WhiteHorse Finance, Inc.

Good afternoon, everyone. My name is Beau, and I will be your conference operator today. At this time, I would like to welcome everyone to the White Horse Finance second quarter 2026 earnings conference call. Our hosts for today's call are Mr. Stuart Aronson, Chief Executive Officer, and Mr. Joyson 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 telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. And lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Mr. Robert Grinberg of Rose & Company. Please go ahead, sir.

Thank you, Beau, and thank you, everyone, for joining us today to discuss Whitehorse Finance's second quarter 2026 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 second quarter 2026 earnings presentation, which was posted on our website yesterday. With that, allow me to introduce Whitehorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

Thank you, Rob. Good afternoon, everyone, and thank you for joining us today. As you're aware, we issued our earnings yesterday after market close. and I hope you've had a chance to review our results for the period ending June 30th, 2026, which can also be found on our website. On today's call, I'll begin by addressing our second quarter results and current market conditions. Then, Joyson Thomas, our Chief Financial Officer, will discuss our performance in great detail. Afterwards, we will open the floor for questions. At a high level, our second quarter results reflect three main themes. One, net asset value per share increased, primarily driven by unrealized gains in one of our existing workout accounts. Two, share repurchases during the quarter, again, provided a meaningful benefit to NAV per share accretion. And three, core earnings moderated relative to the prior quarter, reflecting a portfolio yield that was impacted as a result of a smaller average portfolio size, as well as our loan investment and outward hound. going on to non-accrual status in the first quarter. Touching more specifically on unrealized depreciation in the portfolio and following the markdowns that weighed on the first quarter's results that we had previously flagged, our portfolio marks turned net positive for this quarter. Gross unrealized depreciation of 7.1 million was offset by just 1.4 million of gross depreciation, with the substantial majority of the portfolio and James Cooley. Net markups were led by our position in Starco, also known as Chase Products or Pressurized Holdings, where the markup on our equity investment contributed approximately 4.8 million, or roughly 22 cents a share. I will provide more detail on the markup in Chase, as well as provide an update on the number of other investments in our portfolio later in this call. Turning to our financial results, Q2 gap net investment income in core NII were each 4.7 million or 21.7 cents per share compared with Q1 gap net investment income in core NII of 5.6 million or 25.3 cents per share last quarter. NAV per share at the end of Q2 was up to 1177. compared with 1147 at the end of Q1, an increase of approximately 2.6%. The change in NAV reflected met realized and unrealized gains of approximately 26.5 cents per share in the aggregate, as well as share repurchases that were created to NAV by more than 6 cents per share, partially offset by the approximate 3.3 cents per share NII shortfall as a result of the distribution paid during the quarter that exceeded the net investment income for the period. A detailed bridge of the quarter over quarter change in the NAV per share is provided on slide 15 of our earnings presentation. Even though our NII this quarter was below the quarterly distribution rate as I've shared in the past, we have a number of restructured credits that have been equitized that are not producing NII are likely to be realized either later this year or in 2027. Those realizations should add to the BBC's NII generating capability. Turning to shareholder value, our shares have continued to trade at a meaningful discount to NAV, and both management and the board remain focused on actions that we believe can help enhance shareholder value over time. So far, that focus has included disciplined portfolio repositioning, selective capital deployment, accretive share repurchases, and steps to support distributable earnings. Management and the board continue to explore other options as well. We remained active under the board's expanded share repurchase program through the first two months of the second quarter, and those repurchases were accretive to NAV, as I mentioned earlier. We paused repurchase activity in late May. That decision reflects the balance we took. We look to strike between buying back shares at a meaningful discount to NAV, which is accretive, and the corresponding reduction in equity, which raises our leverage ratio levels and competes with the capital we can put in to newly originated investments. Capacity remains available under the repurchase program. and we will continue to assess recommending repurchases as a part of our broader strategy of seeking ways to create shareholder value. Joyson will provide additional detail on the quarter's repurchase activity. In addition, the advisor has agreed to extend the temporary voluntary incentive fee waiver for the third quarter of 2026, reducing the applicable rate from 20% to 17.5%. We view the fee waiver as a constructive step to support distributable earnings and shareholder value. As we have said previously, the C waiver is temporary, and any decision regarding future periods will be revisited based on the then current conditions and in consultation with the board. We have also been encouraged by the alignment shown through continued open market purchases by our officers and directors during the second quarter, and it's disclosed on form four filings. We believe that reflects our confidence in the underlying value of Whitehorse Finance. Turning to portfolio activity, we had gross capital deployments of 25.4 million in Q2. Repayments and