Earnings call transcript: WhiteHorse Finance Q3 2025 misses expectations

WhiteHorse Finance reported its third-quarter 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company’s EPS came in at $0.263, falling short of the expected $0.29, while revenue reached $17.69 million, missing the forecasted $18.39 million. Following the announcement, WhiteHorse Finance’s stock price dropped by 6.26%, closing at $6.65, reflecting investor concerns over the earnings miss and broader market conditions.

Key Takeaways

• WhiteHorse Finance reported a Q3 2025 EPS of $0.263, missing forecasts.
• Revenue for the quarter was $17.69 million, below expectations.
• Stock price declined by 6.26% following the earnings release.
• Net Asset Value per share decreased by 3.6% from the prior quarter.
• The company announced a $15 million share buyback program.

Company Performance

WhiteHorse Finance’s performance in Q3 2025 showed some challenges, with both EPS and revenue missing analyst expectations. The company’s net investment income was $6.1 million, a decrease from $6.6 million in the previous quarter. The net asset value (NAV) per share also saw a decline, dropping 3.6% from the prior quarter to $11.41. Despite these setbacks, the company continues to focus on strategic initiatives, including a share buyback program and restructuring efforts.

Financial Highlights

• Revenue: $17.69 million, below the forecast of $18.39 million.
• Earnings per share: $0.263, missing the expected $0.29.
• Net Asset Value per share: $11.41, a 3.6% decrease from the prior quarter.
• Net realized and unrealized losses: $6.7 million.

Earnings vs. Forecast

WhiteHorse Finance’s Q3 2025 EPS of $0.263 came in below the forecasted $0.29, representing a negative surprise of 9.31%. Revenue also fell short, coming in at $17.69 million compared to the anticipated $18.39 million, a miss of 3.81%. This marks a deviation from previous quarters where the company had met or exceeded expectations, raising concerns about its ability to navigate current market conditions.

Market Reaction

Following the earnings announcement, WhiteHorse Finance’s stock experienced a decline of 6.26%, closing at $6.65. This drop reflects investor disappointment over the earnings miss and concerns about the company’s future performance. The stock’s current price is near its 52-week low of $6.39, highlighting the challenges faced by the company in the current economic climate.

Outlook & Guidance

Looking ahead, WhiteHorse Finance anticipates continued market spread compression and is focusing on opportunities in the non-sponsor market. The company is also considering potential supplemental distributions based on earnings and is preparing for possible interest rate cuts. These strategic moves aim to stabilize performance and enhance shareholder value.

Executive Commentary

Stuart Aronson, CEO, emphasized the company’s long-term strategy, stating, "We set that [dividend] at a level that we believe we can earn on a quarterly basis reliably." He also highlighted the ongoing restructuring efforts, noting, "The turnaround of those credits, for the most part, is a multi-year effort." Aronson expressed confidence in the share buyback program, describing it as "highly accretive for shareholders."

Risks and Challenges

• Market volatility and economic uncertainty could impact future earnings.
• Continued spread compression may affect profitability.
• Restructuring efforts may take longer than anticipated.
• Competition in the lending market remains intense.
• Potential interest rate fluctuations could influence financial performance.

Q&A

During the earnings call, analysts inquired about the dividend reset and its long-term implications. The management reiterated that the reset was based on current market conditions and aimed at sustainable earnings. Questions also focused on the share buyback program, with executives highlighting its potential to enhance shareholder value. Concerns about the non-sponsor market’s performance were addressed, with management expressing confidence in its stability and growth prospects.

Full transcript - WhiteHorse Finance (WHF) Q3 2025:

Chloe, Conference Operator: Good afternoon. My name is Chloe, and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Q3 2024 earnings conference call. Our hosts for today’s call are Stuart Aronson, Chief Executive Officer, and Joyson Thomas, Chief Financial Officer. Today’s call is being recorded and will be made available for replay beginning at 4:00 P.M. Eastern Time. The replay dial-in number is 402-220-2572. No passcode required. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press Star 1 on your telephone keypad. If you wish to remove yourself from the queue, press Star 2. It is now my pleasure to turn the floor over to Robert Brinberg of Rosen Company. Please go ahead.

