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Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporation's conference call to report financial results for its fourth fiscal quarter ended 12/31/2025. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, this conference is being recorded today, 03/12/2026. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin your conference. Okay. Thank you.

Thank you, Paul. Good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter and year ended 12/31/2025. This morning's call will be longer and more in-depth than previous calls. We have five topics to cover. First, the financial results for the fourth quarter and year ended 12/31/2025, asset quality, including commentary regarding software exposure, outlook for 2026, our share buyback program recently announced, and our investment advisor joining forces with Ridge Post Capital. Joining me this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements as well as an overview of our financial information.

Thank you, Rob. I would like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited.

Audio replay of the call will be available by using the telephone numbers and PIN provided in our press release announcing this call. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections; we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the Public Investors link or call us at (713) 292-5400. Now I will cover our operating results for the fourth quarter and year. I would like to start with our life-to-date activity. Since our IPO in November 2012, we have invested approximately $2.8 billion in over 220 companies and received approximately $1.8 billion of repayments, while maintaining stable asset quality. We have paid $333 million in dividends to our investors, which represents $18.27 per share to an investor in our IPO in November 2012, which was offered at $15 per share. In the fourth quarter, we generated $0.29 per share of GAAP net investment income, and core net investment income was $0.29 per share also, which excludes excise taxes. During the quarter, we also realized gains of $5.5 million on five equity positions, which resulted in total realized income for the quarter of $0.48 per share. Net asset value per share decreased $0.23 during the quarter from two components: The first was $0.11 per share of dividend payments that exceeded earnings, which was necessary to continue to pay out spillover income balance from 2024. The second was net realized losses of $0.12 per share related primarily to two debt investments. On the capital front, on December 31, we repaid the remaining $50 million of the $100 million of 2026 notes prior to their March 2026 maturity. Turning to portfolio and asset quality, we ended the quarter with an investment portfolio at fair value of $1.01 billion across 115 portfolio companies, unchanged from $1.01 billion across 115 portfolio companies as of 09/30/2025. During the fourth quarter, we invested $34.1 million in four new portfolio companies and had $18 million in other investment activity at par. We also received four full repayments totaling $37.9 million, five equity realizations totaling $7 million, which resulted in a realized gain of $5.5 million, and received $9.1 million of other repayments, both at par. At December 31, 99% of our loans were secured, and 92% were priced at floating rates. Average loan per company is $8.8 million, and the largest overall investment is $19.2 million, both at fair value. Substantially all of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 81% of our portfolio is rated a one or two, or on or ahead of plan, and 19% of the portfolio is marked in an investment category of three or below, meaning not meeting plan or expectations. We added one new loan to our nonaccrual list and removed another from the nonaccrual list during the quarter. Currently, we have loans to five portfolio companies on nonaccrual, which comprise 7.5% of the total cost and 4.1% of the fair value of the total investment portfolio, respectively, which represents a slight increase from the prior quarter. We are always focused on diversification, including by industry sector. We have investments in 24 separate industry sectors, and we have approximately 10% in high-tech industries. Over the last months, there has been a lot of press about the impact of artificial intelligence on large-scale SaaS software industry, which has resulted in concern around investment firms’ exposure, both private equity and private credit, to the sector. Let me first say, Stellus does not have exposure to the large-scale SaaS software sector. Rather, we have a small number of loans to software companies that are related to the SaaS space but are better characterized as industry-specific, tech-enabled solutions. This group consists of five companies out of 100 portfolio companies with debt investments and comprises 6.8% of the loan portfolio, the largest position is 1.8%, both at fair value. Each one of these companies provides integral products and services that are embedded in the businesses that they serve. They are using AI to enhance the software and information they provide and, in many cases, are dealing with proprietary data. A common theme for these software businesses is that they are using AI to enhance their value proposition rather than the customer being able to do this all internally with AI. In summary, we believe AI will enable these and many of our portfolio companies across a variety of industry sectors to improve the speed and quality of information, and we do not believe that AI will supplant the need for what our portfolio companies provide. Let me add, each of these companies is owned by a substantial private equity sponsor, is well-capitalized with material equity below us, has modest leverage, and EBITDA that is stable to increasing. The risk rate of these companies is either a one or a two, meaning on or ahead of plan. We will continue to monitor these companies closely as we do with all of our portfolio companies. Importantly, looking forward, we would be surprised if AI had a material negative impact on the recovery of our loans to these companies. And now I would like to turn the call back over to Rob to cover the outlook and a few additional topics.

