Thank you very much, and good morning. Welcome to SLR Investment Corp.'

s earnings call for the quarter ended June 30th, 2026. I'm joined today by my long-term partner, Bruce Spohler, Co-Chief Executive Officer, as well as Chief Financial Officer Shiraz Kajee and members of the SLR investor relations team.

Shiraz, before we begin, would you please start by covering the webcast and forward-looking statements?

Thank you, Michael. Good morning, everyone.

Would like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Investment Corp.

and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast on the events calendar in the Investors section on our website at www.slrinvestmentcorp.com.

Audio replay of this call will be made available later today, as disclosed in our August 4th earnings press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements.

Today's conference call and webcast may include forward-looking statements and projections. These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties.

Past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC.

We do not undertake to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website or call us at 212-993-1670.

At this time, I would like to turn the call back to our Chairman and Michael Gross.

Thanks, Shiraz, and again, thank you for to everyone for joining our earnings call this morning. Before we discuss our Q2 results, I'd like to spend a moment on our approach to navigating what has become a more challenging environment for direct lending.

My partner Bruce and I, as well as our partners, have been in private credit for a long time. This summer marks our 20th year managing SLRC.

Over those years, we've seen time and again that patience and discipline pay off for the long run. Importantly, over 15 years ago, we also saw the need to diversify our investment focus towards specialty lending strategies with higher barriers to entry and consistent performance across economic cycles.

Against the backdrop of a market rife with risk-taking, we view our specialty finance platform as a differentiator that enables us to successfully navigate this environment. With the retrenchment of regional banks and the experience and skillset needed to underwrite and monitor collateral, we are not seeing the level of competition in our specialty finance strategies that is that has gripped the sponsored cash flow market.

As a result, we are securing higher yields than the market levels for cash flow loans, with better structure with better structural protection and importantly, liquid collateral coverage, which we actively monitor and adjust. Nearly all of our originations last quarter were in specialty finance, and this trend is continuing in our third quarter pipeline.

Turning to our second quarter results: for the second quarter of 2026, SLRC reported net investment income, or NII, of 33 cents per share and net income of 15 cents per share. As of June 30th, the company had a net asset value per share of $18, down less than 90 basis points from the prior quarter.

The decline was primarily driven by markdown on two loans which we placed on non-accrual during the quarter, a move from zero non-accruals. Bruce will provide more detail on these.

Importantly, these are isolated situations and do not represent a systemic trend in our portfolio. At June 30th, our watch list accounts for only 2.5%, and we continue to have strong conviction in the credit quality of our portfolio companies.

Moreover, our de minimis exposure to the software industry puts us in a position of strength as a software maturity wall draw draws closer. We are concerned that many of the software loans currently outstanding, which according to KBRA represent $224 billion, or 22% of total private debt exposure, may be challenging to refinance.

This dynamic provides us with the ability to be opportunistic in other areas as a software maturity wall approaches. Meanwhile, after having been repaid at a premium to par on a software investment during Q2, our exposure to the software industry now stands at less than 1% of fair value.

Furthermore, only 2% of our gross income is derived from restructured PIK resulting from amendments. With our conservatively positioned portfolio, we are focused on attractive investment opportunities in asset-based lending.

During the second quarter, we originated $471 million of new investments across the comprehensive portfolio. This volume, weighted 98 98% to specialty finance, was 60% higher than our average gross originations since 2018.

During the second quarter, we received repayments of $431 million, for net originations of approximately $40 million, resulting in a quarter-end comprehensive portfolio of $3.2 billion. We view this level of portfolio churn favorably, as repayments typically represent successful realizations at par or better, and the associated prepayment and exit fees add a further source of income.

Based on our current pipeline, we are expecting another solid quarter of originations with a similar weighting towards specialty finance investments. With our strategic focus on specialty finance, we are executing growth strategies to expand our footprint through new hires, acquisitions, and sourcing partnerships.

We remain active in the cash flow market in our core industry, healthcare, and are ready to pivot to this asset class more broadly should market dislocation improve the opportunity set. At June 30th, including available credit facility capacity at SSLP and our specialty finance portfolio companies, SLRC had over $900 million of available capital to deploy.