sales were muted during the quarter and offset gross deployments by approximately 2.2 million, resulting in net deployments of approximately 23.2 million before the effects of transferring assets into the STRS and JV. Gross capital deployments consisted of three new originations totaling 23.1 million with the remaining amount deployed to fund add-ons to five existing portfolio companies. The three new originations were headlined by two former Whitehorse borrowers, Empire Office for 10.1 million and Intermedia Cloud Communications for 6.6 million. as well as one new portfolio company borrower, Vibration Mountings and Controls for $6.4 million. Of our three new originations in Q2, one was non-sponsor and two were sponsor. The sponsor deals are targeted to be transferred to the STRS-JV. Our new originations in Q2, had an average leverage of approximately 4.2 times EBITDA and were all first lien loans. Total repayments and sales of 2.2 million were driven by partial paydowns with no full realizations during the quarter. During the quarter, the BDC transferred two new deals to the STRS-JV, totaling 7.8 million. The transfers were headlined by Industrial Service Solutions at 5.1 million, and Trim Light at $2.7 million. We continue to successfully utilize the STRS-JV and believe that Whitehorse Finance's equity investment in the JV continues to provide attractive returns to our shareholders. After net deployments in JV transfer activity, as well as net realized and unrealized gains recognized during the quarter, total investments increased from the prior quarter by $26.2 million. to $569.2 million. This compares to our portfolio's fair value of $543 million at the end of Q1. During the quarter, we recognized approximately $0.1 million in net realized losses and approximately $5.8 million of net unrealized gains. For aggregate, net realized and unrealized gains of approximately $5.7 million or approximately 26.5 cents per share. The net mark-to-market gains were driven primarily by a $4.8 million markup on Chase, a $0.4 million markup on PlayMonster, and approximately $0.5 million of other net markups across the portfolio. For those unfamiliar, Chase Products is a developer and manufacturer of bulk consumer and industrial chemical and aerosol products in the United States. We assumed ownership of the business in March of 2023. Since then, the company has improved EBITDA from negative levels to a run rate in the low positive double digits, supported by new customer wins and added production capacity, and it continues to track ahead of plan this year. The markup this quarter reflects the improvement in operating performance and the updated valuation inputs that follow from it. We are cautiously optimistic about the prospect of a liquidity event on this asset over the next six to 12 months. PlayMonster, you may recall, is a toy and game company with owned and licensed brands, including Hacky Sack, Spirograph, Taco vs. Burrito, and Five Second Rule. We assumed ownership alongside a co-lender in January of 2022. The business has returned to positive and growing adjusted EBITDA. with meaningful year-over-year improvement and continued momentum into 2026, and the markup reflects that trajectory. PlayMonster is an earlier stage than Chase with respect to any realization, and we would expect any process to follow the finalization of full-year 2026 results at the earliest. Both positions generate limited cash income today, a realization in either case would convert the full realized value into cash available for future redeployment into income-producing investments, which would positively contribute to help support core NII over time. At the end of Q2, 98.8% of our debt portfolio was first lien senior secured, and our portfolio continued to reflect the balanced mix of sponsor and non-sponsor investments, with non-sponsor representing approximately 40% of the portfolio at fair value. The weighted average effective yield on our income-producing debt investments was 10.8% at the end of Q2, consistent with the 10.8% at the end of Q1. The weighted average effective yield on our overall portfolio was approximately 8.8% at the end of Q2 compared to approximately 8.7% at the end of Q1. With respect to non-accrual status, there were no additions to or removals from non-accrual during the quarter, excluding the STRSJV non-accrual investments represented 3.6% of the total debt portfolio at fair value, consistent with the 3.6% at the end of the prior quarter, and 6.9% at cost compared with 7.2% at cost at the end of the prior quarter. The four issuers on non-accrual at quarter end were Camarillo Fitness Holdings, New Cycle Solutions, Outward Hound, and PlayMonster. Turning to Outward Hound, we completed the restructuring of the business subsequent to quarter end in early July. Working alongside the other lenders in the group, we recapitalized the company with a new revolver and term loan. converted a substantial portion of the outstanding debt into equity and extended the maturity. Whitehorse now holds the majority ownership and control of the board, and the restructured term loan returned to accrual status upon closing, which will be positive for Q3 NII. The company continues to operate in a challenging environment for pet products, where category demand has softened and retailers have maintained lean inventory positions. Consumer sell-through has held up better than peers, though that is not yet translated into improved orders. With a materially deleveraged capital structure and control of the board, we are working closely with management on various operating initiatives to drive incremental top-line growth and optimize the company's cost structure. We will continue to evaluate both organic and inorganic past to build value in the position and improve our ultimate recovery over time. Regarding news cycle, this is a small position for the BBC representing less than one-half of 1% of the portfolio at fair value. Management has been focused on stabilizing financial