WhiteHorse Finance Q2 2026 Earnings Report

WhiteHorse Finance EPS Results

• Actual EPS: $0.22
• Consensus EPS: $0.25
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

WhiteHorse Finance Revenue Results

• Actual Revenue: $15.29 million
• Expected Revenue: $15.66 million
• Beat/Miss: Missed by -$371.00 thousand
• YoY Revenue Growth: N/A

WhiteHorse Finance Announcement Details

• Quarter: Q2 2026
• Date: 8/10/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 11, 2026
• Conference Call Time: 1:30PM ET

WhiteHorse Finance (NASDAQ:WHF) Corporation (NASDAQ: WHF) is a closed-end management investment company organized as a business development company under the Investment Company Act of 1940. The firm’s primary objective is to generate current income and, to a lesser extent, capital appreciation by making debt and equity investments in privately held middle-market companies. WhiteHorse Finance seeks to partner with established businesses across a range of industries, providing flexible financing solutions designed to support growth initiatives, acquisitions and recapitalizations.

The company’s investment portfolio predominantly comprises senior secured loans, second-lien debt, subordinated debt and select equity interests. WhiteHorse Finance targets U.S. headquartered companies with EBITDA profiles typically exceeding $10 million, though it retains the flexibility to consider larger transactions. While the portfolio spans multiple sectors—such as healthcare, technology, business services and industrials—the firm places particular emphasis on businesses with recurring revenue streams and defensible market positions.

Established in 2016 and commencing operations following its initial public offering in early 2017, WhiteHorse Finance is externally managed by PPMG Private Markets LLC, an affiliate of Ares Management Corporation. The investment team leverages Ares’ underwriting, portfolio monitoring and credit-management capabilities to identify underwriting opportunities and actively manage risk. Headquartered in Los Angeles, with additional support from Ares offices across North America and Europe, WhiteHorse Finance combines middle-market specialization with institutional-grade resources to deliver tailored financing solutions to its portfolio companies.

WhiteHorse Finance Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: NAV per share increased 2.6% to $11.77, supported by $5.8 million of net unrealized gains—primarily a $4.8 million markup on Chase Products—and more than $0.06 per share of accretion from share repurchases.
• Negative Sentiment: Core net investment income declined to $4.7 million, or $0.217 per share, from $5.6 million, or $0.253 per share, in the prior quarter and fell below the $0.25 quarterly distribution. The company extended a temporary incentive fee waiver for the third quarter, reducing the fee rate to 17.5%.
• Positive Sentiment: Management reported improved lending conditions, including lower leverage, higher pricing, stronger documentation and covenant protection on many new deals. Second-quarter gross deployments totaled $25.4 million, while new first-lien originations averaged approximately 4.2x EBITDA.
• Neutral Sentiment: Outward Hound was recapitalized after quarter end, with a substantial portion of debt converted to equity and the restructured term loan returning to accrual status in the third quarter. However, management expects the turnaround could take through 2027, with a potential realization not likely before 2028 absent a strategic buyer.
• Negative Sentiment: The company has $85 million of unsecured notes maturing in December 2026 and ended the quarter with gross leverage of 1.30x and net effective leverage of 1.19x. Share repurchases were paused in late May, with approximately $9.5 million remaining under the authorization, while capacity for additional balance-sheet investments is limited to roughly $10 million.

Presentation

[Operator]

Good afternoon, everyone. My name is Beau, and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance second quarter 2026 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 a replay is available through a webcast in the investor relations section of our website at whitehorsefinance.com. 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 one on your telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star two.

[Operator]

Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the call over to Robert Brinberg of Rose & Company. Please go ahead, sir.

[Robert Brinberg, President at Rose & Company]

Thank you, Beau, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's second quarter 2026 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 second quarter 2026 earnings presentation, which was posted on our website yesterday. With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson.

[Robert Brinberg, President at Rose & Company]

Stuart, you may begin.

[Stuart Aronson, CEO at WhiteHorse Finance]

Thank you, Rob. Good afternoon, everyone, and thank you for joining us today. As you are aware, we issued our earnings yesterday after market close, and I hope you have had a chance to review our results for the period ending June 30, 2026, which can also be found on our website. On today's call, I will begin by addressing our second quarter results and current market conditions. Joyson Thomas, our Chief Financial Officer, will discuss our performance in greater detail. After which, we will open the floor for questions. At a high level, our second quarter results reflect three main themes. One, net asset value per share increased, primarily driven by unrealized gains in one of our existing workout accounts. Two, share repurchases during the quarter, again, providing a meaningful benefit to NAV per share accretion.