Robert Brinberg, Rosen Company Representative, Rosen Company: Thank you, Chloe, and thank you, everyone, for joining us today to discuss WhiteHorse Finance’s Q3 2025 earnings results. Before we begin, I’d like to remind everyone that certain statements, which are not based on historical facts made during this call, including any statements relating to financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. WhiteHorse Finance assumes no obligation or responsibility to update any forward-looking statements. Today’s speakers may refer to material from the WhiteHorse Finance Q3 2025 earnings presentation, which was posted on our website this morning. With that, allow me to introduce WhiteHorse Finance’s CEO, Stuart Aronson. Stuart, you may begin.

Stuart Aronson, Chief Executive Officer, WhiteHorse Finance: Thank you, Rob, and good afternoon, everybody. Thank you for joining us today. As you’re aware, we issued our earnings this morning before market open, and I hope you’ve had a chance to review our results for the period ending September 30, 2025, which can also be found on our website. On today’s call, I will begin by addressing our Q3 results and current market conditions. Joyson Thomas, our Chief Financial Officer, will then discuss our performance in greater detail, after which we will open the floor for questions. Our results for Q3 of 2025 were disappointing and reflect the onset of interest rate cuts, continued pressure on market spreads, as well as the impact of material markdowns on some credits that we have previously discussed.

Q3 GAAP net investment income and core NII was $6.1 million, or $0.263 per share, compared with Q2 GAAP and core NII of $6.6 million, or $0.282 per share. NAV per share at the end of Q3 was $11.41, representing approximately a 3.6% decrease from the prior quarter. In addition to the approximate $0.12 shortfall in NII coverage of our Q3-based distribution, NAV per share was also impacted by net realized and unrealized losses in our portfolio, totaling $6.7 million, or approximately $0.29 per share, which I’ll discuss later in the call. As a result of these earnings and current market conditions, I have three important announcements.

First, given the current earnings power of the BDC, as well as our expectations for lower interest rates and continued spread compression in challenging market conditions, our Board of Directors has taken the prudent measure to reset our quarterly-based distribution to $0.25 per share. This adjusted distribution rate represents an implied 8.8% annualized yield based on the company’s ending NAV per share as of the end of Q3. This was a difficult but necessary decision. Ultimately, we believe the reset puts us in a better position to earn our base distribution going forward, given management’s expected earnings power of the BDC, future base rate movements, as well as current market conditions.

We will continue our distribution policy framework that was previously announced during our Q1 2023 earnings call on May 9, 2023, where the company intends to distribute its base distribution as well as make potential supplemental distributions above the base level in the future pursuant to this distribution policy. To the extent our non-accrual and other troubled situations in our portfolio result in recoveries, or if current market conditions improve and/or base rates increase, and any of these factors lead to additional earnings, we will be prepared to share those incremental earnings with investors in the form of supplemental or special distributions. Joyson will provide a refresher on how our supplemental distribution policy gets calculated when he speaks in a little while.

Second, on the big topics, as a result of recent disappointing results and as a part of our ongoing commitment to align interests of the advisor with those of our shareholders, the advisor has voluntarily agreed to reduce the incentive fee on net investment income from its stated annual rate of 20% to 17.5% for the next two fiscal quarters ending December 31, 2025, and March 31, 2026, respectively. This temporary 2.5-point reduction in our income-based incentive fee will provide additional financial support for our quarterly distributions to shareholders. The advisor may extend this voluntary reduction; however, the duration and extent of future reductions are uncertain and will be subject to ongoing discussions with the board. Finally, given the discount of the company’s stock price relative to its book value, the board has approved a share buyback program of up to $15 million.

Under the share repurchase program, the company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time at the then current market prices at the discretion of WhiteHorse Finance’s management team. The company’s current share price level implies a discount to its current book value of more than 40%, which we believe will result in very accretive share repurchases. Turning now to portfolio activity, we had gross deployments of $19.3 million in Q3, which was more than offset by elevated repayments and sales of $50.5 million, resulting in net repayments of $31.2 million. Gross capital deployments consisted of two new originations totaling $14.3 million, and the remaining amounts were deployed to fund two add-ons to existing investments. In addition, there was $500,000 in net fundings made on revolver commitments.