Our liquidity profile and minimal watch list puts us in a position to take advantage of either stable economic conditions or softening of the economy. I'll now turn the call over back to Shiraz, our CFO, to take you through second quarter financial highlights.

Thank you, Michael. SLR Investment Corp.'

s net asset value at June 30th, 2026 was $982 million, or $18 per share, compared to $18.16 per share at March 31st, 2026. Quarter-end, SLRC's on-balance sheet investment portfolio had a fair value of approximately $2.1 billion in 79 portfolio companies across 24 industries, compared to a fair value of $2.1 billion in 99 portfolio companies across 28 industries at March 31st.

SLRC's investment portfolio continues to be funded by a combination of our multi-lender revolving credit facilities and the issuance of term debt in the unsecured debt markets to institutional investors. The company is investment grade rated by Fitch, Moody's, and DBRS, and more than 40% of the company's debt capital is comprised of unsecured debt at June 30th.

At June 30th, the company had approximately $1.16 billion of debt outstanding, with a net debt-to-equity ratio of 1.16 times, within our target range of 0.9 to 1.25 times. We have ample liquidity to fund our unfunded commitments and for future portfolio growth.

Looking forward, the company has three unsecured debt maturities of $75 million in December 2026, $135 million in January 2027, and $50 million in March 2027. We expect to continue to prudently access the debt capital markets and issue unsecured debt as and when needed.

During Q2, the company increased its revolving facility capacity by $25 million with the addition of a new lender. Total revolving commitments across our two credit facilities now totals $995 million.

Moving to the P&L: for the three months ended June 30th, gross investment income totaled $48.8 million versus $49.3 million for the three months ended March 31st. Net expenses totaled $31.1 million for the three months ended June 30th.

This compares to $31.4 million for the prior quarter. Accordingly, the company's net investment income for the three months ended June 30th totaled $17.8 million, or 33 cents per average share, in line with the prior quarter.

Below the line, the company had net unrealized losses of $9.5 million in the second quarter, versus net unrealized losses of $0.7 million for the first quarter of 2026. As a result, the company had a net increase in net assets resulting from operations of $8.3 million for the three months ended June 30th, 2026, compared to a net increase of $17.1 million for the three months ended March 31st, 2026.

Lastly, on August 4th, 2026, the board of directors declared a quarterly distribution of 31 cents per share, payable on September 25th, 2026 to holders of record as of September 11th, 2026. With that, I'll turn the call over to our Bruce, Bruce Spohler.

Thank you, Shiraz. As Michael mentioned, we are maintaining a defensive investment approach in the current uncertain investment environment.

Fixed income markets are now pricing in more rate hikes, not relief. We're therefore treating this as a lasting rise in operating interest expense, not a temporary peak.

Companies growing EBITDA organically are managing well. Those with flat or declining cash flows are seeing interest coverage erode, and prolonged high interest rates are turning manageable strain into real stress for this group.

This gap reinforces our longstanding approach at this stage of the credit cycle to prioritize asset-heavy, liquid collateral-backed lending over cash flow-dependent structures. Before I dive into our portfolio, I'd like to touch on our approach to investing during the seismic advance of AI in our world.

As a reminder, earlier this year we formed an AI committee that assesses the risk of AI disruption on potential new as well as existing investments. Regarding our view of AI as it relates to cash flow investments specifically, we have historically avoided software lending given questions about the long-term durability of software IP, a decision that is currently paying off.

We do, however, prefer the more defensible IP profile of late-stage life science companies, where value requires years of clinical and regulatory validation to create. In healthcare services and physician practice management companies, we look for AI that solves real operational problems.

For example, unifying fragmented legacy billing systems into standardized claims processes, cutting administrative friction and errors, and speeding up collections. We specifically assess how AI makes a business more resilient to disruption, not just more efficient.

Now let me turn to the portfolio. At quarter-end, on a fair value basis, the comprehensive portfolio consisted of approximately $3.2 billion, with an average exposure of $3.7 million.