[Stuart Aronson, CEO at WhiteHorse Finance]

Three, core earnings moderated relative to the prior quarter, reflecting a portfolio yield that was impacted as a result of a smaller average portfolio size, as well as our loan investment in Outward Hound going on to non-accrual status in the first quarter. Touching more specifically on unrealized appreciation in the portfolio and following the markdowns that weighed on the first quarter's results that we had previously flagged, our portfolio marks turned net positive for this quarter. Gross unrealized depreciation of $7.1 million was offset by just $1.4 million of gross depreciation, with the substantial majority of the portfolio unchanged quarter-over-quarter. Net markups were led by our position in Starco, also known as Chase Products or Pressurized Holdings, where the markup on our equity investment contributed approximately $4.8 million or roughly $0.22 a share.

[Stuart Aronson, CEO at WhiteHorse Finance]

I will provide more detail on the markup in Chase, as well as provide an update on a number of other investments in our portfolio later in this call. Turning to our financial results, Q2 GAAP net investment income and core NII were each $4.7 million or $0.217 per share, compared with Q1 GAAP net investment income and core NII of $5.6 million or $0.253 per share last quarter. NAV per share at the end of Q2 was up to $11.77, compared with $11.47 at the end of Q1, an increase of approximately 2.6%.

[Stuart Aronson, CEO at WhiteHorse Finance]

The change in NAV reflected net realized and unrealized gains of approximately $0.265 per share in the aggregate, as well as share repurchases that were accretive to NAV by more than $0.06 per share, partially offset by the approximate $0.033 per share NII shortfall as a result of the distribution paid during the quarter that exceeded the net investment income for the period. A detailed bridge of the quarter-over-quarter change in the NAV per share is provided on slide 15 of our earnings presentation. Even though our NII this quarter was below the quarterly distribution rate, as I have shared in the past, we have a number of restructured credits that have been equitized that are not producing NII, but are likely to be realized either later this year or in 2027. Those realizations should add to the BDC's NII-generating capability.

[Stuart Aronson, CEO at WhiteHorse Finance]

Turning to shareholder value, our shares have continued to trade at a meaningful discount to NAV, and both management and the board remain focused on actions that we believe can help enhance shareholder value over time. So far, that focus has included disciplined portfolio repositioning, selective capital deployment, accretive share repurchases, and steps to support distributable earnings. Management and the board continue to explore other options as well. We remained active under the board's expanded share repurchase program through the first two months of the second quarter, and those repurchases were accretive to NAV, as I mentioned earlier. We paused repurchase activity in late May.

[Stuart Aronson, CEO at WhiteHorse Finance]

That decision reflects the balance we look to strike between buying back shares at a meaningful discount to NAV, which is accretive, and the corresponding reduction in equity, which raises our leverage ratio levels and competes with the capital we can put into newly originated investments. Capacity remains available under the repurchase program, and we will continue to assess recommending repurchases as a part of our broader strategy of seeking ways to create shareholder value. Joyson will provide additional detail on the quarter's repurchase activity. In addition, the advisers agreed to extend the temporary voluntary incentive fee waiver for the third quarter of 2026, reducing the applicable rate from 20% to 17.5%. We view the fee waiver as a constructive step to support distributable earnings and shareholder value.

[Stuart Aronson, CEO at WhiteHorse Finance]

As we have said previously, this fee waiver is temporary, and any decision regarding future periods will be revisited based on the then-current conditions and in consultation with the board. We have also been encouraged by the alignment shown through continued open-market purchases by our officers and directors during the second quarter, as disclosed on Form 4 filings. We believe that reflects our confidence in the underlying value of WhiteHorse Finance. Turning to portfolio activity, we had gross capital deployments of $25.4 million in Q2. Repayments and sales were muted during the quarter and offset gross deployments by approximately $2.2 million, resulting in net deployments of approximately $23.2 million before the effects of transferring assets into the STRS JV. Gross capital deployments consisted of three new originations totaling $23.1 million, with the remaining amount deployed to fund add-ons to five existing portfolio companies.