Our new originations in Q3 included one non-sponsor and one sponsor deal at an average leverage of approximately 3.5 times EBITDA. All of our Q3 deals were first lien loans at an average spread of 612 basis points. Total repayments and sales were driven by complete or partial realizations in five portfolio positions, including Barbecue Guys, Lab Logistics, Power Plant Services, Coastal TV, and Ross Simon. At the end of Q3, 99.2% of our debt portfolio was first lien, senior secured, and our portfolio ownership mix was approximately 65% sponsor and 35% non-sponsor. The weighted average effective yield on our income-producing debt investments decreased to 11.6% as of the end of Q3, compared to 11.9% in Q2, mainly due to lower spreads and lower base rates.

The weighted average effective yield on our overall portfolio also decreased slightly to 9.5% at the end of Q3, compared to approximately 9.8% at the end of Q2. During the quarter, the BDC transferred one new deal and four existing investments to the STRSJV. At the end of Q3, the STRSJV portfolio had an aggregate fair value of $341.5 million and an average effective yield of 10.3%, compared with 10.6% from Q2. We continue to successfully utilize the STRSJV and believe WhiteHorse Finance’s equity investment in the JV continues to provide attractive returns for our shareholders. After net repayments and JV transfer activity, as well as the net realized and unrealized losses recognized during the quarter, total investments decreased from the prior quarter by $60.9 million to $568.4 million. This compares to our portfolio’s fair value of $629.3 million at the end of Q2.

During the quarter, we recognized $1.8 million in net realized losses and approximately $4.9 million of net unrealized losses for an aggregate total of $6.7 million in net realized and unrealized losses in Q3. Our mark-to-market losses were primarily driven by write-downs in Alveria, which was formerly known as Aspect Software, and in Camarillo Fitness, also formerly known as Honors Holdings. Alveria has continued to underperform and has struggled to service its existing debt levels. At the end of Q3, we marked down our position in Alveria by approximately $1.7 million based on our expectations of a multi-tiered restructuring to occur in Q4. Subsequent to Q4, a lender group, including WhiteHorse, completed a restructuring of the transaction in which we extinguished our existing debt position for cash and equity consideration equal to approximately the aggregate fair value we marked to as of the end of September 30.

Camarillo Fitness, which is the largest franchisee of Orangetheory Fitness, also continues to underperform. At the end of Q3, we marked down our position by approximately $4.4 million in the aggregate. We’re making every effort to optimize Camarillo to be well-positioned for new year sign-up period, which could give the business a boost in performance. As a partial offset to the markdowns this quarter, we were able to provide an incremental add-on to Motivational Marketing subsequent to the end of Q4 to help effectuate the merging of that portfolio company with another portfolio company. As part of the add-on, the sponsor contributed a fresh amount of additional equity cushion behind the debt. As a result, that has taken leverage of Motivational Marketing down significantly and led to a slight markup of approximately $0.7 million on that asset.

The BDC also recognized $2.1 million in realized losses, which was partially offset by a reversal of approximately $1.7 million in previously recorded unrealized losses from the restructuring of MSI Information Systems. With the restructuring of MSI, the restructured debt investments returned back to accrual status as we expected it would. Non-accrual investments now represent 2.7% of the debt portfolio at fair value, an improvement compared with 4.9% of the debt portfolio in the prior quarter. Other deals on non-accrual are likely to remain that way for some period of time. We are continuing to actively work on getting deals off non-accrual, leveraging the expertise of our five-person dedicated WhiteHorse restructuring team and the resources of HIG Capital. Aside from the credits on non-accrual, our portfolio is performing quite well.

Turning to the lending market, M&A activity has not picked up as much as the investment banks and private equity shops had hoped for, although there has been a steady trickle of improvement. There is still plenty of capital available to serve the reduced supply of new financings in the market, and the environment remains extremely competitive, particularly for companies that are non-cyclical and do not have meaningful international sales exposure. Lenders in the sponsor markets are being very aggressive, while the non-sponsor markets continue to be less competitive. In the mid-market, pricing for sponsor deals is pretty solidly in the SOFR 450-500 range, as competition has compressed spreads, and OID is typically a point to a point and a half. Lower mid-market sponsor deals are pricing in the 475-575 spread over SOFR, at least a range of that.

