CION Investment Corporation

Greetings and welcome to the Scion Investment Corporation's third quarter 2024 conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If you 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 you to your host, Charlie Aristia, Managing Director and Head of Investor Relations. Thank you, Charlie. You may begin.

Good morning and welcome to Scion Investment Corporation's third quarter 2024 earnings conference call. An earnings press release was distributed earlier this morning before market opened. A copy of the release along with a supplemental earnings presentation is available on the company's website at www.scionbdc.com in the investor resources section. and should be reviewed in conjunction with the company's Form 10-Q filed with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results, and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. Joining me on today's call will be Mark Gatto, Scion Investment Corporation's Co-Chief Executive Officer, Greg Bresner, President and Chief Investment Officer, and Keith Franz, Chief Financial Officer. With that, I would like to now turn the call over to Mark Gatto. Please go ahead, Mark.

Thank you, Charlie. Good morning, everyone, and thanks for joining our call today. I am pleased with Scion's quarterly results as we continue to navigate a highly competitive credit environment with persistent uncertainty in the broader capital markets. The Fed's rate cut during the quarter, the first such move in four years, represented the first steps towards a potentially more normalized inflation and lower interest rate environment. However, we continue to maintain a conservative and prudent outlook as we have for the past several quarters heading into the end of the calendar year. As Keith will discuss later on the call, We were very active in managing the right side of our balance sheet in the third quarter, which resulted in unsecured debt making up the majority of our overall debt funding mix for the first time. These transactions have given us a more flexible balance sheet that we believe is better positioned to withstand any potential volatility in the capital markets heading into next year without meaningfully increasing our cost of capital. We were also pleased with the execution of our public baby bond offering, which was more than three times oversubscribed and saw strong interest from both existing and new institutional investors, as well as a strong showing from retail investors. Our offering is the largest standalone baby bond in the publicly listed BDC space today. This is a significant step in the evolution of Scion as a public company, and we were thrilled to see the strong investor support. Moving now to our quarterly results, Scion reported 40 cents in quarterly net investment income for the third quarter, driven primarily by a mix of interest income from our portfolio as well as transaction fees from our quarterly investment activity, more than covering our 36 cents base quarterly dividend. Our net asset value declined quarter over quarter to $15.73, down from $16.08 in the second quarter, driven primarily by fair value marks in our equity portfolio, somewhat offset by over-earning our base dividend and accretive share repurchases. As we have discussed in prior calls, we anticipate some volatility in the equity book given the relatively large size of our David Bridles position. Greg will provide some additional details later in the call. Over the longer term, we are pleased with our track record of preserving Scion's net asset value since listing as a public company in 2021. We also remain pleased with the credit performance of our portfolio as our borrowers continue to navigate an unpredictable macroeconomic environment. Following an extensive review process utilizing both our internal valuation team and external specialists, we downgraded six loans, offset by upgrading three loans on our internal risk rating scale. We added one new loan to non-accrual status during the quarter, bringing total non-accruals to 1.85% of the portfolio at fair value, up modestly from 1.36 last quarter. At the end of the quarter, loans rated four or five comprised less than 2% of our overall portfolio at fair value. Once again, we were active purchasers of our common stock in Q3, buying back approximately 166,000 shares at an average price of $12.09. Early in the quarter, we renewed our share repurchase authorization through 2025, reflecting our view that shares remain undervalued and preserving our strong alignment with shareholders. Since the inception of our buyback through the end of the third quarter, we have repurchased over 3.5 million shares at an average price of $10.09. The market environment during the third quarter remained highly competitive, and many of the trends we have observed in earlier quarters have continued to affect deal volumes, pricing, and lender protections. However, we are also seeing some green shoots as our deal pipeline continues to rebuild following the typical late summer slowdown, and a broader thaw in the M&A market has been constructive following an extensive period of more sluggish activity. As Greg will discuss later, we are certainly seeing a healthy amount of deal opportunities, but we remain highly selective with regards to deploying into new transactions given these dynamics. Additionally, we believe the increased flexibility of our balance sheet and sufficient liquidity should allow Scion to remain nimble and take advantage of opportunities that may arise in a higher volatility environment. With that, I will now turn the call over to Greg to discuss our portfolio and investment activity during the quarter.