CION Investment Corporation

Greetings. Welcome to Scion Investment Corporation first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Charlie Arestia, Managing Director and Head of Investor Relations. Please go ahead, sir.

Good morning and welcome to Scion Investment Corporation's first quarter 2025 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. It should be reviewed in conjunction with the company's form 10Q 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'd like to now turn the call over to Mark Gatto. Please go ahead, Mark.

Thank you, Charlie, and good morning, everyone. Thank you all for joining our call today. Scion reported $0.36 in quarterly net investment income for the first quarter, covering our base dividend and representing a slight increase from the prior quarter, driven by lower interest expense as we absorb the impact of our balance sheet repositioning from late last year. Our net asset value declined quarter over quarter to $14.28, down from $15.43 in the fourth quarter. driven primarily by fair value marks in a limited number of portfolio companies, somewhat offset by accretion from share repurchases during the quarter. While we will provide additional detail on what drove the quarterly decline in NAV later in the call, two names specifically contributed to most of the decline. First, during the quarter, we announced a new growth capital raise for David's Bridal. expanding the pool of investment partners and supporting the company's strategic focus on its asset-light, higher-growth Pearl Marketplace business. In conjunction with that new term financing facility, equity was issued to our new lending partners, which drove a quarterly reduction in the fair value of certain tranches of our term loan investments. We are hopeful that the recently announced strategic initiatives can accelerate our plan to increase long-term equity value for all stakeholders. Second, we experienced a decline in the mark on our term loan in Anthem Sports and Entertainment, driven primarily by the company's continued strategic business shift away from a subscription-based to a variable-driven revenue model, a shift which requires time to ramp financial results. The overall credit performance of our portfolio has held up well despite a shifting macroeconomic backdrop, and we continue to observe encouraging EBITDA growth trends on an LTN basis in the first quarter. As a result of our quarterly valuation process, we downgraded five investments in three portfolio companies on our internal risk rating scale and upgraded four investments in three portfolio companies. Similar to the prior quarter, loans risk-rated four or five represent a very small portion of the portfolio, comprising 128 basis points of the portfolio at fair value. Overall non-recruits in the portfolio also remain relatively low at 1.2% of the portfolio at fair value. At a high level, we believe the credit performance of the portfolio is strong. especially amidst a rapidly changing operating environment. We repurchased approximately 186,000 shares of our common stock at an average price of $11.68 during the quarter and have continued to repurchase shares in the second quarter as the recent tariff-induced market volatility has resulted in a broad sell-off in the capital markets. As of last Friday, we are over 70% of the way through our authorized repurchase program, which we believe, along with continued insider purchasing, has preserved a strong alignment with our shareholders. While tariffs and trade deal negotiations have amplified volatility in the capital markets, we believe our portfolio has several mitigating characteristics. We remained in constant communication with our portfolio company management teams and also went through our portfolio on a line by line basis to gauge the potential impact of prolonged tariffs on each company to both China specifically and to a broader basket of other countries. In doing this analysis, our estimation is that approximately 6% of the portfolio at fair value is at our highest classification of tariffs risk. defined as heavily dependent on China with little ability to change in the near term. The vast majority of the portfolio measured at fair value has nominal or relatively low China exposure and we believe should not be disproportionately impacted if a trade war persists. With respect to David's Bridal specifically, for years the company has been diversifying the supply chain outside of China. which we believe insulates the company from a more severe shock while tariff disputes play out. That being said, continuing macro uncertainty that could lead to a prolonged decrease in consumer confidence could certainly affect David's and others in our portfolio. While it remains to be seen and we will watch closely, we believe our portfolio, which is entirely focused on the US middle market, and is most concentrated in B2B services was deliberately constructed to avoid highly cyclical and directly consumer facing industries that may be most susceptible to pricing pressures from a sustained trade war. As we think about this environment, we continue to see opportunities on the direct lending side, both in our existing portfolio as well as new transactions. but remain highly selective given our investment capacity and broader market trends. We also believe that our secondary investment capabilities will allow us to opportunistically take advantage of technical or tactical dislocations in the lightly syndicated loan market that may arise during periods of volatility. We believe Scion's dynamic and differentiated investment approach which we outlined in great detail at our investor day last quarter, allow Scion to flex into wherever we see the greatest risk-adjusted returns while still preserving our conservative first lean focus in the middle market. With that said, however, as we look to the year ahead, we stand ready to support our portfolio companies as they navigate what could be an unusually difficult operating environment as management teams are trying to weigh longer-term strategic decisions against a rapidly evolving macroeconomic backdrop. We believe that focusing on our existing portfolio is likely the most prudent approach in this environment from the perspective of a lending partner to our companies and the fiduciary to our stakeholders. Our first lien focus and majority unsecured debt funding mix supports the defensive posture of our outlook, but we have also seen just over the past few weeks how quickly things can change in either direction. Accordingly, we continue to be hyper-focused on regularly assessing both our portfolio and the broader market to deliver the best results for our shareholders. With that, I will now turn the call over to Greg to discuss our portfolio and investment activity during the quarter. Greg?