Bain Capital Specialty Finance, Inc.

Good morning, ladies and gentlemen, and welcome to the Bain Capital Specialty Finance first quarter ended March 31st, 2023 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we'll conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 10th, 2023. I would now like to turn the conference over to Catherine Snyder. Please go ahead.

Thanks, Colin. Good morning, everyone, and welcome to the Bain Capital Specialty Finance first quarter-ended March 31st, 2023 conference call. Yesterday after market closed, we issued our earnings press release and investor presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finances 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 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-Q that could cause actual results to differ materially from those indicated. Bank 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 CEO, Michael Ewald.

Thanks, Catherine. Good morning, and thanks to all of you for joining us today on our earnings call. I'm also joined here today by Mike Boyle, our president, and our chief financial officer, Sally Dornis. I'll start with an overview of our first quarter ended March 31st, 2023 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. Yesterday, after market close, we delivered strong first quarter results. Q1 net investment income per share was $0.50, driven by high levels of investment income earned from our portfolio during the quarter. Our net investment income return represented an annualized yield of 11.5% on book value and covered our dividend by 132%. Net investment income per share was up 35% quarter over quarter and 47% year over year. The significant growth in our NII was driven by the continued benefits of higher interest rates, greater dividend income earned from our joint ventures as these investments have grown over time, and higher other income. Q1 earnings per share were 45 cents driven by stable credit quality across our portfolio investments during the quarter. Our net income produced an annualized return on book value of 10.5%. Net asset value per share as of March 31st was $17.37, reflecting a 0.5% increase from our $17.29 NAV as of December 31st. Subsequent to quarter end, our board declared a second quarter dividend equal to 38 cents per share and payable to record date holders as of June 30th, 2023. This represents an 8.8% annualized yield on ending book value as of March 31st. We believe the company is well positioned to continue to generate net investment income in excess of our regular dividend rate, as demonstrated by our strong out earnings during Q1. Our spillover income per share is approximately 44 cents, which we believe is a healthy amount of undistributed income and provides for increased dividend stability. Our management team, alongside our board, continues to evaluate potential increases to the dividend rate versus retaining excess earnings, while taking a thoughtful approach under various future interest rate and macroeconomic scenarios. Turning now to the market environment, we observed lower levels of new activity in the middle market, driven by lower LBO and M&A volumes, and increased market volatility stemming from the commercial bank challenges during the quarter. Following these events, banks in general are likely to be more risk-averse and pull back from lending activities, which can create a greater opportunity set for private lenders like us as borrowers value certainty of capital, especially during periods of increased market volatility. Against this backdrop, we continued to execute on our longstanding strategy of sourcing and underwriting middle market investment opportunities. The majority of our new investment fundings were to existing portfolio companies versus new companies, benefiting from the incumbency advantage we enjoy across our portfolio. We continue to observe favorable terms and structures for newly originated loans as compared to prior loan vintages, The weighted average spread on our new portfolio company, First Lean Debt Investments, was 677 basis points, which produced a weighted average yield of 11.7% when factoring in current base rates and amortization of original issue discounts. Our private credit group platform takes a global approach to source new middle market investments. Our longstanding global presence provides us with a large pipeline of investment opportunities, and we remain selective regarding the ones that we choose to pursue and based on the relative attractiveness of each new investment. In recent years, our investment activities have ebbed and flowed in and out of Europe. In 2021, we viewed the market in Europe to be increasingly attractive given the increased competitiveness in the U.S. markets, while conversely, we slowed our investing activities in Europe last year given increased volatility and broader recessionary concerns that took hold in that region earlier than elsewhere. Today, our view of relative value between Europe and the U.S. is back on parity. During the first quarter, our new investments to companies were comprised of approximately two-thirds to North American borrowers and one-third to European borrowers. Having that global footprint enhances and further diversifies our deal flow of opportunities to identify attractive, risk-adjusted returns for our shareholders. Our portfolio companies continue to perform well and have proven to be defensive thus far in light of the macro headwinds related to inflationary pressures and the high interest rate environment. This has been demonstrated by the stable credit quality metrics across our portfolio, including a decline in our non-accrual investments, with no new investments added to non-accrual status during the quarter, and watch list investments remaining relatively stable quarter over quarter. At quarter end, we only had two companies on non-accrual status, representing 0.6% of the portfolio at fair value, which we believe is one of the lowest levels in the entire BDC sector. I will now turn the call over to Mike Boyle, our president, to walk through our investment portfolio in greater detail.