Okay. Thank you, Todd. As we look ahead to 2026, I will cover four topics. First, the outlook for Q1 and Q2; the recent announcement concerning our advisor’s plans to join Ridge Post Capital’s platform; a $20 million share buyback program; and our view on the private credit sector overall. So outlook for Q1 and Q2. Today, our portfolio is approximately $996 million across 115 portfolio companies. With the turbulence that we have all been observing, M&A activity has slowed some after a very robust fourth quarter for us. Therefore, we expect in 2026 a portfolio at the current level or slightly less. We expect continued equity realizations in Q1 of approximately $2 million, resulting in a $1 million realized gain. Regarding dividends, in January we declared the dividends for 2026 of $0.34 per share in the aggregate, payable monthly. We expect to keep the dividend at this level of $0.34 for the second quarter, which will be declared in early April, of course subject to Board approval. Just looking at our stock price today that is a little under $9 a share, the second quarter dividend is a 15% annualized yield. Now turning to Ridge Post. On February 5, we announced that our external manager, Stellus Capital Management, agreed to be purchased by Ridge Post Capital, formerly known as PTEN. Ridge Post is a leading private capital solutions provider that similarly serves the lower middle market. Stellus will continue to be managed by its current partners, who will retain control of its day-to-day operations, including investment decisions and investment committee processes. We like to say there will be no changes in how we operate. Todd Huskinson will continue to be Stellus Capital Investment Corporation’s CFO, and I will continue to serve as the company’s Chairman and CEO. Now turning back to Ridge Post. Ridge Post Capital, which has more than $43 billion in assets under management, invests across private equity, private credit, and venture capital and access-constrained strategies, with a focus on the middle and lower middle market. We believe that our advisor joining Ridge Post Capital is a very positive development for a number of reasons, the most important of which is the anticipated investment opportunities that Ridge Post Capital will open up for Stellus Capital Investment Corporation and our affiliates. Ridge Post’s largest strategy is a lower middle market private equity firm specializing in North American small buyouts through primary, secondary, and co-investment vehicles known as RCP Advisors, which is based in Chicago. RCP Advisors has invested with more than 200 lower middle market private equity firms and is typically the largest or one of the largest LPs in the PE funds in which they invest. As you will recall, all of our lending is to companies owned by lower middle market private equity firms. As part of Ridge Post Capital, we expect to see a material increase in investment opportunities coming from those PE relationships, many of which we do not currently have. Given the nearly identical size profile of the RCP sponsor relationships and our sponsor relationships, we think we have a meaningful opportunity to increase the top of our funnel for new origination opportunities. We are excited by this new growth opportunity and we believe it will benefit all shareholders. The transaction with Ridge Post Capital is expected to close in mid-2026, subject to BDC board and BDC shareholder approvals, and other customary closing conditions. Let me add, some of our shareholders have asked, are you selling Stellus Capital Investment Corporation, our public company, or Stellus Capital Management, to Ridge Post Capital? We are not. Stellus Capital Investment Corporation will remain publicly traded. Our leadership will remain the same, as I mentioned earlier, and our independent board members will also remain in place. Our shareholders will continue to own Stellus Capital Investment Corporation stock. Now turning to share repurchase. Our Board of Directors recently approved a stock repurchase program of up to $20 million. This decision reflects the current trading level of our shares, which are at approximately a 30% discount to recently reported net asset value. Historically, our stock has traded at or above NAV for many years. At the current price levels, we believe repurchasing shares represents a compelling opportunity to generate meaningful value for our shareholders. This authorization will remain in place for at least one year. And finally, I am going to turn to private credit today. Given the significant press coverage of perceived stress in private credit, we thought this would be a good time to share our view of private credit overall. I will first cover our strategy versus larger managers; second, a reminder of our history in private credit; and finally, the importance of private credit for the U.S. economy. Stellus Capital focuses on direct-originated senior secured loans to lower middle market, private equity-backed companies rather than participating in large, broadly shared loans or nationally syndicated credits. This represents a fundamental difference between the Stellus platform, including Stellus Capital Investment Corporation, and many of the larger private credit managers and larger BDCs. Larger managers are lending to all types of companies, many without deep-pocketed private equity owners, and some with complex capital structures or off-balance-sheet vehicles. And now a reminder of our history. First, we are one of the longest-tenured active private credit managers, with a history of investing that is 22 years across 400 companies and $10 billion of deployment. The Stellus management team has an investing history that has been resilient across multiple macroeconomic cycles, including the Global Financial Crisis of 2008–2009, COVID-19, the global pandemic, and periods of other market volatility such as the international tariff disruption of 2025. Second, our asset quality across the portfolio has remained stable over time, with a weighted average risk rate of approximately two, which corresponds to investments performing on plan. All of our loans have financial covenants. All but one of our portfolio companies are backed by a private equity sponsor, and all have substantial equity below us at the time the loans are made. Third. All of our investment vehicles, with our public company, have the same investment mandate. All lend to the same businesses. We have no competing strategies or distractions. All of our work is focused on doing well for our shareholders and investors. And lastly, fourth, we have a long history of equity co-investments alongside our debt investments. This is where we buy a small piece of equity in the companies we lend money to, usually 5% of the total portfolio at cost. The equity co-investments have resulted in substantial equity gains. For Stellus Capital Investment Corporation, this has generated approximately $98 million of net realized gains life-to-date, with a historical return on equity co-investments of greater than 2.5x. And now I will turn to private credit, the private credit sector more broadly. We believe there is a lot of opportunity for growth in the private credit space, especially in our market, the lower middle market. In our market, there is a tremendous amount of dry powder in lower middle market private equity firms, who are our client base, if you will. When they buy private businesses, we are there to finance the purchases. The best data we have would indicate there is approximately 10x the dry powder to invest by lower middle market private equity versus the amount of dry powder in lower middle market private credit providers. We will be there to provide the financing. Finally, for private credit overall, the need for this capital is very large. Why? Private credit in our country fills the large gap that commercial banks cannot provide. The reason for this is commercial banks are typically levered 10 to 11 times and are mostly lending out retail and commercial deposits. As a result, their risk profile is very tight, and they are highly regulated to safeguard these deposits. Private credit providers are not highly levered (typically 1 to 2 times), and we are not investing bank deposits. We are investing equity capital coupled with modest institutional leverage. I will say both banks and private credit providers are focused on protecting their capital bases. Private credit, though, has the flexibility to provide more leverage, earn higher returns, and can participate in the equity upside of our portfolio companies. Together, private credit and commercial banks are the growth engine of our U.S. economy. So the takeaway for our shareholders is we have a long history of investing in private credit. We think there is a lot of opportunity to invest going forward in the lower middle market, where we have always been, and also to provide strong returns for our shareholders. And with that, I recognize today’s call was longer than normal. We hope that it was helpful to better understand our business and the industry we operate in. And with that, Paul, please open up the line for Q&A.

Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 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. And one moment please while we poll for questions. The first question today is coming from Christopher Nolan from Ladenburg Thalmann. Christopher, your line is live.

Hey, guys. Good morning. Thank you for all the detail, Rob. Given the change in the ownership of the external manager and the share repurchase initiative, will there be a change in the leverage targets for Stellus Capital Investment Corporation?

Thank you. Good morning, Chris. And no. Good question. There will not be a change in our targeted leverage for Stellus Capital Investment Corporation, which, as you will recall, is approximately 1:1 on the regulatory test and approximately 2:1 including SBIC debentures.

Okay. And then, turning to SBA for a second, what is the remaining capacity in the SBA, and should we be looking at that to be a growth engine for you guys in the first half of the year?

Yes. So ultimately, we have quite a bit of new capacity that we will have in the SBA. We, as you may have noted in Todd’s remarks and in our press release, paid down $39 million of debentures on March 1 under our first license, which brings a total of $65 million. So that would be one example. We have $65 million of new debentures that we will be able to take out, plus more when we obtain our third license. So it is a good question. A lot of growth from here, given that we have repaid $65 million of debentures so far.

Great. And final question. I noticed that you have done some subsequent investments to Venbrook and Real Estate Services, both of which are nonaccrual. Can you give a little detail of what is going on with those guys?