Leverage multiples are between four and six times, and partial PIK features are being used selectively to make cash flows work on upper mid-cap and large-cap deals. The non-sponsor market remains much less competitive and has a significant pricing premium compared to the sponsor market. We are generally seeing non-sponsor deals pricing at SOFR plus 600 and above. OID is still generally two points or higher compared to sponsor deals. Leverage levels on non-sponsor deals have been consistently lower and more stable than the sponsor-backed deals. To put the attractiveness of the non-sponsor market in context, our non-sponsor mandates are still levered only three to five and a half times, and the highest deal we have priced recently is at SOFR 650 plus a warrant.

We continue to focus significant resources on the non-sponsor market, where there are better risk returns in many cases and much less competition than what we were seeing, especially in the on-the-run sponsor market. We currently have 22 originators covering 13 regional markets. Given market conditions, these originators are primarily focused on sourcing off-the-run sponsor deals and non-sponsor deals as we look for value and good risk return in a market where there is limited deal flow and a lot of aggressiveness. Subsequent to quarter end, the BDC has closed on one new deal and one add-on investment totaling $16.2 million and had one full repayment totaling $22.2 million.

Following the net deployment activity to date in Q4, the BDC’s remaining capacity is approximately $40 million, and pro forma for several transactions that we anticipate to close in Q4 of 2025, the BDC’s capacity for new assets is approximately $20 million. At the end of Q4, the STRSJV’s remaining capacity was approximately $20 million, and pro forma for recently mandated deals to eventually be transferred in, the JV’s capacity is fully deployed. Our pipeline remains lower than normal for this time of year. We currently have six new mandates and are working on three add-ons to existing deals. Our six mandates comprise of two non-sponsor deals and four sponsor deals. While there can be no assurances that any of these deals will close, all of these credits would fit into the BDC or our JV should we elect to transact.

All of the non-sponsor mandates have pricing of 600 over SOFR or better and would be targeted to go into the BDC’s balance sheet. Several of these mandates are large and will help us with asset balances in the BDC. The sponsor mandates have pricing of 425-550 over SOFR. With that, I’ll turn the call over to Joyson for additional performance details and a review of our portfolio composition. Joyson?

Robert Brinberg, Rosen Company Representative, Rosen Company: Thanks, Stuart, and thanks everyone for joining today’s call. During the quarter, we recorded GAAP net investment income and core NII of $6.1 million or $0.263 per share. This compares with Q2 GAAP NII and core NII of $6.6 million or $0.282 per share, as well as our previously declared Q3-based distribution of $0.385 per share. Q3 fee income was only approximately $0.1 million and was lower than historical quarters due to lower amendment and prepayment fee activity. For the quarter, we reported a net decrease in net assets resulting from operations of $0.6 million. Our risk ratings during the quarter showed that approximately 81.8% of our portfolio positions either carried a one or two rating, an increase from 76.8% reported in the prior quarter.

Upgrades during the quarter included positions in Motivational Marketing and Educational Dynamics, which were both upgraded to a two, and positions in Telestream, which was upgraded to a three. As a reminder, a one rating indicates that a company has seen its risk of loss reduced relative to initial expectations, and a two rating indicates that a company is performing according to such initial expectations. Regarding the JV specifically, we continue to grow our investment. As Stuart mentioned earlier in the call, we transferred one new deal and four existing investments during Q3 to the STRSJV, totaling $24.2 million. As of September 30, 2025, the JV’s portfolio held positions in 43 portfolio companies with an aggregate fair value of $341.5 million, compared to 43 portfolio companies with an aggregate fair value of $330.2 million as of June 30, 2025.

Leverage for the JV at the end of Q3 was approximately 1.24 times compared with 1.16 times at the end of Q4. The investment in the JV continues to be accretive for the BDC’s earnings, generating a mid-teens return on equity. During Q3, income recognized from our JV investment aggregated to approximately $3.6 million, a slight increase from the $3.4 million reported in Q2. As we have noted in prior calls, the yield on our investment in the JV may fluctuate period over period as a result of a number of factors, including the timing and amount of additional capital investments, the changes in asset yields in the underlying portfolio, as well as the overall credit performance of the JV’s investment portfolio.