Measured at fair value, approximately 98% of the portfolio consisted of senior secured loans, with approximately 96% invested in first lien loans. 2% of our loan portfolio invested in second lien investments consists entirely of asset-based loans which contain underlying borrowing bases, with no second lien cash flow loans.

At quarter-end, over 86% of the comprehensive portfolio is comprised of specialty finance investments. At June 30th, our weighted average asset-level yield was 11.1%, consistent with the prior quarter.

Overall, we believe our portfolio has been less impacted by changes in base rates and spread compression compared to the broader peer group, due to our higher allocation to specialty finance loans. As Michael mentioned, during the second quarter we increased our non-accrual loans from zero to two investments.

Now let me just briefly address both of those. We have a cash flow loan to RQM Corporation, a contact research organization and consulting firm that focuses on medical devices and diagnostics.

After strong performance in our initial years following our $26 million investment, the company faced challenges following a change in regulations that delayed the market need for their services. We are focused on maximizing our returns and are currently in constructive dialogue with the stakeholders, and will share updates as we move forward.

Now let me turn to our second non-accrual: OmniGuide Holdings, which is a manufacturer of advanced surgical lasers and proprietary single-use fibers used predominantly for urological indications. They have been adversely affected by operational and supply chain issues.

In anticipation of liquidity challenges, we placed the $34 million par value loan on non-accrual. We have engaged third parties to assist us with the operational challenges and are committed to maximizing our value.

Outside of these two investments, which accounts for the majority of our watch list, our portfolio continues to perform well. At quarter-end, the weighted average investment risk rating was under two, based on our 1 to 4 risk rating scale, with 1 representing the least amount of risk.

97.5% of the portfolio is rated 2 or higher at quarter-end. Our portfolio companies continue to exhibit healthy business fundamentals and perform at or above our expectations.

In addition, only 2% of our gross income is derived from PIK interest resulting from amendments. Now let me touch on each of our four investment verticals.

Let me start with asset-based lending. Direct corporate ABL remains a highly fragmented industry and contains high barriers to entry through the complexity of sourcing, underwriting, collateral monitoring, and active borrowing base management.

Commercial banks have continued to retreat from this market. Due to the significant investment in experienced human capital as well as infrastructure required for this strategy, competition from other private credit firms also remains limited.

Our priority remains a first lien position on liquid current assets, predominantly accounts receivable and inventory, which has historically minimized our risk exposure. At quarter-end, our ABL portfolio totaled just over $1.4 billion across 246 borrowers, representing over 43% of our comprehensive portfolio.

For the first quarter, we originated just over $280 million of new ABL investments and had $246 million of repayments. Weighted average asset-level yield on this portfolio was 12%, compared to 12.3% the prior quarter.

We're seeing increased activity across our ABL platform. See an uptick post a very quiet first quarter from both sponsor finance clients as well as entrepreneurs who are seeking incremental liquidity through ABL solutions for their portfolio companies.

PE firms are increasingly using ABL structures to finance LBOs, strategic acquisitions, as well as turnaround asset purchases. In particular, we're seeing traction with healthcare sponsors given our understanding of complex healthcare accounts receivable.

SLR and its affiliates have been financing healthcare receivables for over 30 years and understand the reimbursement nuances of accounts receivable typically used for ABL facilities in the healthcare industry. This kind of asset-level diligence is often what separates a lender willing to structure around complexity from one that simply lacks the historical context of healthcare accounts receivable collectibility.

Based on our third quarter pipeline and longer-term outlook, we expect to produce net portfolio growth across our ABL strategy this year. Turning to our asset-based lending strategic initiatives: our advisor recently established a sourcing arrangement for ABL investments with a large US commercial bank that spans many of our ABL strategies.

This partnership broadens our origination reach. We're optimistic that this initiative will enhance our investment sourcing funnel and support portfolio growth in attractive ABL investments.

We're currently in discussions for other partnership opportunities. We're also continuing to evaluate strategic acquisitions, such as portfolio and business acquisitions, and we continue to expand our ABL origination team.