[Stuart Aronson, CEO at WhiteHorse Finance]

The three new originations were headlined by two former WhiteHorse borrowers, Empire Office for $10.1 million and Intermedia Cloud Communications for $6.6 million, as well as one new portfolio company borrower, Vibration Mountings & Controls, for $6.4 million. Of our three new originations in Q2, one was non-sponsor, and two were sponsor. The sponsored deals are targeted to be transferred to the STRS JV. Our new originations in Q2 had an average leverage of approximately 4.2x EBITDA and were all first-lien loans. Total repayments and sales of $2.2 million were driven by partial paydowns, with no full realizations during the quarter. During the quarter, the BDC transferred two new deals to the STRS JV totaling $7.8 million. The transfers were headlined by Industrial Service Solutions at $5.1 million and Trimlite at $2.7 million.

[Stuart Aronson, CEO at WhiteHorse Finance]

We continue to successfully utilize the STRS JV and believe that WhiteHorse Finance's equity investment in the JV continues to provide attractive returns to our shareholders. After net deployments and JV transfer activity, as well as net realized and unrealized gains recognized during the quarter, total investments increased from the prior quarter by $26.2 million to $569.2 million. This compares to our portfolio's fair value of $543 million at the end of Q1. During the quarter, we recognized approximately $0.1 million in net realized losses and approximately $5.8 million of net unrealized gains for aggregate net realized and unrealized gains of approximately $5.7 million or approximately $0.265 per share. The net mark-to-market gains were driven primarily by a $4.8 million markup on Chase, a $0.4 million markup on PlayMonster, and approximately $0.5 million of other net markups across the portfolio.

[Stuart Aronson, CEO at WhiteHorse Finance]

For those unfamiliar, Chase Products is a developer and manufacturer of bulk consumer and industrial chemical and aerosol products in the United States. We assumed ownership of the business in March of 2023. Since then, the company has improved EBITDA from negative levels to a run rate in the low-positive double digits, supported by new customer wins and added production capacity, and it continues to track ahead of plan this year. The markup this quarter reflects the improvement in operating performance and the updated valuation inputs that follow from it. We are cautiously optimistic about the prospect of a liquidity event on this asset over the next 6-12 months. PlayMonster, you may recall, is a toy and game company with owned and licensed brands including Hacky Sack, Spirograph, Taco vs. Burrito, and 5 Second Rule. We assumed ownership alongside a co-lender in January of 2022.

[Stuart Aronson, CEO at WhiteHorse Finance]

The business has returned to positive and growing adjusted EBITDA with meaningful year-over-year improvement and continued momentum into 2026, and the markup reflects that trajectory. PlayMonster is in an earlier stage than Chase with respect to any realization, and we would expect any process to follow the finalization of full-year 2026 results at the earliest. Both positions generate limited cash income today. A realization in either case would convert the full realized value into cash available for future redeployment into income-producing investments, which would positively contribute to help support core NII over time. At the end of Q2, 98.8% of our debt portfolio was first-lien senior secured, and our portfolio continued to reflect the balanced mix of sponsor and non-sponsor investments, with non-sponsor representing approximately 40% of the portfolio at fair value.

[Stuart Aronson, CEO at WhiteHorse Finance]

The weighted average effective yield on our income-producing debt investments was 10.8% at the end of Q2, consistent with the 10.8% at the end of Q1. The weighted average effective yield on our overall portfolio was approximately 8.8% at the end of Q2, compared to approximately 8.7% at the end of Q1. With respect to non-accrual status, there were no additions to or removals from non-accrual during the quarter. Excluding the STRS JV, non-accrual investments represented 3.6% of the total debt portfolio at fair value, consistent with the 3.6% at the end of the prior quarter, and 6.9% at cost, compared with 7.2% at cost at the end of the prior quarter. The four issuers on non-accrual at quarter-end were Camarillo Fitness Holdings, New Cycle Solutions, Outward Hound and PlayMonster. Turning to Outward Hound, we completed a restructuring of the business subsequent to quarter-end in early July.

