Owl Rock Capital Corporation

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Owl Rock Capital Corporation's first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, just press star one. Thank you. Dana Sclafani, Head of Investor Relations. You may begin your conference.

Thank you, Operator. Good morning, everyone, and welcome to Alaroc Capital Corporation's first quarter earnings call. Joining me this morning are Chief Executive Officer Craig Packer, our Chief Financial Officer and Chief Operating Officer Jonathan Lamb, and other members of our senior management team. I'd like to remind our listeners that remarks made during today's call may contain forward-looking statements which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in ORCC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We will also be referring to non-GAAP measures on today's call. which are reconciled to gap figures in our earnings press release and supplemental earnings presentation available on the investor relations section of our website at owlrockcapitalcorporation.com. With that, I'll turn the call over to Greg.

Thanks, Dana. Good morning, everyone, and thank you for joining us today. First, let's cover our high-level results. Our net investment income was $0.31 per share in line with our previously declared first quarter dividends. We also reported net asset value per share of $14.88, down modestly from our fourth quarter NAV per share of $15.08, primarily driven by market credit spread widening. This quarter was clearly an inflection point in the economy and in the credit markets. Investor concerns around geopolitical uncertainty, inflation, and the shift in Fed policy led to increased volatility across the broader market. Despite these developments, we are very pleased with our performance and how our portfolio is positioned for the evolving economic environment. This was our third consecutive quarter of covering our dividend, but it was a notable one because we were able to generate 31 cents per share of NAI despite very little repayment income, primarily due to a seasonally quieter M&A environment in the first quarter. Repayment-related fee income was a meaningful contributor to our results in the last two quarters, given how active the deal environment was in the second half of 2021. During the quarter, we originated primarily first lien investments at attractive spreads, and we continued to optimize our portfolio mix. We were able to redeploy capital from lower spread repayments into higher spread new originations while still maintaining roughly 75% of our assets in first lien or Unitron's term loans. We finished the quarter with a $12.8 billion portfolio across 157 investments, which continues to generate healthy interest and dividend income. We believe our NII this quarter demonstrates the strong core earnings power of our portfolio, even without significant fee income. In addition, we would expect to see further benefits from rising rates and an increase in repayment income as deal activity rebounds in the second half of the year. For some perspective, a year ago in the first quarter of 2021, our NII was $0.26 per share. Since that time, we have significantly grown the portfolio and increased leverage to within our target range which drove an almost 20% increase in NII year over year. We are also pleased with how well our portfolio is performing despite recent macroeconomic challenges. From the effects of the pandemic in 2020 to the current impact of supply chain disruptions and rising costs, the performance of our borrowers has been resilient. And while we continue to monitor the portfolio closely, we expect it to continue to perform well. The portfolio is well diversified, and our internal ratings remain largely consistent. We continue to have only one company on non-accrual status, representing 0.1% of the portfolio based on fair value, one of the lowest levels in the BDC sector, and our annualized loss ratio remains very low at roughly 15 basis points. We believe this performance reflects the quality and long-term orientation of our investment process. Since inception, we have invested in non-cyclical, service-oriented businesses with enduring revenue models. These businesses have historically been less impacted by issues such as supply chain disruption and have performed well in various market cycles. As of quarter end, more than half of our portfolio companies were in service-oriented sectors such as software, insurance, financial services, and healthcare. where customer demand, sales, and margins have remained strong. While we certainly have select credits experiencing some cost pressures due to labor, freight, or commodity prices, many of our borrowers are leaders in their markets, which often allows them to pass many of these costs onto their end customers through price increases. While they may experience a temporary lag, by and large, we expect most of our companies to be able to manage through the current environment well. We are also focused on how a rising rate environment will impact our borrowers as we enter a Fed tightening cycle. The large majority of our borrowers are entering this environment from a position of strength with an average interest coverage ratio of 2.7 times. We also take comfort that our average loan-to-value in the portfolio is approximately 45%, giving us ample cushion in a downside scenario. We are closely monitoring the impact of increased borrowing costs on our borrowers, but we expect they will be able to maintain comfortable cushions even as rates increase as expected. We believe the tailwinds of the strong U.S. economy will continue to support the businesses in our portfolio, and based on our discussions with borrowers, they are well prepared to adapt quickly and respond to evolving market conditions. With that, I will turn it over to Jonathan to discuss our financial results in more detail.