Now let me touch on equipment finance. At quarter-end, this portfolio totaled just over $1.1 billion, representing 34% of our comprehensive portfolio.

Was diversified across 580 borrowers. Credit profile of this portfolio was stable quarter-over-quarter.

During the second quarter, we originated $154 million of new assets, with the majority of those investments coming from our business that provides leases predominantly to investment-grade corporate borrowers for mission-critical equipment. During the quarter, we had repayments of just under $140 million.

Weighted average asset-level yield for this portfolio was 10.7%. Our equipment finance pipeline has expanded.

Additionally, we're continuing to see demand from existing borrowers who are looking to extend their existing lease on equipment rather than buy new equipment at higher, tariff-adjusted prices. Now let me turn to life sciences.

Life science industry and the corresponding capital market conditions continued to recover in the first half of '26. The opportunity set for late-stage life science loans is improving.

With greater market activity, our pipeline has increased. That said, we're holding firm on our rigorous underwriting standards in the face of an environment where new competitors are winning transactions by offering terms and structures that don't align with our approach to long-term capital preservation.

During the second quarter, we had originations of $24 million and repayments of $11 million. At quarter-end, portfolio had $190 million senior secured investments across six borrowers, representing just under 6% of our total portfolio.

This is down from a peak of 15% in 2020. With our recently expanded life science finance team and product offering, we have been seeing a broader set of opportunities.

We're issuing term sheets that combine our capabilities, such as a traditional first lien term loan with an asset-based revolver for working capital needs. We believe these efforts to provide full financing solutions should generate portfolio growth over the coming quarters, which will eventually increase our portfolio churn as well as our fee income.

Finally, let me turn to cash flow lending. With greater competition in the sponsor finance market, we're taking an opportunistic approach to this asset class.

Our broad platform expertise in healthcare enables us to continue to serve as a valuable cash flow lend loan provider to companies in the healthcare industry. Broadly, cash flow activity continues to be muted.

Sponsors have been focused on working on portfolio companies, as well as amend-and-extend executions with 2021 maturity wall approaching. Activity in healthcare is starting to pick up, as these companies have suffered less enterprise value degradation than many other industries.

Many private credit lenders have pulled back from healthcare, as they may lack the expertise, which gives us an even larger opportunity set and the ability to be more discerning. Quarter-end, our sponsored cash flow portfolio was $450 million across 26 borrowers, including our loans held in the SSLP.

Following the repayment of a software investment at a premium to par in the second quarter, our direct software exposure accounts for less than 1% of our total portfolio. Weighted average EBITDA of the cash flow portfolio was approximately $116 million.

100% of our cash flow investments are first lien structures, and the portfolio had a weighted average loan-to-value of approximately 39%. Our underlying borrower fundamentals remain solid, with growth in average year-over-year revenue and EBITDA.

The average interest coverage ratio for our sponsor finance cash flow loans was 2.25 times at quarter-end. During the second quarter, we made investments of $9 million in first lien cash flow loans and had repayments of approximately $34 million.

Weighted average yield on this portfolio was 9.6%, compared to 9.9% at the end of the first quarter. Now let me touch on our SSLP.

During the quarter, SSLP invested just over $6.5 million and had $12 million of repayments. Net leverage was .9 times.

In the second quarter, we earned income of $1.4 million from the SSLP, representing an annualized yield of 11.8%, compared to 12.2% in the prior quarter. At quarter-end, SSLP had $55 million of undrawn capacity, and we expect to continue to grow this portfolio opportunistically as conditions in the cash flow market warrant.

Now let me just turn to originations. Regarding our outlook: specialty finance now makes up the majority of our near-term pipeline.

This is a deliberate, relative value response to the current cycle, not style drift. In our specialty finance underwriting, we focus on liquidity, quality of collateral with requirements for frequent updated appraisals, monitoring of collateral with weekly or monthly borrowing bases, and importantly, tight credit documentation.

Our processes have been refined through our team's four decades of managing collateral-based loan facilities. A multi-strategy approach built on decades across multiple cycles ensures that our capital is deployed only when the market rewards discipline.