Turning to our balance sheet, we had cash resources of approximately $45.9 million at the end of Q3, including $36.4 million in restricted cash and $100 million of undrawn capacity under a revolving credit facility. Following elevated repayments during the quarter, we repaid in full the $40 million of unsecured notes paying 5.375% interest that were due to mature on October 20. As of September 30, 2025, the company’s asset coverage ratio for borrowed amounts, as defined by the 1940 Act, was 180.7%, which was above the minimum asset coverage ratio of 150%. Our Q3 net effective debt-to-equity ratio, after adjusting for cash on hand, was approximately 1.07 times compared with 1.22 times from the prior quarter. Before I conclude and open up the call to questions, I’d like to discuss our distribution policy. This morning, we announced that our board declared a Q4-based distribution of $0.25 per share.

To supplement Stuart’s earlier comments, I note the company still has the ability, under our existing distribution framework, to issue supplemental distributions. Each quarter, the board will utilize this framework to determine if a supplemental distribution should be made in addition to the regular base quarterly distribution. The framework the board will use to determine a supplemental distribution, if any, will be calculated as the lesser of: one, 50% of the quarter’s earnings that is in excess of the quarterly base distribution; and two, an amount that results in no more than a $0.15 per share decline in NAV over the current quarter and preceding quarter. Earnings for the purpose of measuring the excess over the quarter’s base distribution is net investment income. The NAV decline measurement is inclusive of the supplemental distribution calculated, and to be clear, is measured over the two most recently completed quarters.

We believe this formulaic supplemental distribution framework allows us to maximize distributions to our shareholders while preserving the stability of our NAV, a factor that we do believe to be an important driver of shareholder economics over time. The upcoming $0.25 distribution will be payable on January 5, 2026, to stockholders of record as of December 22, 2025. As we said previously, we will continue to evaluate our quarterly distribution both in the near and medium term based on the core earnings power of our portfolio, in addition to other relevant factors that may warrant consideration. In addition to our quarterly distribution, we elected to declare a special distribution of $0.035 per share for stockholders of record as of October 31, 2025. The distribution will be payable on December 10, 2025.

This distribution was related to undistributed taxable income that was earned last year, which would have otherwise been taxable. With that, I’ll now turn the call over to the operator for your questions. Operator.

Stuart Aronson, Chief Executive Officer, WhiteHorse Finance: Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star two. Once again, for your questions today, that is star and one. We will take our first question from Melissa Wedel with JPMorgan. Your line is open.

Melissa Wedel, Analyst, JPMorgan: Good afternoon. Thanks for taking my questions today. I wanted to start with the dividend and understand how you’re approaching it with the announcement for the 4Q level of $0.25 a share. Should we be thinking about that as the new base level, or is this going to be something that will fluctuate a little bit more quarter to quarter outside of the supplemental component?

Speaker 0: Melissa, we took a look at where interest rates are, what interest rates are supposed to do in the future, where deployments are, what the current market spreads are, and the earnings power of the BDC, given some losses on accounts that we’ve taken, both realized and unrealized losses. We came up with a sensitivity analysis that caused us to work with the board to set a new base dividend that should be a long-term dividend if our projections as to market conditions and interest rates are correct. We set that at a level that we believe we can earn on a quarterly basis reliably, even if interest rates do continue to decline in alignment with the current yield curve.

Melissa Wedel, Analyst, JPMorgan: Okay. Appreciate that. As a follow-up, I wanted to touch on the fee waiver. I’m curious about, I guess, two aspects of it: the level going to 17.5% from 20% and the two quarters for 4Q and 1Q that that will apply to. I guess the question behind both is why that level and why that time frame? Is there a longer-term consideration the board was taking under advisement? Thank you.

Speaker 0: Thank you, Melissa. The board and the manager discussed what we should do vis-à-vis providing some cushion to the earnings capability of the BDC, and it was agreed that we would waive the 2.5% amount for or forgive the 2.5% amount for the next two quarters. Then, based on the performance of the BDC going forward, the board and the manager will discuss whether additional forgiveness is warranted and appropriate. Two quarters are done, and going forward, it’ll be based on discussions between the board and the manager and linked to the results of the BDC.