Yes. So, of course, we do not talk much about the detailed companies, but these are companies where we have been working with others to provide additional capital to see them through a rough spot. The Partners is a realtor business based in the Midwest, and Venbrook is an insurance agency. These are small advances to further the companies’ operations during a little bit of a slow period.

Great. That is it for me. Thank you, Rob.

Thank you, Chris.

Thank you. The next question will be from Brian McKenna from Citizens. Brian, your line is live.

Okay, great. Thanks. Good morning, everyone. So just a bigger-picture fundraising question for you guys as it relates to the broader Stellus platform. What are you hearing from some of your institutional investors in terms of having some incremental exposure to the lower middle markets and moving some capital away from the large-cap managers in the upper middle markets? And I am curious—we will see how the environment plays out from here—but given maybe the dynamic there, could we actually see a scenario where fundraising at Stellus starts to accelerate over the next year or so?

Yes. Good morning, Brian, and thank you for the question. We have definitely seen, for the overall Stellus platform, an increasing interest in the lower middle market where we operate. This is coming from large institutional investors that have noticed in some of their larger managers some overlap in different credits and found our type of investing interesting. We have definitely seen an uptick in that area, and this would be, of course, across the Stellus platform.

Yep. Okay. Got it. That is helpful. And then, Rob, you have clearly done a great job managing the business throughout a number of cycles and operating environments over the past 20 years or so. I think you have a great perspective as well. And so, while each cycle and period of dislocation is always a little bit different, history always rhymes. So what past experiences can you lean on today to make sure you are prudently managing your business in the current environment?

Yes. I would say, historically, it is important in times like this to not be over-levered, which we are not, and I would add that the private credit industry is not. So modest leverage is helpful in these times. Certainly, we are very focused on strong underwriting throughout periods, and you may have heard us say before that when we look at a new company, we are thinking we are going to have a recession within the first 18 to 24 months. Whether we are is another matter, but we underwrite to that. So we will continue that diligent underwriting, expecting if this company got into trouble or there was an economic cycle down, how would it behave or how does the sector behave? So I think strong underwriting will continue for us. And then I would say, we will be very selective about opportunities. My guess is, too, that you may see some improved pricing in our sector. In other words, spreads may widen a little bit to the benefit of our shareholders. But I would say throughout our investing period, this goes back 20-plus years, what we have found in our part of the market, again the lower middle market, is that we have always had large equity checks below us, we have always had financial covenants, and therefore well-capitalized businesses from the start. So, again, I think it is the same that we have been doing historically. But we will be very focused and cautious if we think things are turning. We think there is a lot of noise in the system today that is less about the quality of the portfolios in private credit.

Alright. Thanks so much. I will leave it there.

And thanks so much, Brian, for joining.

Thank you. The next question will be from Justin Marchandt from Capital. Justin, your line is live.

Hey, guys. Good morning. On for Eric today. I just want to talk a little bit more about the Ridge Post transaction. Sounds like a good fit for your investment strategy. When do you expect to see the full benefits of increased deal flow and opportunities, should the deal go through in mid-2026?

Justin, thank you for joining. So, again, as you pointed out, subject to the various approvals, this transaction would close in the summer of this year. We have had initial conversations with the RCP subsidiary, if you will, Ridge Post, and we think there is a great opportunity there. So our hope and plan would be that as we get to this summer, we will hit the ground running. And I think that collectively, we think there is lots of opportunity to open up. So I would say that, not to be overly optimistic, but I would imagine this will kick in in 2026.

Okay. Alright. That is great. And then looking at PIK income, it has been a significant increase year-over-year. Are these portfolio companies prioritizing growth, or are there operational issues? And what kind of strategies can you implement to get borrowers back to cash pay?

Yes. So, although our PIK income has increased, we are still at the low end of our competitor set. We do not go into a new loan with PIK income, and by the way, we understand in the upper market lenders will go into a new credit with some PIK income; we do not. At the outset, all the loans are cash pay. So if you see PIK income with us, it would mean that the company needs some relief from a cash flow perspective. And typically, when we have some PIK aspect to the income, it means that the private equity owner is contributing new capital. So this, we think, is a good trade for both parties. For that PIK to come down, it will be that those companies that needed relief have improved their performance, or we have exited the investment—in other words, the company has been sold or refinanced. So that is the nature of our PIK income, not something that is planned on the front end.