We say this as a longtime resident of specialty finance, not a recent arrival during the current cycle. Our teams have underwritten these strategies across multiple cycles.

Capital deployment is a genuine challenge for the industry right now, with more capital chasing a narrower set of attractive opportunities than at almost any point in recent memory. Our diversified platform and broad solution set positions us to take advantage of opportunities as they evolve across our investment strategies.

This combination of flexibility, experience, and resources gives us the confidence during this more uncertain stage of the credit cycle. Now let me turn back to Michael.

Thank you, Bruce. To sum up, our strategy for navigating the challenges facing private credit as the industry matures is centered on our unique specialty finance platform.

This can most clearly viewed via the lens of our stability in our net asset value per share over the last three years, following what was labeled the golden period of private credit, resulting in a total economic return that has exceeded the average of externally managed BDC peers. The solid financial health of our portfolio provides us with the foundation to focus on growing our portfolio of interest-earning assets and therefore earnings power.

We're advancing several growth initiatives that we expect will lift net investment income over the next year. We're continuing to expand our ABL personnel and infrastructure to deepen origination reach, and adding life science investment professionals to broaden our capabilities.

The collaboration between our life science and ABL teams has resulted in multiple investments combining term loans with working capital ABL facilities. In addition, we are evaluating an active pipeline of specialty finance acquisition opportunities.

Our entire team at SLR owns over 8% of the company's stock today, as a significant percentage of the annual incentive compensation invests in SLRC stock each year, including purchases that took place in the first quarter of this year. We thank you all again for your time today, given how busy this is with BDC earnings season.

Operator, would you please open the line for questions?

Hey, good morning, thank you. Just in terms of ROEs on incremental new investment activity, could you frame out how you're seeing that given the mix as you've discussed on the pipeline?

Maybe discuss a little bit of how that perhaps shifts the leverage profile, given the durable nature of specialty finance loans?

I think the yield that you're seeing across our underlying assets of around 11% continues to be a good target. We are seeing some things, as you've heard, in the cash flow portfolio opportunistically in the 9s.

We are seeing some opportunities in the 12s, but I think the 11% is a good target asset-level return that we're seeing today, aside from one's perspective on the forward base rate curve.

Okay. Then in terms of leverage, does the shift in origination mix shift your leverage profile at all to the higher end of that range or shift the range?

Yes, I think the short answer is we have been comfortable taking that leverage ratio up to the higher end of the range. It's really been the pace of repayments that has led it to be sort of stable in this, call it 1.15 area.

Our underlying comfort is extremely strong in taking that leverage higher up.

Okay. That was it for me.

Thank you.

Thank you.

Hey, guys. Thanks for taking my questions this morning.

Look, we are basically now about a year into a really bullish cycle in biotech and in life sciences. I'm curious how you guys think about that.

You talked about staffing up, but I'm curious about how that impacts both M&A, refinancing opportunities, and pricing in the sector.

Sure, great question. I think it's important to just frame our track record in life sciences as a key foundation that, together with the market conditions, encourages us to lean in on the sector.

While we did touch on the fact that we have a non-accrual in life sciences, I think it's important to note that this team has been investing with us for close to 15 years, deploying $3 billion of capital. That $3 billion of capital has generated 16% asset-level returns, with zero defaults and zero losses.

This is actually the first non-accrual they've experienced, and that is consistent with the track record they had before they joined us, having founded the business at GE Capital. I have no doubt that all of our peers would welcome that type of track record: one non-accrual over 20-plus years.

With that as a foundation, we are definitely leaning in to the market. We have added senior-level professionals this year to expand the capability.

You heard Michael talk about our focus on delivering full healthcare financing solutions. Our capabilities extend across not only life sciences and later-stage businesses that have revenues and royalty streams, but also underlying healthcare asset-based loans, as well as our focus in healthcare cash flow.

It is a strong and deep bench for us. You're right: the market has come our way.

As we look back, the biotech index is up 100% since the trough a year ago, it's up 25% year-to-date. M&A activity, which is also a driver of velocity and churn of capital here, has been up significantly, is up over two times first half of this year versus last year.