performance and on cost reduction initiatives, and the company is currently preparing for a sale process who will provide an update as that progresses. Finally, regarding Camarillo Fitness, formerly known as Honors Holdings, a mark reflects the expected proceeds from the sale of the underlying locations. That process is actively underway, and as locations are sold and cash is returned, we redeploy that capital into income-producing investments. As always, we continue to actively manage underperforming credits, leveraging our dedicated restructuring resources, and the broader capabilities of HIG. Aside from the credits and non-accrual, our portfolio continues to perform well. Consistent with what we shared last quarter, our exposure to software companies remains modest at approximately 10.5% of the portfolio at cost and 9.3% at fair value across six portfolio companies. Turning to the market conditions, the market conditions are interesting and different from those a quarter ago. The volume of M&A activity is only moderate, similar to last year. However, the supply-demand imbalance we experienced last year is much improved due largely to the negative press surrounding the direct lending market. This negative press has had multiple effects. One effect has been to scare retail investors resulting in capital outflows that have reduced the appetite of some of the largest players in the marketplace. Another effect is that increasing criticism of the asset marketing policies of direct lenders and VDCs has led to greater scrutiny of both where assets are marked down and the types of credits in which people are investing. In particular, the software sector, which was strongly in favor a year and a half ago, is now strongly out of favor because the market recognizes that some software and technology companies face significant downside risk from potential AI disruption. Those factors have resulted in more conservative market environment. Deals are being completed at headline multiples that are generally more reasonable. That is certainly true in the technology and software sector, but we think we are seeing it more broadly as well. Previously out-of-favor sectors such as industrials, have come back into favor because they do not face the same AI risk. Overall, what we're seeing in the market, depending on the sector, is leverage that is a half a turn to a full turn lower than a year to a year and a half ago, with pricing 25 to 50 basis points higher. This is particularly true in the sponsor market. As I shared before, the sponsor market cycles up and down, but the non-sponsor market does not cycle very much. We are seeing lower leverage multiples and higher pricing on sponsored deals with most deals below 50% loan to value and some even below 40% loan to value. In general, we are also getting better documents including protection against LMEs or liability management executions. Without LME protection, instead of equity coming into a troubled credit, companies may issue super senior debt, strip existing lenders of collateral, and install the super senior debt at the top of the capital structure. We have been vigilant in avoiding those situations ever since the aspect software deal that led to a loss of the BBC. In the vast majority of deals we have completed over the past three years, we have limited or we believe eliminated the downside risk from LME. As geopolitical tensions rise and fall, M&A activity slows when tensions are high, and tends to pick up when tensions are lower. Across the Whitehorse direct lending platform, we are doing about 40% to 50% more volume this year than we did last year because we find current market conditions more attractive. We are seeing better credits, lower leverage and better documents. We are also getting covenants on most of our deals. In fact, the vast majority of our middle market credits have covenant protection. Spreads in the middle market and upper middle market are generally as high or higher than spreads in the lower mid-market. Again, this fact applies primarily to sponsor deals. Intuitively, that does not make sense because, on average, smaller companies carry greater risk and historically have commanded a pricing premium. However, third-party data from an investment bank that performs independent valuations for a portfolio validates what we are seeing. Pricing for midsize and larger deals is as high or higher than pricing for smaller deals. We are therefore trying to improve the risk-return tradeoff. Most of the deals we are working on now are middle market or upper middle market credits, but we see a better risk-return dynamic. Current market pricing for sponsor deals is SOFR plus 475 to 550, approximately 50 basis points higher than a year ago. As I mentioned, we're getting covenants on the vast majority of deals we are doing. We are not, sorry, we are doing senior secured debt almost exclusively. The non-sponsored market is relatively stable. Non-sponsored middle market, lower middle market deals generally command pricing of SOFR plus 600 and above with two point upfront fees or higher. Larger non-sponsored deals are priced more in the range of 550 to 650. If we believe those are good credits, we will participate in them as well. Deals priced at $600 and above are still targeted for the BDC balance sheet. Deals below $600 are generally targeted for the JV. With that said, and subsequent to our quarter end, we closed on one new deal in the BDC. We also transferred positions in five portfolio companies to the STRS-JV, pro forma for those transfers the STRS-JV's remaining capacity has been fully utilized. So, new deals will generally be added to the JV only as repayments occur on existing JV investments. The BDC balance sheet currently has capacity for approximately 10 million of additional assets. And similarly, we will create additional capacity there as we receive repayments. With that, I'll turn the call over to Joyson. for additional performance details and a review of our portfolio composition. Joyson?