WhiteHorse Finance, Inc.

Good afternoon. My name is Brittany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Whitehorse Finance Third Quarter 2021 Earnings Conference Call. At this time, our hosts for today's call are Stuart Aronson, Chief Executive Officer, and Joyce Thomas, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 5 p.m. Eastern Standard Time. The replay dial-in number is 402-220-9185. Please note, no passcode is required. 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 keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company.

Thank you, operator, and thank you, everyone, for joining us today to discuss Whitehorse Finance's third quarter 2021 earnings results. Before we begin, I would like to remind everyone that certain statements which are not based on historical facts made during this call, including any statements related to the 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 third quarter 2021 earnings presentation, which was posted on Whitehorse Finance's website this morning. With that, allow me to introduce Whitehorse Finance's CEO, Stuart Aronson. Stuart, you may begin. Thank you, Rob.

Good afternoon, and thank you all for joining us today. As you're aware, we issued our press release this morning prior to market open, and I hope you've had a chance to review our results from the period ended September 30th, 2021, which can also be found on our website. On today's call, I'll start by addressing our third quarter results and market conditions, and Joyce and Thomas, our Chief Financial Officer, will then discuss our performance in greater detail after which we'll open the floor for questions. I'm pleased to report the strong third quarter performance. In the third quarter, core NII was 7.8 million, or 37.2 cents per share, covering our dividend of 35.5 cents, and up from Q2 core NII of 7 million, or 33.8 cents per share. NII was higher than the previous quarter, primarily due to higher fee income, and accelerated OID amortization driven by repayment activity. I note that this is the company's 36th consecutive quarterly distribution paid since our IPO in 2012, with all distributions consistent at the rate of 35.5 cents per share per quarter. I think this speaks to both the strength of the platform and the deal sourcing capabilities, as well as our historically conservative approach to deal structuring. As we announced on October 14th, the increase in net investment income and realized gains caused us to declare a special distribution of 13.5 cents per share, which will be payable on December 10th of 2021 to stockholders of record as of October 29th, 2021. We achieved modest NAV accretion in the quarter, with NAV per share increasing to 15.46 compared to 15.42 in Q2, driven by NII in excess of our 35.5-cent dividend and markups within our portfolio. When adjusting for special dividends paid in prior years, our pro forma Q3 NAB per share reached a record level for the second consecutive quarter. Q3 was another strong period for capital deployments, totaling $122.5 million across seven new originations. This investment activity enabled us to grow the portfolio by 2.5% from Q2, net of repayments, and after the favorable impact of unrealized gains on our investments. $123 million of gross deployments were partially offset by repayments of $73 million, which included $47 million of refinancings from source code, education dynamics, and NNA services, dispositions of $2 million, and principal repayments of $25 million, excluding revolvers. The result was net deployment value of $49 million. Of our seven new originations, five were sponsor and two were non-sponsor, with an average leverage level of only 4.2 times. I note that these deals were all first lien, and at the end of the third quarter, 95% of our debt portfolio was first lien and 100% of it was senior security. Sponsor loans comprise 67% of our portfolio, which was in line with Q2. We continue to be pleased with our pace of capital deployment, despite the active M&A market driving elevated repayments. Our weighted average effective yield on income-producing debt investments was 9.3% in Q3, slightly below Q2 levels at 9.5%. Now stepping back to bring our entire investment portfolio into focus, Our investment portfolio achieved an increase in the fair value, reaching $687 million at the end of Q3, up from $671 million at the end of Q2. Non-accruals represented only 1.3 percent of our debt portfolio, compared to 1.5 percent based on fair value in Q2. This decrease is driven primarily by the increase in fair value of our portfolio, as the Group Ohima investment remains the only non-accrual as of September 30th. Now, after the quarter closed, we received updated information on Group Ohima. Based on this information and subject to further performance updates and market conditions, we expect to mark the position down by another 5 to 15 cents of par by the end of Q4. The investment is expected to be on non-accrual until restructuring negotiations with the company conclude. Many of our portfolio companies have experienced supply chain issues and inflationary pressures, including higher shipping costs. Thankfully, so far, most of these borrowers have been able to pass cost increases