Ares Capital Corporation

Good afternoon. Welcome to Aries Capital Corporation's fourth quarter and year-ended December 31st, 2019 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Wednesday, February 12th, 2020. I will now turn the call over to Mr. John Stilmar, Managing Director of Investor Relations.

Great. Thank you, Kate, and good afternoon, everybody. Let me start with some important reminders. Comments made during the course of this conference call and webcast, as well as the accompanying documents, contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, and similar such expressions. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. There is Capital Corporation assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, the company may discuss certain non-GAAP measures as defined by the SEC Regulation G as core earnings per share or core EPS. The company believes that core EPS provides a useful information tool to investors regarding the financial performance because it is one method the company uses to measure its financial condition and results of operation. A reconciliation of core EPS to the net per share increase or decrease in stockholders' equity resulting from operations, the most directly comparable GAAP financial measure, can be found in the accompanying slide presentation for this call. In addition, reconciliation of these measures may also be found in our earnings release filed this morning with the SEC on Form 8-K. Certain information discussed in this presentation, including information relating to portfolio companies, was derived from third parties and has not been independently verified, and accordingly, the company makes no representation or warranty in respect of this information. The company's fourth quarter-ended December 31, 2019 earnings presentation can be found on the company's website at www.areascapitalcorp.com by clicking on the Q419 earnings presentation link on the homepage of the investor resources section of the website. Aries Capital Corporation's earnings release and 10K are also available on the company's website. I would now like to turn the call over to Mr. Kip DeVere, Aries Capital Corporation's chief executive officer.

Thanks, John. Hello to everyone and thank you for joining us. I'm here with our co-president, Michael Smith, our chief financial officer, Penny Roll, and several other members of our management team. I'll start by highlighting our fourth quarter and full year results and then provide some thoughts on the company's position and current market conditions. This morning we reported fourth quarter core earnings of 45 cents per share, which is a strong finish to a great year for Aries Capital Corporation. Our core earnings for the year of $1.89 per share benefited from an active year of investing, modest portfolio growth, and higher utilization of our low-cost borrowing facilities. We generated strong gap earnings of 48 cents per share for the fourth quarter and $1.86 per share for the year, which drove another year of net asset value growth to $17.32 per share at year end. Supporting these results, our portfolio continues to demonstrate stable credit performance. Looking beyond these strong results, we believe the company is well-positioned. The addressable market opportunity for Aries Capital is large and growing. Both small and upper middle market companies are increasingly accessing the private markets for financial solutions. We see concrete evidence of this as the pipeline of transactions that we review annually has increased by approximately 40% since 2015. We think a major factor here is our increased market share in larger deals where we feel we offer companies a more attractive solution and the alternative, smaller syndicated deals that typically come with a lot of execution risk for their sponsors. As our market opportunity expands, we benefit from our large direct origination platform, extensive market reach and longstanding relationships with companies, financial sponsors and deal participants. By reviewing a large pipeline, we can remain selective and choose to invest in what we believe are the strongest borrowers which is critical in these highly competitive market conditions. Over the past 10 plus years, we've closed on only about 4% of the investments we've evaluated with new borrowers. And due to our cautious view of the market for much of 2019, we became increasingly selective, resulting in the second lowest closing rate of deals to new borrowers in a decade. One of the most important sources of deal flow is our expanding core of incumbent portfolio companies, We believe these opportunities provide attractive and differentiated investments and often reflect lower risk propositions as we typically have spent years observing a company's management team and operations. While these long-term secular trends continue to drive an expanding opportunity for Aries Capital, we've had to counteract what have undoubtedly been strong flows of new capital to the sector that have put more pressure on our investing business. In our view, newer entrants often acquiesce on terms and reduce pricing to win deals and to deploy their capital. Given our stringent underwriting criteria and the breadth of our deal flow, we're finding ourselves passing more and more and for a host of different reasons, including pricing and structure. The good news is we see a stable and slow growing economy. After a difficult end to 2018, the credit market spent most of 2019 with positive momentum and this has continued into 2020. The healthy financing environment is likely to remain, although we are seeing things slow a bit in terms of activity. U.S. companies, and investors are highly focused on the fact that we have an upcoming presidential election and the uncertainty that exists with a seemingly wide variety of potential outcomes at this point. There's also a belief that accommodative monetary policy and low interest rates for longer are needed to support growth in corporate America. With this in mind, we're not surprised to see a wait and see approach from a lot of deal sponsors and companies, particularly with regard to M&A activity. Finally, in these kinds of markets, we're focused on building deep sources of committed capital so that we are positioned to be opportunistic should market volatility increase. Since the beginning of 2019 through to today, we've strengthened our financial position by closing on an additional $4.1 billion of new financing capacity from both bank and capital markets providers. And we've extended maturities on over $3.5 billion of committed bank financing. Given this progress, we currently have approximately $3 billion of undrawn credit commitments and believe that our balance sheet continues to be a source of strength for our company. I'll now turn things over to Penny to provide some more detail on the fourth quarter and the full year results.