Stuart Aronson, Chief Executive Officer, WhiteHorse Finance: We will take our next question from Robert Dodd with Raymond James. Your line is open.

Robert Dodd, Analyst, Raymond James: Hi, guys. Looking at the BDC and the JV, to your comments, Stuart, it sounds like you’re about to be really close to full capacity in terms of investments. Unless, obviously, there’s recoveries from some of these stressed assets. I appreciate all the color you gave us on the situation at some of these businesses. Can you give us any more thoughts on—and obviously, some of these turnarounds, they don’t happen quick. To your point, Camarillo, maybe it gets through Q1 and there’s a rebound in activity. What are your long-term realistic expectations about fair value recovery from these troubled assets? Obviously, that’s one of the tools that would potentially be reinvestable, maybe rebound the dividend, maybe give the BDC a bit more capacity. Any thoughts on what you can tell us on the real prospects there?

Speaker 0: Yeah. Robert, the deals that are on non-accrual right now, as I indicated in the prepared remarks, are likely to remain on non-accrual for at least the next 12-24 months. In a number of cases, we have taken over the management of those companies, and our five-person restructuring team works cooperatively with HIG Capital private equity operating professionals to make sure that we’re getting optimal management teams into those companies, cutting costs where appropriate, and driving growth strategies. The turnaround of those credits, for the most part, is a multi-year effort. In certain circumstances, as it regards a credit like Play Monster, we have taken it, and that was a credit where there was fraud originally, and we found out that the EBITDA of the company was actually pretty strongly negative. We have turned that company around, and the EBITDA is now positive.

We believe we have a good management team, and we’re hoping for improved results not only this year but heading into next year. That would be a good example of an account that’s heading in the right direction. In order for us to get to a markup and a cash realization, we need to continue to turn that account around more than has already occurred so far. The same is true for credits like ArcServe, which we’re still working on, and a couple of the other credits in the portfolio. In all the cases, except for Alveria and Camarillo Fitness, we’re seeing stabilization to improvement in the performance of the company. We do think it’s going to be a significant period of time, again, at least 12-24 months before those assets that are on a non-accrual come back onto accrual.

Robert Dodd, Analyst, Raymond James: Got it. Thank you. Can you give us any kind of on the track record of performance sponsor versus non-sponsor? To your point, the sponsor deals carry meaningfully higher spreads, lower leverage. Obviously, if something does go wrong, it’s kind of on you to fix it rather than the sponsor to work through the process. Can you give us any kind of—I mean, the returns are higher, but what’s the track record of the income returns are higher? The track record of outcomes between the two different deployment strategies?

Speaker 0: Robert, in general, the leverage on the non-sponsor deals is anywhere from a turn to a turn and a half lower than on the sponsor deals. Our track record historically has been that we see fewer defaults—sorry, fewer payment defaults on the non-sponsor deals. During COVID, we had a number of sponsor deals that went into payment default and needed equity support, but we did not have any non-sponsor deals that went into payment default during that COVID period. We’ve had one non-sponsor deal that has resulted in a significant loss. That was American Crafts, which is now fully resolved.

As I think through the non-accruals—and maybe Joyson, I’ll ask you to double-check me on this—but I believe all of the non-accrual accounts at this point are actually deals that were sponsor deals, and none of them currently are non-sponsor deals, which speaks to the relative strength of what we do in the non-sponsor market. And Joyson, am I right on that? Are any of the non-accrual deals non-sponsor deals?

Robert Dodd, Analyst, Raymond James: You’re right. I think if we’re including maybe non-income-producing restructured assets, Lift Brands might be one that we considered. I forgot if we considered that as a sponsor or non-sponsor deal.

Speaker 0: No, no, no. Lift Brands was a sponsor deal. That was a deal that during COVID, the private equity firm injected a significant amount of equity into turning around the company.

Robert Dodd, Analyst, Raymond James: Let me double-check on the others, and I’ll come back on that. I think that is correct then. The only other one I could think of is potentially Sklar, again, another non-income-producing or a portion of the equity, which is non-income-producing.

