Ares Capital Corporation

Good afternoon. Welcome to the Aries Capital Corporation's third quarter and its September 30th, 2021 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Tuesday, October 26th, 2021. I will now turn the conference over to Mr. John Stilmar, Managing Director of Aries Investor Relations.

Thank you. Let me start with some important reminders. Comments made during the course of this conference call and webcast and the accompanying documents contain forward-looking statements and are subject to risks and uncertainties. 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 filing. Aries 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 financial measures as defined by SEC Regulation G, such as core earnings per share or core EPS. The company believes that core EPS provides useful information to investors regarding 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 8K. Certain information discussed in this conference call and the accompanying slide presentation, including information relating to portfolio companies, was derived from third-party sources and has not been independently verified. And accordingly, the company makes no representation or warranty with respect to this information. The company's third quarter ended September 30th, 2021 earnings presentation can be found on the company's website at www.ariescapitalcorp.com by clicking on the third quarter 2021 earnings presentation link on the homepage of the investor resources section. Aries Capital Corporation's earnings release and 10Q are also available on the company's website. I'll now turn the call over to Kip DeVere, Aries Capital Corporation's Chief Executive Officer.

Thanks a lot, John. Hello, everyone, and thank you for joining the call today. I'm here with our co-presidents, Mitch Goldstein and Michael Smith, our chief financial officer, Penny Roll, and several other members of the management team. I'll begin by providing some third quarter highlights and then discuss the current market and the company's positioning. This morning, we reported third quarter core earnings of 47 cents per share, up from 39 cents per share a year ago. and well ahead of our 41 cent per share dividend. Our third quarter gap earnings per share of 73 cents included $150 million of net realized and unrealized gains, which drove our net asset value to a new record of $18.52 per share. Our NAV is now about $1.20 per share higher than the NAV pre-pandemic. With this rising NAV, we've generated $110 million of realized gains in excess of losses since the onset of the pandemic, which I believe is a real achievement for a debt-oriented portfolio and is worth calling out. This continued increase in NAV demonstrates not only the quality of our underwriting and the benefits of our approach to portfolio construction, but also the strength of our risk management efforts and our portfolio management team. These gains add to our industry-leading track record. The company has now generated over a billion dollars in net realized gains since our IPO in 2004. We believe we are one of the few business development companies that has demonstrated an ability to pay a stable dividend while growing our NAV over an extended period of time and through multiple credit cycles. In terms of the current market, we believe we are benefiting from an expanding opportunity set And we believe we've increased our market share in this large and growing industry. The US economy is experiencing well above average economic growth, and this remains a positive driver of transaction activity. Companies and sponsors are increasingly seeking growth capital to support the execution of organic and M&A driven business plans. Additionally, private capital solutions are now increasingly accepted by larger companies. who see value in our flexible capital, partnership approach, and our ability to provide certainty of close. As these market trends accelerate, we've seen the size of our portfolio companies grow. And today, the weighted average EBITDA of our portfolio companies has increased to $157 million, compared to $67 million just five years ago. We believe our company is now operating with a wider fairway for deal opportunities in an expanding market for direct lenders in the US. The company's exceptional team, scale and market tenure, coupled with the many platform advantages we can harness at Aries, have all permitted us to expand our share in what we believe to be a $1.5 trillion addressable market. As evidence of this trend, Our pipeline of reviewed transactions has increased almost four times faster than Refinitiv's view of the reported middle market since 2019. In order to achieve this market share growth, we continue to build upon our relationships with sponsors and middle market companies. We believe our track record of working with private equity sponsors during our 17 years as a public company is unmatched, and we continue to benefit from the continued growth in private equity. We've closed transactions with more than 400 sponsors, but we're continuing to expand our leading roster of private equity relationships, with over 15% of the deals completed this quarter being with new sponsors. Beyond our sponsor relationships, we continue to develop our coverage of non-sponsored transactions. Over the past five years, we've focused more intently on expanding these capabilities and now have dedicated specialized teams in software, healthcare services, financial services, and sports media and entertainment, all aimed at going direct to companies seeking financing. We are seeing these focused industry groups contribute meaningfully to the growth of our non-sponsored business. And over the past four quarters, our non-sponsored total commitments grew over 30% when compared to the full year 2019. In addition to these sourcing advantages, our team continues to focus on the existing portfolio and robust risk management. Our portfolio companies are generally demonstrating strong underlying financial performance. And in the third quarter, the weighted average annually EBITDA growth rate of our portfolio companies increased 13%, more than double the conference board's expected GDP growth for 2021. This strong growth in profitability of portfolio companies reflects our long-standing focus on selecting high free cash flow companies in defensive industries with relatively inelastic demand for their products and services. For example, our three largest industries, software and services, healthcare services, and commercial and professional services, which represent about 40% of the portfolio today, are demonstrating 30% faster EBITDA growth on average than the overall portfolio as a whole. We believe this orientation to defensive industries and downside protection has positioned our portfolio away from segments of the economy that are likely to be negatively impacted by commodity inflation and the current supply chain disruptions that we are witnessing generally. With strong overall portfolio credit metrics, It's also worth noting that our non-accrual rates at cost declined this quarter and are now below our historical average. With that, let me turn the call over to Penny to provide more details on our third quarter results and some updates on the balance sheet.