WhiteHorse Finance, Inc.

Your program is about to begin. If you need assistance during today's program, please press star zero. Good morning. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Whitehorse Finance First Quarter 2024 Earnings Conference Call. Our hosts for today's call are Stuart Aronson, Chief Executive Officer, and Joyce and Thomas, Chief Financial Officer. Today's call is being recorded. And a replay is available through a webcast in the investor relations section of our website at whitehorsefinance.com. 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 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. If you should require operator assistance again, you may press star 0. It is now my pleasure to turn the call over to Robert Brindberg of Rosen Company.

Please go ahead. Thank you, Mike, and thank you, everyone, for joining us today to discuss Whitehorse Finance's first quarter 2024 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 relating to 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 can 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 first quarter 2024 earnings presentation, which was posted to our website this morning. With that, allow me to introduce Whitehorse Finance's CEO, Stuart Jensen. Stuart, you may begin.

Thank you, Rob. Good morning. And thank you for all of you for joining today. As you're aware, we issued our earnings this morning prior to market open. And I hope you've had a chance to review our results for the period ended March 31st, 2024, which can also be found on our website. On today's call, I'll begin by addressing our first quarter results and current market conditions. Joyce and Thomas, our chief financial officer, will then discuss our performance in greater detail, after which we will open the floor for questions. I'm pleased to report continued strong performance for the first quarter of 2024. Q4 GAAP net investment income in core NII was 10.8 million, or 46.5 cents per share, which more than covered our quarterly base dividend of 38.5 cents per share. This represents a slight increase from Q4 GAAP and core NII of 10.6 million, or 45.6 cents per share. NAV per share at the end of Q1 was 13.50, representing a 1% decrease from the prior quarter, NAV per share was negatively impacted by net markdowns on our portfolio totaling $5.2 million, the majority of which related to a markdown in equity warrants in Seagate Corporation, which I will discuss shortly. The NAV decrease was partially offset by the excess of core NII over our quarterly dividend. Turning to portfolio activity in Q1, gross capital deployments totaled $55 million, with $44.7 million funding five new originations and the remaining 10.3 million funding add-ons to existing investments as activity remained reasonably strong. In addition to the add-ons, there were 0.8 million in net fundings made for revolver commitments. Of our five new originations in Q1, two were sponsor deals and three were non-sponsor deals with an average leverage of approximately three and a half times that to EBITDA. All of these deals were first lien loans, with an average spread of 730 basis points and an average all-in rate of 12.6%. I note that both of these statistics are attractive from a historical and current market perspective. During the quarter, the BDC transferred two of these new deals and one existing investment to the Ohio STRS-JV, totaling $8.5 million. At the end of Q1, 99% of our debt portfolio was first lien, senior, secured, And our portfolio mix was approximately two-thirds sponsor and one-third non-sponsor, which is consistent with the prior quarter. In Q1, total repayments and sales were 43.4 million, primarily driven by five complete realizations and one partial realization. We expect repayment activity to remain relatively high, particularly for credits that are more than two years old, where call protection has expired or is more limited. In some cases, deals will be repriced and we will evaluate risk and return on a case-by-case basis to determine whether we want to follow credits into the current more aggressive market environment. Thus far in Q2, we've had 115, sorry, we've had 15 million in full repayments and sales. With repayments and JV transfers mostly offsetting our deployment activity, the company's net effective leverage increased slightly to 1.19 times and remains below the lower end of our target leverage range. So long as our portfolio remains heavily concentrated in first lien loans, which have lower risks than second lien loans, we expect to continue to run the BDC at up to 1.35 times leverage. With that in mind, I'll now step back to bring our entire investment portfolio into focus. After the effects of net repayments and STRS-JV transfers, as well as 0.8 million in net mark-to-market increases and 6.1 million of realized losses, the fair value of our investment portfolio was 697.9 million at the end of Q1. This compares to our portfolio fair value of 696.2 million at the end of the previous quarter. The weighted average effective yield on our income-producing debt investments was 13.7% as of the end of Q1, unchanged from the end of last year. We continue to utilize the STRS-JV successfully. The JV generated investment income to the BDC of approximately $4.8 million in Q1, up from $4.2 million in Q4. As of March 31st, the fair value of the JV's portfolio was $309.4 million, and at the end of Q1, the JV's portfolio had an average unlevered yield of 12.4%, consistent with Q4. The JV is currently producing an average annual return on equity in the mid-teens to the BDC. We believe Whitehorse's equity investment in the JV provides attractive returns for our shareholders. Transitioning to the BDC's portfolio more broadly, there are some markdowns in the portfolio during Q1, most notably there was a $3.5 million markdown to our equity investment in Seagate Corporation. We exited the Seagate loan several years ago, and due to covenant defaults at the time, we were granted warrants equal to at least 17% of the company. I should note that we had no cash basis in these warrants. In any event, Seagate went out of business in Q1, and we therefore marked the warrants down to zero. There were some other modest markdowns in three other credits, including in New Cycle Solutions, also known as Navigup, which was placed on non-accrual in the quarter. Markdowns were more than offset by reversals of aggregate prior unrealized losses upon the realization in Crown Brands' second lien investment and the restructuring of Atlas Purchaser, which is also known as Aspect Software. We resolved the Crown Brands loan in Q1 by selling it back to the sponsor who was running the company. Although the loan was sold at a discount, we were able to sell it at a price that it was a premium to where the loan had been valued at the end of Q4. We also participated in a restructuring of our position in Atlas Purchaser, also known as Aspect Software, which resulted in a portion of the investment to incur a realized loss. New cycle was the only