Bain Capital Specialty Finance, Inc.

Greetings and welcome to the Bain Capital Specialty Finance fourth quarter and fiscal year earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Catherine Schneider, Investor Relations. Please go ahead, ma'am.

Thanks, Renan. Good morning, everyone, and welcome to Bain Capital Specialty Finance fourth quarter and year-ended December 31st, 2022 conference call. Yesterday, after market closed, we issued our earnings press release and investor presentation of our quarterly and year-end results, a copy of which are available on Bain Capital Specialty Finance's Investor Relations website. Following our remarks today, we will hold a question and answer session for analysts and investors. This call is being webcast and a replay will be made available on our website. This call and the webcast are property of Bain Capital Specialty Finance and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance and actual results may differ materially. These statements are based on current management expectations, which include risks and uncertainties, which are identified in the risk factor section of our Form 10-K that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance assumes no obligation to update any forward-looking statements at this time unless required to do so by law. Lastly, past performance does not guarantee future results. So with that, I'd like to turn the call over to our Chief Executive Officer, Michael Ewald.

Thank you, Catherine. Good morning, everyone, and thank you for joining us on our earnings call today. I'm here with Mike Boyle, our president, and our chief financial officer, Sally Dornis. I'll start with an overview of our fourth quarter and year-ended December 31, 2022 results, and then provide some thoughts on our performance, the overall market environment, and our positioning. Thereafter, Mike and Sally will discuss our investment portfolio and financial results in greater detail. Beginning with our results, Q4 net investment income per share was $0.37, equating to an annualized yield on average book value of 8.7%. Our net investment income covered our dividend by 103% during the fourth quarter. Q4 earnings per share, or 67 cents, equating to an annualized return on average book value of 15.7%. For the full year 2022, net investment income per share was $1.59, equal to a 9.3% return on equity. This was up over 100 basis points from our 2021 NII return on equity. Our NII covered our dividend by 115% during the year. Earnings per share for 2022 were $1.63, representing a total return on equity of 9.8% for the full year of 2022. Consistent with our 2021 earnings, our annual net earnings exceeded our dividend payout for a second consecutive year. We believe this is an important metric for measuring not only attractive levels of net investment income generated across our portfolio, but also overall credit performance of our portfolio and is a testament to Bain Capital Credit's experience investing in the middle market. Our returns were driven by high quality interest income earned from our middle market borrowers and strong credit performance as demonstrated by overall net realized and unrealized gains across our portfolio during both the fourth quarter and full year. Our net asset value ended the year at $17.29 per share, up from $16.98 from the previous quarter and up from $17.04 as of Q4 2021, reflecting the portfolio's strength. We are especially pleased with the strong performance in 2022 during a period of greater market volatility that occurred throughout the second half of the year. At year end, we estimate that our spillover income per share is approximately 32 cents. We believe this is a healthy amount of undistributed income and beneficial to the stability of our dividend. For the second consecutive quarter, our board increased our regularly quarterly dividend by approximately 6%, or two cents per share, to 38 cents per share, to shareholders of record as of March 31st, 2023. This represents an annualized yield of 8.8% on book value as of December 31st. On a year-over-year basis, we increased our regular dividend level by 12%, driven by the higher levels of interest income being generated by the company. Our Q1 regular dividend represents and 11.7% annualized yield based on BCSF's current trading levels. We believe this is a very compelling level for investors on both an absolute and relative value basis across the BDC sector. Our investment portfolio is largely comprised of a highly diversified portfolio of first lien, senior secured, floating rate notes. The strong credit quality health of our portfolio is reflected by low non-accrual rates, as over 98% of our debt investments at fair value are performing loans that are paying interest currently pursuant to their contractual terms. Furthermore, we are in a solid capital structure position with over 40% of our outstanding liabilities comprised of low cost, fixed rate debt maturing in 2026. We ended the fourth quarter with a net leverage ratio of 1.14 times, right in the middle of our target range of between 1.0 and 1.25 times, providing us with additional dry powder to capitalize on new investments in the current environment. As compared to prior loan vintages in recent years, we are seeing higher market spreads, tighter documentation, and more favorable overall structures. While we see compelling returns within the middle market opportunity set, we are also mindful of high inflation, high interest rates, and a slow growth economic backdrop for middle market companies. We believe having a disciplined investment approach and prior experience investing through several cycles will be increasingly important to navigate potential risks ahead. Bain Capital Credit has 25 years of experience investing in the middle market, and our senior leadership has remained consistent over that long-standing history. Given the current market backdrop, we have heightened our focus on our portfolio company's debt service coverage and free cash flow metrics. For companies that are on our watch list, we are looking ahead and focusing on our alignment with private equity sponsors on near-term value preservation and liquidity management. This is especially important to get ahead of any potential issues that may arise so we can identify problems early and preserve value to maximize our outcome in any downside scenario. 93% of our debt investments are structured with documentation containing financial covenants tied directly to management's forecasts, and we have majority control positions in 80% of our debt tranches, allowing us to drive eventual outcomes in our direction. Bain Capital Credit's industry research team continues to provide us with even deeper sector expertise across many verticals and allows us to uncover companies and niche industries that are expected to be strong performers over the coming years. Recently, we have been digging in further to uncover industries that may have less susceptibility to inflationary pressures, and more importantly, we are looking to avoid acutely impacted sectors for new investments. We believe this deep industry expertise will be increasingly important in a higher default cycle and allow us to avoid businesses that may be in more cyclical sectors. We remain focused on resilient companies with rational capital structures and investments that have meaningful insulation to equity volatility. I will now turn the call over to Mike Boyle, our president, to walk through our investment portfolio in greater detail.