[Stuart Aronson, CEO at WhiteHorse Finance]

Working alongside the other lenders in the group, we recapitalized the company with a new revolver and term loan, converting a substantial portion of the outstanding debt into equity and extended the maturity. WhiteHorse now holds the majority ownership and control of the board, and the restructured term loan returned to accrual status upon closing, which will be positive for Q3 NII. The company continues to operate in a challenging environment for pet products, where category demand has softened, and retailers have maintained lean inventory positions. Consumer sell-through has held up better than peers, though that has not yet translated into improved orders. With a materially deleveraged capital structure and control of the board, we are working closely with management on various operating initiatives to drive incremental top-line growth and optimize the company's cost structure.

[Stuart Aronson, CEO at WhiteHorse Finance]

We will continue to evaluate both organic and inorganic paths to build value in the position and improve our ultimate recovery over time. Regarding New Cycle, this is a small position for the BDC, representing less than one-half of 1% of the portfolio at fair value. Management has been focused on stabilizing financial performance and on cost-reduction initiatives, and the company is currently preparing for a sale process. We will provide an update as that progresses. Finally, regarding Camarillo Fitness, formerly known as Honors Holdings, our mark reflects the expected proceeds from the sale of the underlying locations. That process is actively underway, and as locations are sold and cash is returned, we will redeploy that capital into income-producing investments. As always, we continue to actively manage underperforming credits, leveraging our dedicated restructuring resources and the broader capabilities of H.I.G.

[Stuart Aronson, CEO at WhiteHorse Finance]

Aside from the credits on non-accrual, our portfolio continues to perform well, consistent with what we shared last quarter. Our exposure to software companies remains modest at approximately 10.5% of the portfolio at cost and 9.3% at fair value across six portfolio companies. Turning to the market conditions. The market conditions are interesting and different from those a quarter ago. The volume of M&A activity is only moderate, similar to last year. However, the supply-demand imbalance we experienced last year is much improved, due largely to the negative press surrounding the direct lending market. This negative press has had multiple effects. One effect has been to scare retail investors, resulting in capital outflows that have reduced the appetite of some of the largest players in the marketplace.

[Stuart Aronson, CEO at WhiteHorse Finance]

Another effect is that increasing criticism of the asset marketing policies of direct lenders and BDCs has led to greater scrutiny of both where assets are marked down and the types of credits in which people are investing. In particular, the software sector, which was strongly in favor a year and a half ago, is now strongly out of favor because the market recognizes that some software and technology companies face significant downside risk from potential AI disruption. Those factors have resulted in a more conservative market environment. Deals are being completed at headline multiples that are generally more reasonable. That is certainly true in the technology and software sector, but we think we are seeing it more broadly as well. Previously out-of-favor sectors such as industrials have come back into favor because they do not face the same AI risk.

[Stuart Aronson, CEO at WhiteHorse Finance]

Overall, what we are seeing in the market, depending on the sector, is leverage that is a half a turn to a full turn lower than a year to a year and a half ago, with pricing 25 to 50 basis points higher. This is particularly true in the sponsor market. As I shared before, the sponsor market cycles up and down, but the non-sponsor market does not cycle very much. We are seeing lower leverage multiples and higher pricing on sponsored deals, with most deals below 50% loan-to-value, and some even below 40% loan-to-value.

[Stuart Aronson, CEO at WhiteHorse Finance]

In general, we are also getting better documents, including protection against LMEs, or liability management executions. Without LME protection, instead of equity coming into a troubled credit, companies may issue super-senior debt, strip existing lenders of collateral, and install the super-senior debt at the top of the capital structure.

[Stuart Aronson, CEO at WhiteHorse Finance]

We have been vigilant in avoiding those situations ever since the Aspect Software deal that led to a loss in the BDC. In the vast majority of deals we have completed over the past three years, we have limited, or we believe we eliminated, the downside risk from LME. As geopolitical tensions rise and fall, M&A activity slows when tensions are high and tends to pick up when tensions are lower. Across the WhiteHorse Direct Lending platform, we are doing about 40%-50% more volume this year than we did last year because we find current market conditions more attractive. We are seeing better credits, lower leverage, and better documents. We are also getting covenants on most of our deals. In fact, the vast majority of our middle market credits have covenant protection.