Speaker 0: I believe Sklar, which is non-sponsor, is on accrual. So that would not be on accrual.

Robert Dodd, Analyst, Raymond James: Yeah. So it’s not on accrual.

Speaker 0: Correct. Yeah. Sklar is also a company that we had to take control of. We have dramatically improved the performance of that credit since taking control of it. That is a credit that, if it hits its projected numbers for next year based on new customers that have been signed up and additional EBITDA we expect to be earning, that is a credit. Again, it is on accrual right now. The debt is paying interest in cash, but we own the equity, and there is potential for an equity gain upon the sale of that credit next year if we are able to hit our projected numbers.

Robert Dodd, Analyst, Raymond James: Got it. Thank you for all that detail. Appreciate it. There’s just one more if I can. On the pricing, to your point, I mean, even in the lower middle market for sponsor deals, pricing is pretty tight by historic standards. I mean, is that just—I mean, I say just—is that a consequence of more competition in terms of large market competitors coming down because there’s not enough activity at their end of the market, or is it just it’s your same long-term competitors just getting much more aggressive?

Speaker 0: It’s a really good question, Robert. The mid-market spread compression is a result, in many cases, of large market players not having enough volume and coming into the mid-market and creating additional supply of capital. In the mid-market, we’re typically seeing pricing of 450-500, and I would say that has definitely been impacted by the larger players coming down market. In the lower mid-market, we’re not really seeing the larger players, but there have been a number of new organizations that have been formed that don’t have a track record of relationships in the industry. Some of those shops are trying to buy market share by discounting price and/or doing higher leverage on deals.

The lower mid-market, where frankly there are hundreds of private equity firms operating, is a much more variable market where we are seeing pricing anywhere from 475-575, depending on how much competition there is on any given deal and given on the complexity of the credit. I do not believe that lower mid-market spreads have been significantly impacted by the large shops. Again, when I talk lower mid-market, I’m talking about EBITDA below $30 million.

Robert Dodd, Analyst, Raymond James: Got it. Thank you for the color.

Speaker 0: No problem, Robert. Thank you.

Stuart Aronson, Chief Executive Officer, WhiteHorse Finance: Once more, for your questions, that is star and one on your telephone keypad. We’ll pause a moment to allow any further questions to queue. We will take our next question from Christopher Nolan with Lattenberg Thoman. Your line is open.

Christopher Nolan, Analyst, Lattenberg Thoman: Hi. Thank you for taking my question. It really revisits the incentive fee reduction. Once we’re beyond first quarter 2026, if the EPS continues to underperform, what’s the, I guess, state of mind or headspace in terms of lowering the incentive fee or continuing it?

Speaker 0: The board of directors has provided us a perspective that the forgiveness of the incentive fee or the temporary reduction of the incentive fee is aligned with trying to make sure that we are earning the dividend. If there is underperformance in terms of core dividend earnings, I would expect that the board would take a view that they would seek additional forgiveness or additional waiver of that 2.5% for additional quarters. Six months is a significant amount of time in the market, and we all need to see what is going on with M&A volume, spreads in the marketplace, and core interest rates in terms of what the Fed is doing to have a better sense of what earnings will be out three and four quarters or more from now.

Christopher Nolan, Analyst, Lattenberg Thoman: Understood. I guess on the share repurchases, if I were to read your comments earlier, it seems like deal flow seems to be slow. Should we read into that that the company will be aggressive on share repurchases?

Speaker 0: Chris, we’re trading at a very significant discount to NAV, even off of the reduced NAV that I showed you today of $11.41. Buying back shares at levels anywhere around today’s price is highly accretive for shareholders, both in terms of NII and NAV. Given limitations in how many shares we can purchase in any given day or week, we felt a $15 million allocation made a lot of sense to recapture shareholder value if the shares did not materially trade higher. We, as a manager, are going to try to act in the interest of the shareholders and repurchase shares so long as there is a material benefit to the shareholders in doing so.

Robert Dodd, Analyst, Raymond James: Thank you.

Stuart Aronson, Chief Executive Officer, WhiteHorse Finance: It does appear there are no further questions at this time. This does conclude today’s program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.

Christopher Nolan, Analyst, Lattenberg Thoman: Thank you.

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