to their customers to offset these higher costs. We continue to successfully utilize our JV with SDRS Ohio. which generated investment income to the BDC of approximately $1.8 million in the quarter, as compared to $2.1 million in Q2. During the third quarter, we contributed an additional $46 million of investments into the JV portfolio. The fair market value of the JV's portfolio was $239 million as of September 30th. The JV's portfolio had an average unleveraged yield of 8% at the end of Q3. a slight decline compared to its Q221 average yield of 8.1% at a portfolio size of $210 million. The JV's portfolio is also comprised exclusively of first lien senior secured loans. We remain pleased with the income contribution from the JV. We believe it supports the higher returns for shareholders and is particularly relevant given the current market backdrop. Once the existing JV capital commitment of $75 million for WHF is deployed, WHF is likely to allocate an additional $25 million or more of commitments into this program to continue to generate attractive returns for Whitehorse Finance and our shareholders. As a result of repayments and transfer of certain investments into the JV, leverage at the end of Q3 was 1.19 times for WHF, approaching our target range of one and a quarter times. During the last quarter, we previewed that our leverage may approach or exceed the top of our targeted range in the near future due to evolving market backdrop and short-term expectations around repayments. We expect to see repayments over the next two quarters due to an uptick in M&A activity and the refinancing of certain existing credits in Q4. Offsetting the expected increase in repayments, we continue to build a strong pipeline. The market is quite busy with a mix across sponsor and non-sponsor deals, and our weekly investment pipeline often includes more than 150 deals. The sourcing process is becoming more competitive, particularly for the on-the-run sponsor deals where pricing, leverage, and documentation terms have returned fully to pre-COVID levels. In addition, heavily adjusted EBITDA levels are often being offered by competitors and we are frankly walking away from more deals than we have in the recent past. While we expect our origination activity levels to remain high, we generally have a cautious approach and continue to underwrite to conservative downside scenarios. Documentation terms and EBITDA adjustments in the off-the-run sponsor market, which are the smaller sponsors, are less aggressive. We continue to have a significant off-the-run sourcing advantage due to our presence in 12 regional markets, Consistent with prior quarters, there is less competition for non-sponsor deals as well, where we continue to source attractively priced transactions at attractive leverage profiles. Whitehorse continues to have differentiated sourcing capabilities through our three-tier architecture. We continue to derive significant advantages from the shared resources and affiliation with HIG, who is a leader in the mid-market. The Whitehorse platform includes 63 deal professionals, dedicated to direct lending, and HIG gives us a 20-plus person business development team leveraging HIG's proprietary prospect database, and we also get additional sourcing at the HIG level from over 400 investment professionals across the firm. Our sourcing drives a high-quality pipeline in markets with less competition for mandates. Our strategy and competitive advantages continue to result in a momentum in our originations business, Thus far in Q4, we have closed five deals and are working on an additional 14 mandates with targeted closings in Q4 and Q1 of 2022. Three of the five closed deals are sponsor, and eight of the mandated deals are sponsor, split between new originations and add-ons. At this stage, we expect the fourth quarter will produce one of the highest origination volume quarters we've ever generated through our platform, which positions us well to deploy the proceeds from our recent issuance of primary shares. This exceptional pipeline growth and these mandated deals are enabling the BDC to drive portfolio growth and grow the JV, which will ultimately lead to higher income levels and greater coverage of our dividend. In closing, we're well positioned to continue executing our three-tiered sourcing approach and rigorous underwriting standards through the last quarter of 2021 and into the new year, Our portfolio as a whole remains very high quality and healthy. Together with a strong pipeline of investment opportunities due to expected repayments, our fee income could ramp up in the final quarter, allowing for continued dividend coverage by core NII. We remain cautious about cyclical industries and the lingering effects of the pandemic and are underwriting deals with these risks in mind. The evolving credit environment also continues to create uncertainty and could impact both portfolio performance and the rate of new asset origination. Nonetheless, we believe our platform is well-positioned to drive portfolio growth and compelling returns to our shareholders. With that, I'll turn the call to Joyce for additional performance details and a review of our portfolio composition. Joyce, go ahead.