[Stuart Aronson, CEO at WhiteHorse Finance]

Spreads in the middle market and upper middle market are generally as high or higher than spreads in the lower mid-market. Again, this fact applies primarily to sponsored deals. Intuitively, that does not make sense because, on average, smaller companies carry greater risk and historically have commanded a pricing premium. However, third-party data from an investment bank that performs independent valuations for a portfolio validates what we are seeing. Pricing for midsize and larger deals is as high or higher than pricing for smaller deals. We are therefore trying to improve the risk-return trade-off. Most of the deals we are working on now are middle market or upper middle market credits, where we see a better risk-return dynamic. Current market pricing for sponsored deals is SOFR +475-550, approximately 50 basis points higher than a year ago.

[Stuart Aronson, CEO at WhiteHorse Finance]

As I mentioned, we are getting covenants on the vast majority of deals we are doing. We are doing senior secured debt almost exclusively. The non-sponsor market is relatively stable. Non-sponsor middle market, lower middle market deals generally command pricing of SOFR +600 and above, with two-point upfront fees or higher. Larger non-sponsor deals are priced more in the range of 550-650. If we believe those are good credits, we will participate in them as well. Deals priced at 600 and above are still targeted for the BDC balance sheet. Deals below 600 are generally targeted for the JV. With that said, and subsequent to our quarter-end, we closed on one new deal in the BDC. We also transferred positions in five portfolio companies to the STRS JV.

[Stuart Aronson, CEO at WhiteHorse Finance]

Pro forma for those transfers, the STRS JV's remaining capacity has been fully utilized, so new deals will generally be added to the JV only as repayments occur on existing JV investments. The BDC balance sheet currently has capacity for approximately $10 million of additional assets, and similarly, we will create additional capacity there as we receive repayments. With that, I will turn the call over to Joyson for additional performance details and a review of our portfolio composition. Joyson?

[Joyson Thomas, CFO at WhiteHorse Finance]

Thanks, Stuart, and thanks everyone for joining today's call. During the quarter, we recorded GAAP net investment income in core NII of $4.7 million, or $0.217 per share. This compares with Q1 GAAP NII and core NII of $5.6 million, or $0.253 per share, as well as our previously declared second quarter base distribution of $0.25 per share. Q2 fee income was approximately $0.1 million, compared with $0.4 million in the prior quarter, driven primarily by amendment fees from Lift Brands, also known as Snap Fitness, and NA Services. For the quarter, we reported a net increase in net assets resulting from operations of $10.4 million. Our risk ratings during the quarter showed that approximately 86.6% of our portfolio positions either carried a one or two rating, a slight decrease from the 88.3% reported in the prior quarter.

[Joyson Thomas, CFO at WhiteHorse Finance]

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 a company is performing according to such initial expectations. Regarding the JV specifically, we continue to utilize the platform as a complement to the BDC. As Stuart mentioned earlier, we transferred two new deals during the second quarter to the STRS JV, totaling $7.8 million in exchange for a net investment in the STRS JV of $2.3 million, as well as cash proceeds of $5.5 million. During the quarter, there were no full realizations in the JV. At the end of Q2, the STRS JV's total portfolio had an aggregate fair value of $340.3 million across 43 issuers, of which 14 are common issuers with the company at an average effective yield of 9.8%.

[Joyson Thomas, CFO at WhiteHorse Finance]

This compares with an aggregate fair value of $327.1 million at an average effective yield of approximately 9.9% across 41 portfolio companies as of March 31, 2026. Leverage for the JV at the end of Q2 was approximately 1.10x, compared with approximately 1.08x at the end of the prior quarter. The investment in the JV continues to be accretive for the BDC's earnings, generating a low-teens return on equity. During Q2, income recognized from our JV investment aggregated to approximately $3.2 million, compared to approximately $3.6 million reported in Q1. 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 amount of additional capital investments, changes in asset yields in the underlying portfolio, and the overall credit performance of the JV's investment portfolio.

[Joyson Thomas, CFO at WhiteHorse Finance]

Turning to our balance sheet, we had cash resources of approximately $28.1 million at the end of Q2, including approximately $19.6 million in restricted cash, primarily representing interest and principal proceeds received at quarter-end in our securitized leverage facilities, and approximately $8.5 million at the fund level reserved for the quarterly dividend paid in early July. We have $85 million of unsecured notes maturing in December of this year, consisting of $10 million or 5.375% notes due December 4th, and $75 million of over 4% notes due December 15th. We continue to monitor the debt capital markets and recent offerings in both the retail and institutional space. We will remain opportunistic in evaluating our alternatives as we approach year-end in addressing these maturities, which may also include a combination of available capacity under a revolving credit facility, as well as cash on hand.