Importantly, what drives all of this and attracts capital is FDA approvals. We've seen growth this year, up 44% in FDA approvals in the sector versus prior year.

It is a tremendously favorable backdrop. As the equity capital comes in first, and then as a late-stage lender, we come in after that fact.

We view it, Rick, as when, not if. We do see a tremendous amount of opportunity.

It's also led to some of the repays. We've seen some very high valuations taking out our existing portfolio, both across drugs and devices.

We do believe, as we look at our pipeline, which is up 20% over the prior year, that you will see growth across our healthcare life science book, as well as the healthcare ABL book in tandem. As I mentioned earlier, we will maintain our discipline because they're those returns are attractive.

They bring in new entrants, but as you can appreciate, there is a tremendous amount of complexity in life sciences, and the good news is many of the new entrants, unfortunately—we wish no ill will, but—come in without their eyes wide open and kind of stub their toe quickly and exit. Long-winded way of saying we're very encouraged about the backdrop to your point on the sector and expect additional growth there over the next year.

Got it. I really appreciate that.

Thank you, guys.

Thanks. You mentioned in your prepared commentary that you continue to remain open and review opportunities to add teams specifically within specialty finance.

Just curious, as you kind of look at what you may have done year-to-date, if there's been any material change in the number of opportunities you've reviewed and taken a look at. Also just kind of maybe a second part of the question: do you find more opportunities coming from banks or non-bank competitors?

So,

I would say let's break that into two categories. Individuals, as as we mentioned, we are we've already added to our life science team, we're actively adding to our ABL origination team.

We also on the portfolio and team side are looking at, as we continue to over the years, additions to the ABL platform. The volume of activity there has been elevated.

I I will say, given a lot of what we have talked about in the ABL investment strategy, it is attracting others who are thinking about getting in, and it's difficult to build. Many of our peers are thinking about ways to acquire other platforms.

There's just not many platforms of scale. Our focus has been looking at tuck-in platforms.

ABL is a regional business, it's highly fragmented, we're looking at filling out our footprint both regionally as well as in certain industries. You may recall we have not only our healthcare specialty, we have a team that specializes in ABL for the staffing industry, ABL for the digital media sector, retail sector, apparel sector.

There's a lot of white space for us beyond those regions and beyond those industries. With that do come localized teams who can assist both in collateral monitoring, but localized sourcing, because this is a a localized business beyond the sponsor opportunity, as well as calling, to your other question, on regional banks.

We are seeing a lot of opportunities from the regional banks, not so much from the private credit peers because, again, not many of them are in the ABL business. Although we're starting to see cash flow borrowers come to us and say, "We've taken the keys.

We're restructuring this business. Can you, SLR, provide an ABL liquidity line to this formerly cash flow borrower?"

That is another place we're spending time talking to some of our peers, trying to assist them with liquidity lines in situations where they may be taking the keys.

Thanks, I appreciate that the details there. Just a last question for me: there's been some discussion that potentially, the negative sentiment that's surrounding the private credit and BDC industry now could result in lower capital coming to the sector, and that could have the effect of returning the market to be a little bit more, lender-friendly as if they are borrower-friendly in terms of covenants and underwriting and things of that nature with less capital to go around.

Are you seeing any signs of that at this point?

Not in traditional cash flow lending, and the main reason for that is on the other side, just lack of activity amongst the PE community. There's just not a lot of new transactions happening, there's not a lot of refinancings, not a lot of acquisitions or add-ons.

You kind of need to see both of those work in lockstep. Also, away from, you focus a lot on the BDC industry because here we talk about, but capital is also coming into institutional funds.

We're still seeing real interest by institutional LPs who want to be in private credit, notwithstanding the redemptions that we're seeing in the retail BDCs. I'm not sure there's a that big of a net capital outflow in the space, and it would take a much bigger dent than that to really make a difference from that perspective.

All right, I appreciate your thoughts there. That's all for me today.

Thank you.

Thank you.

Morning, guys. Sorry, I forgot to punch in.

