Ares Capital Corporation

Good morning and welcome to Aries Capital Corporation's fourth quarter and year-ended December 31st, 2021 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 9th, 2022. I will now turn the call over to Mr. John Stomar, Managing Director of Aries Investor Relations.

Thank you. But let me start with some important reminders. Comments made during the course of this conference call and webcasts 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 file. Barry's Capital Corporation assumes no obligation to update any such forward-looking statement. 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, 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's one method the company uses to measure its financial condition and results of operation. A reconciliation of core EPS to basic and diluted net income per share, 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 in respect to this information. The company's fourth quarter and year-end December 31, 2021 earnings presentation can be found on the company's website at www.AriesCapitalCorp.com by clicking on the fourth quarter 2021 earnings presentation link on the homepage of the investor resources section. Aries Capital Corporation's earnings release and .10k are also available on the company's website. I'll now turn the call over to Kip DeVere, Area's Capital Corporation's Chief Executive Officer. Kip?

Thanks, John. Hello, everyone, and thanks for joining our earnings call today. I'm here with our co-presidents, Michael Smith and Mitch Goldstein, and our Chief Financial Officer, Penny Roll, along with other members of the management team. I'll begin by providing some fourth quarter and full year highlights, and then discuss the current market and the company's positioning. This morning, we were delighted to report strong results for the fourth quarter and the full year. We generated record core earnings of 58 cents per share for the quarter and $2.02 per share for the year. Our financial results reflect the strongest quarterly and annual origination activity in our history. with $5.9 billion of commitments for the fourth quarter and $15.6 billion for the year, more than double that of either 2020 or 2019. On a GAAP basis, our fourth quarter earnings of 83 cents per share capped off a year with the second highest GAAP earnings in our company's history. GAAP earnings for the year were $3.51 per share, and included $258 million, or 58 cents per share, of net realized gains on investments. The strength of these earnings led to 12% growth in our net asset value per share during the year, which ended the year at an all-time high of $18.96. When you combine this NAV growth With our dividends paid during 2021, we generated a 22% economic return for our shareholders for the year. Before Penny takes you through our results in more detail, I'd like to take some time to highlight our positioning in the $1.5 trillion and growing U.S. direct lending market and to discuss some of the drivers behind our strong investment activity. We believe that our opportunity set continues to widen as borrowers are increasingly turning to private capital as a preferred source of financing for acquisitions and the growth needs of their businesses. There's been a noticeable change in the increasing size of the companies seeking our financing solutions. Over the past five years, the average EBITDA of the companies we review has increased by over 60%. and the number of companies that we reviewed with EBITDA over $100 million has more than tripled. We're also seeing a wider range of opportunities that span both the sponsored and non-sponsored market, as private credit seems more far-reaching and more valuable to companies than ever before. We also continue to invest with our model of flexible capital for virtually any situation. What that means... is that we're happy to customize solutions for companies with capabilities in senior, unit tranche, and subordinated debt, as well as preferred non-controlled common equity. This is valuable to our borrowers and another reason that we believe that we can drive higher originations and still maintain our rigorous standards for credit quality, documentation, and deal terms. We are, however, seeing more competition in this growing to fragmented market. In our opinion, many of our competitors do not always act rationally with respect to credit quality, pricing, leverage, documentation, and other important considerations. But despite the competition and fragmentation, we believe we maintain a strong competitive position, and we continue to take market share. In 2021, the estimated dollar volume of the transactions we reviewed grew to more than $550 billion. In comparing the growth of our reviewed transaction volume to market sources, we note that our volume increased 50% faster than the reported market since 2019. We believe these market share gains and the resulting scale afford us the luxury of being highly selective. Today's market is one where we do have to turn away some businesses that we like, simply because we don't like the structure of the deal, the pricing, or perhaps the proposed loan documentation. We compete for and pursue deals when we want to, but importantly we also have the platform, experience, and deal flow to walk away from situations if we have to. The key to being able to say no is that we have a robust set of opportunities to choose from, larger than we ever have in the past. As the market's grown, we've scaled our direct origination capabilities along with it, building what we believe is the largest direct lending platform in the United States with 145 investment professionals and a strong operational platform. The scale of this team has led to significant market coverage, allowing us to transact with over 420 different sponsors and more than 200 non-sponsored companies since our IPO. Our team remains highly tenured and cohesive, as our investment advisors, investment committee members average 27 years of experience, and importantly have an average tenure of 17 years with Aries Management. This ability has created an institutionalized credit process that's supported in our growth, and we have a consistent market approach with sponsors and companies. In addition to the scale of the U.S. Direct Lending Team here, we benefit from the additional 175 investment professionals in the ARIES Management Credit Group and another 440 investment professionals across the broader ARIES Management Platform who are engaging with companies and sponsors on a daily basis. We believe that our advisors and investment professionals' shared experiences, insights, and deep local relationships further enhance our market presence and our underwriting capabilities. And ultimately, we believe that these advantages are reflected in the health and performance of the portfolio. Our portfolio credit quality remains among the strongest in our company's history, and we ended the year with our non-accruals at a 14-year low. Additionally, we believe our long-standing focus on market-leading companies with high free cash flows and resilient industries has positioned our portfolio to avoid segments of the economy that are likely to be more negatively impacted by recent inflation and supply chain disruptions. As a result, our portfolio companies have demonstrated solid earnings growth throughout the year. The last 12-month weighted average EBITDA growth of our portfolio companies was 16% this quarter, the highest since we began tracking this information over a decade ago. Given the strength of our portfolio's performance and our positive view of the company's earnings power, we are raising our quarterly dividend for the second time in 12 months to $0.42 per share. We believe this step further builds on our consistent track record of generating meaningful shareholder value. Through the quarter ended September 30, 2021, which is the latest full reporting quarter for BDCs, Aries Capital has delivered the highest regular base dividend per share growth rate and the highest NAV per share growth rate over the past five and 10 year time periods among any externally managed BDC with a market cap of over $700 million. Furthermore, in recognition of the strengths of our 2021 earnings, including another year of net realized gains from the portfolio, and the continued growth in our excess undistributed earnings, we will pay additional dividends to shareholders totaling 12 cents per share for 2022. We intend to pay these special dividends of 3 cents per share each quarter this year. With that, let me turn the call over to Penny to provide more details on our financial results and some further thoughts on the balance sheet positioning.