[Joyson Thomas, CFO at WhiteHorse Finance]

As of June 30th, 2026, the company's asset coverage ratio for borrowed amounts, as defined by the 1940 Act, was 177%, which is above the minimum asset coverage ratio of 150%. At quarter-end, gross leverage was 1.30x, compared with 1.31x in the prior quarter. While net effective debt-to-equity ratio, after adjusting for cash on hand, was 1.19x compared with 1.12x in the prior quarter. The increase in net effective leverage primarily reflected a lower cash balance at quarter-end as deployments outpaced repayments during the quarter. In regards to our share repurchase program, the company repurchased approximately 345,000 shares during the second quarter at a weighted average price of approximately $7.42 per share, inclusive of commissions, for a total cost of approximately $2.6 million. Those repurchases were accretive to NAV by more than $0.06 per share.

[Joyson Thomas, CFO at WhiteHorse Finance]

We have not repurchased any shares since late May, and approximately $9.5 million remains available under the current authorization. Cumulatively, since the inception of our share repurchase program in the fourth quarter of 2025, we have repurchased approximately 1.8 million shares at a weighted average price of approximately $7.36 per share. We estimate that our buybacks have contributed approximately $0.33 per share of NAV accretion, demonstrating our commitment to creating shareholder value. Before I conclude and open the call to questions, I'd like to discuss our recent distributions and corresponding distribution policy. Yesterday, we announced that our board declared a third-quarter base distribution of $0.25 per share. The distribution will be payable on October 5th, 2026 to stockholders of record as of September 21st, 2026.

[Joyson Thomas, CFO at WhiteHorse Finance]

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. With that, I'll now turn the call back over to the operator for your questions. Operator?

[Operator]

Thank you very much, sir. Ladies and gentlemen, at this time, if you do have any questions or comments, please press star one. Additionally, if your question has been addressed, you may remove yourself from the queue by pressing star two. We will go first today to Hong Zheng with JPMorgan.

[Hong Zheng, Analyst at JPMorgan]

Yeah. This is Hong. For Rick. I guess on the call you talked about potentially realizing gains in the second half of the year. I was wondering if you would share some color as to either the quantity or the timing.

[Stuart Aronson, CEO at WhiteHorse Finance]

I am sorry. I could not hear you well. Something about the second half of the year?

[Hong Zheng, Analyst at JPMorgan]

Yeah. You talked about potentially monetizing some realized gains in the second half of the year. I was wondering if you could attach some numbers or just timing color to it.

[Stuart Aronson, CEO at WhiteHorse Finance]

The most likely realization, or two realizations, in the second half of the year are Chase, Starco, Pressurized Holdings, which is three different names of one account, and also Naviga. Chase/Starco is doing very well. It is operating above budgeted levels. As I reported, the company has won new customers and actually built new production lines to accommodate those new customers, such that the run-rate EBITDA that was negative when we took over the company is now in the low-positive double digits. The mark that we've taken on that asset, while it is positive, is frankly lower than the valuations that the investment banks have told us to expect in a sale process. We have no idea where it will come out. There's always upside and downside. If the investment banks are accurate, there could be upside to that valuation.

[Stuart Aronson, CEO at WhiteHorse Finance]

Naviga, similarly, the bankers have indicated a valuation range. On that deal, we believe we are marked at or below the low end of that valuation range. That's another monetization that could occur where, again, there can be upside or downside. If you believe the bankers' valuations, there could be upside. If those occur, they will generate cash. That cash can be redeployed into earning assets and/or into shareholder repurchases. While there's no assurance that will occur by year-end, because Lord knows there's plenty of geopolitical volatility out there. As we sit here today, both of those processes are moving forward. PlayMonster, as I've shared in the call, is having a tremendous year. Hacky Sack is very on-trend and is providing a boost even above what we thought the company would be able to do three months ago.

[Stuart Aronson, CEO at WhiteHorse Finance]

If the results at the end of the year are strong, the other lender and we may choose to sell the company. Again, we don't know how that process will go. It's too far away. That could also generate cash revenues or cash receipts that could be reinvested in earning assets.