On one of the questions around AI, if I can, kind of flipping it on. There are a number of startups and AI is a competitive threat to you guys—call me a skeptic on that, but I want to ask you about it.

There are a number of startups, receivable factoring, et cetera, et cetera, and asset-backed finance and AI-powered where the AI is processing invoices, et cetera. We'll see how that works out long term.

To your point on the biotech, sometimes new entrants come in, they stub their toes, but then they do potentially represent a short-term threat, if not a long-term threat. What do you think the risks are to that to your platform in terms of, the way you's business?

Are some people going to come in, throw money at it with AI-powered platforms and represent either a structural or a quality threat for some period of time before they all [bracklet?]

I think where you're seeing more of that, Robert, is in things like consumer-based lending, payday lending, credit card receivables, car loans. With what we do, which again is kind of, for better or worse, it's trench warfare: we're dealing borrower by borrower, finding the right party, evaluating the collateral, valuing the inventory.

For us, it's actually a tool. It's going to make us more efficient.

It's not going to replace us. You can't replicate what we have using AI.

You can make it better, you can make us more efficient, you can make us more cost-effective, but you can't replicate the collateral management, collateral monitoring, and valuation that needs to take place by sticking a computer on it.

I think just to echo Michael's comments, it's really important to appreciate that the good news about ABL lending is you're getting weekly information and insight to operating metrics such as inventory turns and receivable dilution and collectibility that you don't get in broad-based cash flow lending. What that means is it comes with a tremendous volume of information and data.

To Michael's point, we are actively rolling out AI across our ABL platforms to make those teams more efficient in monitoring and structuring our borrowing bases on a weekly basis. At the end of the day, as ABL is not a formula.

It's not 85 cents on receivables and 50 cents on inventory all being created equally. It's a business of judgment, having the tools, having the not only the collateral monitoring, but also having the tight documents and the experience to know when to use those tools to take your advance rate down actively so that you keep your exposure down.

People get in trouble in ABL because they end up over-advancing and not having the judgment to know when to start to de-risk and use those very strong documents that we possess as ABL lenders. That is the true barrier.

I think to Michael's point, AI will make us more efficient, but the barrier to entry and the moat that exists in ABL lending is rather high and will take years to rebuild. That's why people are looking to make acquisitions rather than to try to create de novo ABL platforms.

Got it. Thank you.

Then kind of the flip side of that, right, kind of pressing the point you just made: it is a slow and steady kind of business, right? It takes teams, it takes a long time to do all these things.

Is there to build relationships with commercial banks or other things just on the sourcing side? It's not snap your fingers and they materialize out of the air.

Is there anything—obviously acquisitions, right, but is there anything organically that you can do to kind of accelerate not the closings, not the documentation, but finding the incremental potential borrower? Basically, to anything or that could accelerate the breadth of the pipeline while maintaining the quality of the underwriting?

Yes, I think the three primary, four primary avenues that we're focused on right now is adding originators, further penetrating the sponsor finance market, providing ABL loans to their portfolio companies. Additionally, as I touched on earlier, providing ABL facilities to cash flow borrowers who need liquidity that may not be held by sponsors, may be held by peer lenders.

Approaching regional banks that don't want to hold the assets: the JV that we started, we've got others that are in the works, some will be more formalized than others. We have an active calling effort, a dedicated team that just calls on regional banks for ABL product that they don't want to hold.

That is a very, very large pipeline. Then last but not least, tuck-in acquisitions that expand the ABL footprint also expands our origination capabilities.

It's a multivariate approach to expanding that pipeline, because to your point, we pass on a lot, you need a broad pipeline. Their borrowing is not as consistent, it's not driven by an M&A transaction when you need to fund an event.

It's working capital across the course of a year, you want to have a very big and broad portfolio. As we always like to say, there's high churn, we celebrate getting repaid as a lender, but that is a headwind to growth.

A long-winded way of saying the larger that pipeline is, the more we can grow that book.

Got it. Thank you.

Thank you very much, and we appreciate all your time this morning, all the great questions you all had. As always, we are always available offline if you have any questions for any of us.

Thanks again.