the call back to the operator who will open the line for questions.

Conference Operator: Thank you. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. Our first question is from Eric Zwick with Lucy Capital Markets. Please proceed.

Eric Zwick, Analyst, Lucy Capital Markets: Thank you. Good morning. First question may be for Keith, and I appreciate all of the commentary kind of walking through the puts and takes there and the interest income for the quarter. Curious if you could kind of break it down either in terms of dollar terms or percentage terms. Of that $51 million, what came from kind of regular ongoing interest payments, and what was more from the periodic and non-recurring events?

Keith Franz, Chief Financial Officer, CION Investment Corporation: Yeah. I would think that on a baseline basis, we kind of had interest income similar to what we recorded in Q2, maybe slightly up, and then the rest of it came from the restructured investments that we experienced during the quarter.

Eric Zwick, Analyst, Lucy Capital Markets: Okay. That’s helpful. Maybe a similar line of questioning on the pick income in the quarter, you noted the $5 million of capitalized cost. That was more one-time in nature. Is that the correct interpretation, that $5 million?

Keith Franz, Chief Financial Officer, CION Investment Corporation: Yeah. I do not know if I would necessarily use that vernacular, but yes, that was a pick event that occurred. Uniquely in this quarter.

Eric Zwick, Analyst, Lucy Capital Markets: Okay. And then the remaining, call it $12 million or so, could you provide a breakout of that part, what is structured versus kind of credit-related? Because I know you’ve got a fair amount that’s structured by design.

Keith Franz, Chief Financial Officer, CION Investment Corporation: Yeah. No different than the pool that Gregg had mentioned on his comments that the majority of that is structured.

Eric Zwick, Analyst, Lucy Capital Markets: Got it. Okay. Thanks. Just curious, as you seem fairly optimistic about the originations outlook, just curious if you could provide any commentary on the pipeline in terms of the size relative to maybe three months ago, and also just the quality, what you’re seeing in terms of structure and yield as you look forward to future activity.

Gregg Bresner, President and Chief Investment Officer, CION Investment Corporation: Hi, Eric. It’s Gregg. Definitely more robust than we’ve seen this year. More activity. It’s broader based. There’s definitely been a pickup in M&A, which is different from the first two quarters. I would say in terms of spreads and things like that, pretty consistent with what we’ve done in the past. I would say we’ve definitely what I would call traditional middle-market-type spreads.

Eric Zwick, Analyst, Lucy Capital Markets: Excellent. Thank you. That’s all for me right now. Thanks for taking my questions.

Keith Franz, Chief Financial Officer, CION Investment Corporation: Thank you.

Conference Operator: This will now conclude our question-and-answer section. I would like to turn the call back over to Michael Reisner for closing remarks.

Michael Reisner, Co-Chief Executive Officer, CION Investment Corporation: We appreciate everyone taking time out of their day to join us, and we look forward to communicating with you early next year. Thank you, everyone. Take care.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect our lines at this time, and thank you for your participation.

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