[Hong Zheng, Analyst at JPMorgan]

Got it. I guess as it relates to buybacks, I understand it's always a moving target, but is there a, I guess, a discount-to-NAV threshold that you have in mind that would make buybacks appear more attractive in the near term?

[Stuart Aronson, CEO at WhiteHorse Finance]

Obviously, when the share price is lower, it makes the buybacks more attractive. We have completed enough buybacks that even with limited new investment activity, our leverage is at target levels. So whether there will be more share buybacks this quarter is still a question mark.

[Hong Zheng, Analyst at JPMorgan]

Thanks, and have a great week.

[Stuart Aronson, CEO at WhiteHorse Finance]

Thank you.

[Operator]

Thank you. We go next now to Robert Dodd of Raymond James.

[Robert Dodd, Analyst at Raymond James]

Hi, guys. You answered that question partly there, too, with the presence of more potential upside on NAV from these exits. Moving on to Outward Hound, right? When we look at Chase and PlayMonster, I mean, it is a process on doing these restructurings. It takes a while. There is a lot of work involved. Outward Hound, the restructuring just occurred. On that, I mean, is that more likely to be a late 2027 or even a 2028 kind of realization, as you put some time into maybe hoping the customer volume flows through and things like that? Are you looking to monetize some of these things sooner rather than later? Some of them are just working out, obviously, Chase, maybe, in the second half.

[Robert Dodd, Analyst at Raymond James]

Is that like, are you putting your foot on the gas a little bit, or is that just how it is working out, and what are your thoughts on Outward Hound?

[Stuart Aronson, CEO at WhiteHorse Finance]

Robert, there is always the chance that a strategic buyer comes in and offers us a price that we think makes sense in terms of a quicker redeployment of capital. But if we manage the turnaround process for Outward Hound the same way we have been managing a successful turnaround process for Chase and PlayMonster, that is a two- or three-year process. So certainly the balance of 2026 and 2027 would be years where we would be implementing, in conjunction with management, both potentially organic and inorganic growth initiatives. Also, we are already working with management to optimize on cost, keeping a long-term perspective on value. But I would not expect an exit absent a strategic approaching us anywhere before 2028 on that deal.

[Robert Dodd, Analyst at Raymond James]

Got it. Thank you. Moving on to a different topic. To your point, too, I mean, spreads on new deals in the lower middle market, smaller companies. Yeah, I mean, go back years, right? You used to get a real premium. That is largely evaporated. I mean, that is hearing that across the market. What do you think changes that? To your point in the supply-demand dynamics changed a little bit more upmarket, and spreads are widening there. But, I mean, is there anything that you think can materially change where that premium at the lower end versus the $100 million EBITDA deals can return to a noticeable premium for the incremental risk that you are taking?

[Stuart Aronson, CEO at WhiteHorse Finance]

Robert, I will start by answering your question with the fact that if the lower mid-market is underpricing risk, we have the ability, as a fairly large player, of pivoting. That is the sponsor market in the lower mid-market.

[Stuart Aronson, CEO at WhiteHorse Finance]

Where risk is arguably being underpriced, we have the ability to pivot to the non-sponsor market, the middle market, the upper-middle market, and if we wanted to, even the large-cap market. Although there are things about the large-cap market that we do not like very much, including the LME risks that I talked about-

[Robert Dodd, Analyst at Raymond James]

Right.

[Stuart Aronson, CEO at WhiteHorse Finance]

On our call.

[Robert Dodd, Analyst at Raymond James]

Yep.

[Stuart Aronson, CEO at WhiteHorse Finance]

So we do not need the lower mid-market to come back to premium pricing for the BDC to do well, because we have strong tentacles into other market sectors, and we always pivot to where we see the risk-return being the best. I would tell you that the things that I think would shift the dynamic in the lower mid-market would be, number one, fewer new entrants into that market. I have spoken to bankers who have told me that they will run a process where they will go out to 30 lower mid-market players to get pricing on a deal.

[Stuart Aronson, CEO at WhiteHorse Finance]

And 28 or 29 of those players will come back with pricing and a structure that reflects the fact that the company is so small. But one or two players will come back and undercut the market. And in those smaller deals, you typically only need one or maybe two players.