And then last one for me. Just on the new base distribution still kind of above the 4Q NII run rate, what sort of levers can you guys pull to get earnings back to or above the new distribution? Or is there a potential to right-size the distribution rate later on this year?

Yes. We are striving to improve the NII. I would say that if SOFR stays where it is, which perhaps it will for a while, this will be helpful to us. The new leverage that we would receive under a third license from the SBA will get the portfolio back up. Again, as I mentioned, quite a bit of increased portfolio that was resolved from our third license getting recapitalized. So this would be helpful as well. And again, we always strive to receive the best returns on the loans we are making, and so we will continue to work on that. But it would be a combination of things. In any event, we do have a fair amount of spillover from last year, and so as a result, we will have this level of dividend, at least, through the second quarter. And we will reevaluate it. We will have more to talk about this summer as we hopefully get into our third license with the SBA.

Okay. Thanks for taking my questions today.

Thank you, Justin.

And the next question will be from Robert Dodd from Raymond James. Robert, your line is live.

Hi, guys. A lot of my questions have been answered, and I appreciate the color you gave at the beginning on how much exposure you have to software or AI risk assets. That kind of feels like last month at this point. On something else, what would you say your exposure is in the portfolio to higher energy prices? Obviously, oil is up, could go meaningfully higher potentially. We do not have a lot of direct oil and gas production, obviously, but there is feed-through to other areas in the economy if oil prices do continue to rise or spike again. Could you give us any color on what the exposure is in the portfolio to that kind of issue?

Yes, Robert. Good morning. First, as you indicated, we have no direct exposure to the oil and gas industry. I would say that we also, as a matter of underwriting, have a handful of principal tenets, one of which is to not have commodity price risk exposure. So this would transcend direct oil and gas exposure. I think that the larger impact would be just the impact on the consumer if this started to cause consumer stress. We do have some businesses that are exposed to the consumer spending, but I would say not a material amount. So do not expect any material impact, certainly directly with companies. It would end up being more of whether it causes some change in the overall economy, which, my personal opinion, I would not expect. Not to get into the war and to run, but I would expect this will probably moderate over time. But again, I would not expect it to have a material impact on the portfolio.

Got it. Thank you. On the more stressed assets in the nonaccruals you have, do you have right now a kind of expectation—guess, but about the timeframe for resolution of some of those? Because obviously, to that point right now, there is a decent slug of the portfolio that is not income-producing and maybe could be again at some point in the future. What is the kind of timeline there?

Yes, sir, Robert. This would certainly range by individual company, so I will not get into that specifically. But I would say that we are having some that are coming off nonaccrual, and we did one in the fourth quarter that came off nonaccrual. I think you will see a gradual change over the next 12 to 18 months with regard to the portfolio. I would say that if something is nonaccrual, it is being or has been restructured, and that we as a lender group and typically the owner, because they are not able to pay interest, are looking for exits to monetize the position, reinvest that capital, and then have earnings on it again. But I think, naturally, it is typically a year to 18-month process as you go. Some may take longer, some may take shorter. So I cannot cover specifics, but a gradual resolution, I would say, throughout 2026 and into 2027.

Got it. Thank you for that. If I can, one more, just a general question. You mentioned you might see improved pricing. Obviously, the marketplace has been extremely competitive over the last 24 months, with spreads coming down, and there are some early signs maybe that is going to move. What is your confidence that spreads will in fact widen sustainably over the next year or two versus near-term indications being just a short-term phenomenon? I realize that is a really tough question, but any thoughts there would be appreciated.

Sure. First, the public loan indices have widened materially over the last 60 days, but we have not seen that in the private market that we operate in yet. This will be driven by more than one factor. One would be capital flows—it appears to be less capital coming to the industry, the sector currently. The next would be perceived risk and discipline by the underwriters. Unfortunately, I cannot predict whether it will occur, but we certainly have the ingredients of what we are observing to cause spreads certainly not to get tighter and potentially to widen. Public markets are reflecting it; we have not seen it yet in the private area where we operate, but certainly the ingredients for it are there.

Got it. Thank you.

Thank you, Robert.

Thank you. There were no other questions at this time. I would now like to hand the call back to Robert Ladd for closing remarks.

Thank you, Paul, very much, and thanks, everyone, for joining the call. Thank you for your support, and we look forward to speaking with you again in early May as we report the first quarter.