WhiteHorse Finance, Inc.

Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the White Horse Finance Third 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 will be made available for replay beginning at 4 p.m. Eastern Time. The replay dial-in number is 402-220-6085. 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 1 on your telephone keypad. If you wish to remove yourself from the queue, please press star 2. It is now my pleasure to turn the floor over to Robert Ringberg of Rosen Company. Please go ahead.

Thank you, Jamie, and thank you, everyone, for joining us today to discuss Whitehorse Finance's third quarter 2024 earnings results. Before we begin, I'd 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 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 2024 earnings presentation, which was posted on our website this morning. With that, allow me to introduce Whitehorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

Thank you, Rob. Good morning, everybody, and thank you all for joining us 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 ending September 30th, 2024. which can also be found on our website. On today's call, I will begin by addressing our third 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. Our results for the third quarter of 2024 were disappointing, as our investment portfolio declined this quarter due to net realized and unrealized losses, which impacted our financial performance. Q3 gap net investment income in core NII was $9.2 million, or $0.394 per share, which exceeded our quarterly base dividend of $0.385 per share and was slightly below Q2 gap in core NII of $9.3 million, or $0.40 per share. NAV per share at the end of Q3 was $1,277, representing a 5.1% decrease from the prior quarter. NAV per share was impacted by net markdowns on our portfolio, totaling 15.9 million, the majority of which related to markdowns on American Crafts and Honors Holdings, which I will discuss shortly. Turning to our portfolio activity in Q3, we had gross capital deployments of 51 million, which was partially offset by total repayments and sales of 30.2 million, resulting in net deployments of 20.8 million. Gross capital deployments of 51 million consisted of seven new originations, totaling $49 million, with the remaining 2 million used to fund four add-ons to existing investments. Of our seven new originations in Q3, three were non-sponsor and four were sponsor deals, with the average leverage of approximately 4.13 times debt to EBITDA. All of our Q3 deals were first lien loans, with an average spread of 575 basis points. and an average all-in rate of 10.8% compared to 11.8% in the second quarter of 2024. During the quarter, the BDC transferred three new deals and one add-on to the STRS-JV. At the end of Q3, the STRS-JV total portfolio had an aggregate fair value of $309.8 million and an average unleveraged yield of 11.7% compared to 12.3% in Q2. Leverage for the JV at the end of Q3 was 0.97 times compared with 1.08 times at the end of the prior quarter. We continue to utilize the STRS-JV successfully and believe Whitehorse's equity investment in the JV continues to provide attractive returns for our shareholders. At the end of Q3, 99% of our debt portfolio was first lien, senior, secured, and our portfolio mix was approximately 63% sponsor and 37% non-sponsor. In Q3, total repayments and sales were $30.2 million, primarily driven by two complete realizations and one partial repayment and one partial sale. After the effects of deployments, repayments, and STRS-JV transfers, as well as $15.9 million in net mark-to-market decreases and the $1.3 million of accretion, the total value of our investment portfolio was $654.3 million. This compares to our portfolio's fair value of $660 million at the end of the previous quarter. The weighted average effective yield on our income-producing debt investments was 13.1% at the end of Q3 compared to approximately 13.8% in the second quarter of 2024 and 13.6% in the third quarter of 2023. Transitioning to the BDC's portfolio, the challenges in this quarter generally do not relate to the overall economy, but rather are more company-specific. We are working with experts within HIG to optimize the outcomes of workout accounts. The balance of the portfolio is generally stable. During the quarter, we took a $6.6 million write-down on American crafts, and are currently seeking to either restructure or sell the company. The company's previously challenged performance was further impacted by the loss of a material customer in the quarter. While we continue to execute improvement initiatives, we believe we have the asset marked consistent where it might be sold to a strategic player. We also took a $5 million write-down on honors holdings, reflecting continued challenging industry conditions with a slowdown across many fitness concepts reflected in ongoing weak customer trends. We had previously placed the company on non-accrual status in the second quarter. We continue to work with the franchisor of the company to restructure the honors holding credit and to try to ultimately improve the company's performance. And we, as the lender, have taken control of this credit. At the end of the third quarter, we also placed Telestream on non-accrual status, which resulted in a $0.9 million write-down. We recognized approximately 557,000 of income from the credit in Q3, while reversing our approximately 300,000 in accrued interest. While the company continues to generate significant EBITDA, we are focused on restructuring Telestream, and our current expectation is that part of the loan will be back on accrual status within two quarters, and hopefully even sooner. Non-accrual investments totaled 5.6% of the total debt portfolio compared with the prior quarter of 3.6% of the total debt portfolio. Turning to the lending market in general, conditions across all sponsor segments remain very aggressive. There continues to be a shortage of new quality deal flow, and what is in the market is at very thin pricing. We've seen middle market pricing compressed down to spreads of SOFR 475 to SOFR 525, and lower mid-market spreads moved to approximately SOFR 475 to SOFR 575. From our perspective, we believe there is excessive leverage on a lot of credits that have cyclicality, and we are not participating in those transactions. There's a more attractive backdrop in the non-sponsor market, where the market continues to support leverage of only three to four and a half times, and pricing tends to be between SOFR 600 to SOFR 800. We are redoubling our efforts to focus on the non-sponsor market where there is better risk return in many cases and much less competition than what we are seeing in the on-the-run sponsor market. In the on-the-run sponsor market, we see generally very aggressive terms and therefore focusing more on the off-the-run sponsor market and the non-sponsor market. Fourth quarter volume is likely to be modest compared to other fourth quarters. Generally, supply and demand is out of balance with lender stretching too far for the better credits. For example, what we see on many of the better credits is the leverage is often so high that the cash flows are not greater than a 1.0 fixed charge coverage level. More broadly, while we continue to think there will be some declines in interest rates, we are also concerned that we could have government budgets that could put pressure on inflation based on the current policies of our new elected president. So we do not necessarily believe SOFR will come down as far as the yield curve indicates, which is probably good news for the BDC, but it means we're being careful on debt service coverages. We have also continued to see some softening in the economy based on interest rates having been high over the last several years. Subsequent to quarter end, the BDC closed one new investment and a few add-ons to existing credits, totaling approximately $7.5 million, and has had repayments of approximately $21 million, including three full realizations. The JV in the third quarter had repayments for three investments for approximately $35 million, following net repayment activity in Q3, and pro forma for several transactions in early Q4, and the special distribution we announced in October, the BDC balance sheet has approximately 45 million capacity for new assets. The JV has approximately 90 million of capacity, supplementing the BDC's existing capacity. Given the decline in pricing, we continue to expect repayment activity to remain high for the balance of this year and into 2025. While volume is lighter than we'd like it to be in all market segments, our pipeline is still at about 185 deals. We currently have seven new mandates, and are working on four add-ons to existing deals. While there can be no assurance that any of these deals will close, all of these credits would fit into the BDC or RJV should we elect to transact. With that, I'll turn the call over to Joycen for additional performance details and a review of our portfolio composition. Joycen?