Ares Capital Corporation

Good morning. Welcome to Aries Capital Corporation's second quarter, June 30th, 2024 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Tuesday, July 30th, 2024. I will now turn the call over to Mr. John Stillmer, partner of Aries' Public Markets Investor Relations. Please go ahead.

Thank you very much, and 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. The comments' 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 measures as defined by FCC Regulation G, such as core earnings per share or core EPS. The company believes that core EPS provides useful information for investors regarding the financial performance because it is one method the company uses to measure its financial condition and results of operations. A reconciliation of GAAP net income per share, the most directly comparable GAAP financial measure to core EPS, 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, is 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 second quarter June 30, 2024 earnings presentation can be found on the company's website at www.AriesCapitalCorp.com by clicking on the second quarter 2024 earnings presentation link on the homepage of the investor resources section of the website. Aries Capital Corporation's earnings release and form 10-Q are also available on the company's website. I'd like to now turn the call over to Mr. Kip DeVere, Aries 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, Mitch Goldstein and Cord Schnabel, our chief operating officer, Jana Markowitz, our chief financial officer, Scott Lim, and other members of the management team. I'd like to start the call by highlighting our second quarter results, and we'll follow that with some thoughts on the economic environment and the current market. This morning, we reported another quarter of strong core earnings of 61 cents per share. Our core earnings per share increased 3% from the prior quarter and 5% from the prior year. These results were driven by a continued attractive investment environment, healthy credit performance, and an acceleration of investing activity in a more active transaction environment. We believe we continue to see the benefits of our well-established platform and significant scale in direct lending. We reported record NAV per share of $19.61 this quarter, which is up 6% year over year, and we provided a healthy quarterly dividend. Over the past year, Aries Capital has generated among the best growth in NAV amongst its peer group of externally managed BDCs with over $1 billion of market capitalization. Throughout the second quarter of 2024, we saw a healthy and improving market environment for companies seeking our flexible capital solutions. And we observed a particularly clear acceleration in private equity sponsor activity as most sponsors are seeking capital to support the growth of their portfolio companies and exit investments as they work to increase distributions from aging fund vintages. Against this backdrop, direct lenders have continued to represent a meaningful part of leveraged buyout transactions during the quarter, underscoring the importance of direct lending solutions in the current market. In conjunction with this more active market, we saw meaningful growth in deal flow during the second quarter. Specifically, we reviewed 40% more new transactions compared to the prior quarter, resulting in an estimated $185 billion in total quarterly deal volume reviewed. For some context, this amount exceeded the completed transaction volume reported in the broader institutional loan market for the second quarter. Many of you know our philosophy has always been to out-originate the competition, which we believe is a key contributor to driving deal selection and strong long-term credit performance. And although we increased our $3.9 billion in originations threefold from the same quarter a year ago, our overall selectivity rate remained consistent in the mid-single digits. We believe that our deep origination and longstanding relationships put us in a better position to say no if we need to and move on to the next transaction when terms are not favorable. Despite operating in a more competitive market, our originated investments for the quarter have characteristics that we believe are highly attractive. Specifically, our second quarter originations had a weighted average loan-to-value of below 40 percent, all in yields of approximately 11 percent, and leverage levels nearly a half-turn below our weighted average over the past three years. Furthermore, the originated yield per unit of leverage which we view as one measure of the risk-adjusted return in the current rate environment, was 10% higher than the recent three-year average. Moving on, our portfolio also continues to perform well, and companies have adjusted well to the higher base rate environment. Our non-accrual rates declined quarter over quarter and remain at levels well below industry averages. In addition, the fair value of our risk-rated one and two loans, which are typically our underperformers and watch list names, also declined from the first quarter. The LTM EBITDA growth of our portfolio companies continued to accelerate now for the third consecutive quarter. The organic weighted average LTM EBITDA growth of our portfolio companies reached 12% in the quarter, which is roughly double the rate from a year ago. We see the positive impact of this portfolio company performance driving stable to slightly improving portfolio company interest coverage ratios and declining overall portfolio leverage levels, now reaching the lowest level we've seen in four years. The current pickup in the liquid capital markets environment has also allowed us to enhance our capital base by accessing attractive forms of financing and extending the duration of our committed debt facilities. As Scott will discuss further during the quarter, we access both secured and unsecured funding markets at levels that we believe are amongst the best in our industry. With that, let me turn the call over to Scott to provide some more details on our financial results and some further thoughts on the balance sheet.