credit moved to non-accrual during the quarter. And at the end of Q1, investments on non-accrual total 1.3% of our debt portfolio at fair value compared with 2.5% at the end of Q4. Naviga is in a sale process and values for the company have unexpectedly come in at a modest discount to the value of the debt. We have therefore marked the asset to a level that we think is consistent with where the company will be sold. American Crafts and ArcServe remain on non-accrual status. You may recall that we have a control position in American Crafts, and we along with other lenders took control of ArcServe earlier in Q1. We are continuing to work with our restructuring resources and our private equity resources to turn those companies around and maximize value. The trends we're seeing in both these accounts are positive relative to where they were one quarter ago. Across the portfolio generally, we see balanced activity in terms of credit performance, and remain overall pleased with the health and relative stability of our debt portfolio. The cyclical accounts are continuing to be surprisingly strong, and the accounts that are having trouble are either facing the consumer market or have idiosyncratic problems that we have discussed in the past. As always, we remain vigilant in monitoring our portfolio of companies. We have not seen demand weakness in other sectors, including general industrial, B2B, healthcare, TMT or financial services. Additionally, our portfolio includes mostly non-cyclical or like cyclical borrowers. We hold no direct exposure to oil and gas, auto, new home construction, or restaurants. The vast majority of our deals have strong covenant protection, and we are finding that in most cases, the private equity firms we partner with are supporting their credits with new cash or contingent equity as needed. Turning to the broader lending market, Lenders have gotten significantly more aggressive in terms of credit, documents, and price, a continuation of the trend that we saw emerging in Q4. As Q1 progressed, we saw a modest increase in M&A activity coming out of the sponsor market and the non-sponsor market. Despite that modest increase, there is still a significant supply-demand imbalance in favor of borrowers since direct lending shops that are coming off of poor volume numbers in 2022 and 2023 are trying to make sure they hit their budgets and again are willing to be more aggressive to make that happen. We've definitely seen a shift all the way from broadly syndicated market into upper mid market and also the mid market and lower mid market. The degradation of the market has been most severe in the sponsor market where leverage is up half a turn to a turn and loan to value is now 55 to 65%. More middle market deals are being done with no financial covenants, and pricing has come down 100 to 150 basis points from last quarter. This decline came suddenly, and we have not seen a reversal of that in Q2. The upper mid-market has seen prices decline to where deals are now priced at SOFR 450 to SOFR 525. The mid-market and lower mid-market are pricing deals more in the range of SOFR 500 to SOFR 575. The shift in the non-sponsor market has thankfully been less dramatic. Credits are still at three to four and a half times leverage and pricing has come down by only about 50 basis points. What we have seen over time is that the non-sponsor market is less volatile than the sponsor market because there's less competition and it's harder for lenders to access the non-sponsor market. As I alluded to earlier, the deals that we did in 2022 and 2023 for the most part still have call protection And we're doing a good job of holding on to prices we captured in those years when the markets were much more favorable to lenders with pricing typically at 650 to 750 on both sponsor and non-sponsor deals. In the current market environment, we're being very cautious in our deal sourcing with on-the-run sponsors, and our focus remains on the off-the-run sponsor market and non-sponsor business where market terms remain comparatively more attractive. Because of our ability to access the off-the-run sponsor market and non-sponsor market, we are still commanding higher prices than what you see in the upper mid-market or mid-market in general. With respect to the broader economy, recent data indicates that inflation will continue at a higher level than what the Fed is targeting. We agree with the current thinking that there will be somewhere between zero to two rate cuts in the balance of the year, probably happening later in the year. As a result, we expect slower economic growth through 2024 into 2025. The year started out slowly in terms of pipeline, which is normal from the beginning of the year, but we did enter the year with a decent backlog of deals, most of which were non-sponsor. Our pipeline is ground as we move through the first half of the year due in part to our sourcing model, which allows us to source deals in corners of the market where there's less competition, including the off-the-run sponsor market and the non-sponsor market. Our three-tier sourcing architecture continues to provide the BDC with differentiated capabilities, and we continue to derive significant advantages from the shared resources and affiliation with HIG, who is a leader in mid-market and lower mid-market. Whitehorse has approximately 22 origination professionals located in 11 regional markets across North America. The strength of the origination pipeline enables us to be conservative in our deal selection. Following repayment activity in Q1, the BDC balance sheet has approximately $40 million of capacity for new assets at our target leverage range. The JV has approximately $50 million of capacity, supplementing the BDC's existing capacity. With the move in the markets, deals that are priced below SOFR 600 are targeted for the JV. Those priced at 600 or above are largely targeted for the BDC balance sheet. We're actively working on 11 new mandates and add-on acquisitions. Of the new platform mandates, the majority are non-sponsored deals. While there can be no assurance that any of these deals will close, all of these mandates could fit within the BDC or our JV should we elect to transact. Subsequent to quarter end, we have closed two new originations and three add-ons to existing portfolio companies with several more pending. Of the new originations, one investment was transferred to the JV during the second quarter. We also transferred two add-on investments to the JV in the second quarter. In short, activity continues to pick up, and we remain cautiously optimistic that the market will remain conducive to Whitehorse. Despite sustained concerns of economic softening, we believe we are well positioned to continue to source attractive opportunities, navigate economic challenges due to our rigorous underwriting standards, and continue delivering to our shareholders. With that, I'll turn the call over to Joycen for additional performance details and a review of our portfolio composition. Joycen?