[Robert Dodd, Analyst at Raymond James]

Mmh.

[Stuart Aronson, CEO at WhiteHorse Finance]

To get the deal done. Those players who are, in my opinion, largely new entrants who are not strong on the origination side and desperately need to deploy capital are the reason you're seeing that dynamic. If they either successfully deploy the capital they need to, or fail to raise new capital, then I think you will see a balancing out of the price premium that we historically have seen in the lower mid-market. But even looking at deals that I was talking to my team about earlier today, that dynamic has certainly not changed as of right now. As we sit here in August, the lower mid-market deals are pricing at the same price or, in some cases, even lower prices than the equivalent mid-market or upper mid-market deals.

[Robert Dodd, Analyst at Raymond James]

Got it. Thank you. That's it for me, and congrats on the turnaround success.

[Stuart Aronson, CEO at WhiteHorse Finance]

Thank you.

[Robert Dodd, Analyst at Raymond James]

Well done.

[Operator]

Thank you. Just a quick reminder, ladies and gentlemen, star one, please, for further questions today. We will go next now to Christopher Nolan with Ladenburg.

[Christopher Nolan, Analyst at Ladenburg]

Yeah. I want to echo Robert's sentiment. Congrats on the turnarounds. Talking about Chase Products, that is an affiliated company. What is your equity ownership there, please?

[Stuart Aronson, CEO at WhiteHorse Finance]

Other than the amount we have given to management, we own all the equity in the company. If that company has a successful sale process, as indicated by the bankers, all that upside will flow to WhiteHorse as the owner, and the BDC will get its pro rata share of that benefit.

[Christopher Nolan, Analyst at Ladenburg]

So it is effectively a controlled company?

[Stuart Aronson, CEO at WhiteHorse Finance]

Yeah, it is. We have selected the management team and worked with the management team in terms of strategy, growth, and cost containment. It has been very successful. If you look from when we took over the company with negative EBITDA, we took it from negative EBITDA to positive EBITDA in one year. We approximately doubled the EBITDA in the next year. We are on track to have, without giving exact numbers, very strong growth this year. Then, because we landed new customers that started shipping this year, if you just annualize those new customers, the EBITDA run rate is even higher. So the story there has been remarkably positive. Even though we took a markup, I want to assure you that based on the data we have from bankers, the value that that asset is marked at should be conservative.

[Stuart Aronson, CEO at WhiteHorse Finance]

Again, I can't control markets. Anything could change. But based on the data we have today, we did not take an aggressive mark.

[Christopher Nolan, Analyst at Ladenburg]

Well, congratulations on that turnaround in progress.

[Stuart Aronson, CEO at WhiteHorse Finance]

Appreciate it.

[Christopher Nolan, Analyst at Ladenburg]

That is a sweet victory for your company if you are able to pull off realization.

[Stuart Aronson, CEO at WhiteHorse Finance]

Yep.

[Joyson Thomas, CFO at WhiteHorse Finance]

Chris, I just want to provide one point of clarification. To Stuart's point, we do control Starco. Across the broader WhiteHorse Direct Lending platform, we effectively own 100% outside of management, LTIPs, and whatnot. With that being said, for purposes of the BDC itself, it is not considered or qualifies as a controlled portfolio company, as that definition is noted in the 1940 Act. Just wanted to provide that small clarification.

[Christopher Nolan, Analyst at Ladenburg]

Okay. Thanks, Joyson. Okay. Thanks, guys.

[Operator]

Thank you. Ladies and gentlemen, just a final reminder: star one, please, for any further questions today, and we will pause for just one moment. Gentlemen, it appears we have no further questions today. So ladies and gentlemen, that will bring us to the conclusion of the WhiteHorse Finance second-quarter 2026 earnings conference call. We would like to thank you all so much for joining us today and wish you all a great afternoon. Goodbye.

[Stuart Aronson, CEO at WhiteHorse Finance]

Thank you.

Participants

Executives

• Stuart Aronson, CEO
• Joyson Thomas, CFO

Analysts

• Robert Brinberg, President at Rose & Company
• Hong Zheng, Analyst at JPMorgan
• Robert Dodd, Analyst at Raymond James
• Christopher Nolan, Analyst at Ladenburg