Good day, everyone and welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year Ended December 31, 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note today's call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Katherine Schneider. Please go ahead ma'am.

Thanks, Erica. Good morning, everyone and welcome to the Bain Capital Specialty Finance fourth quarter and year ended December 31, 2024 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 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 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 Factors 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 CEO, Michael Ewald.

Thanks, Katherine. Good morning and thanks to all of you for joining us here on our earnings call this morning. I'm joined today by Mike Boyle, our President; and our Chief Financial Officer, Amit Joshi. In terms of the agenda for the call, I'll start with an overview of our fourth quarter and 2024 full year results and then provide some thoughts our performance, the overall market environment and our positioning. Thereafter, Mike and Amit will discuss our investment portfolio and financial results in greater detail. As usual, we'll also leave some time for questions at the end. So yesterday after market close, we delivered strong fourth quarter and full year 2024 results. Q4 net investment income per share was $0.52 representing an annualized yield on book value of 11.8%. Our net investment income continued to be well in excess of our regular dividend with 124% dividend coverage. Q4 earnings per share were $0.34 reflecting an annualized return on book value of 7.8%. For the full year 2024, net investment income per share was $2.09 equal to an 11.8% return on equity. Our NII covered our regular dividend by 124% during the full year. 2024 earnings per share were $1.85 representing a total return on equity of 10.9%. Our annual net earnings continue to exceed our dividend payout for the fourth consecutive year, demonstrating our consistently strong credit performance. Our results were driven by high-quality interest income earned from our middle-market borrowers and that stable credit performance across our portfolio during the fourth quarter and throughout the year. Our net asset value ended the year at $17.65 per share down from $17.76 from the previous quarter and up from $17.60 as of Q4 2023, reflecting the underlying portfolio strength. We also paid out record dividends to our shareholders during the…

Thanks, Michael. Good morning, everyone. I'll start with our investment activity for the fourth quarter and then provide an update in more detail on our portfolio. New fundings during the fourth quarter were $547 million in 88 portfolio companies including $317 million into 15 new companies and $230 million into 73 existing companies. Sales and repayment activity totaled approximately $505 million, resulting in net investment fundings of $42.7 million quarter-over-quarter. For the full year, fundings were $1.7 billion and more than double our volumes in 2023. Total sales and repayment activity for the year were $1.5 billion. As a result of this activity, the size of our total investment portfolio increased 6% year-over-year. Our new investing activities for the fourth quarter and full year were comprised of a mix of fundings to new portfolio companies and existing portfolio companies. During the fourth quarter, new investment funding to new portfolio companies represented 58% of total fundings versus 42% to existing companies. And for the full year, 62% were to existing portfolio companies and 38% to new companies. In 2024, our platform benefited from its strong sponsor relationships to source new investments and our incumbency advantage from our existing portfolio companies to help them grow. During the quarter, we remain focused on investing in first lien senior secured loans, with 95% of our new investment fundings into first lien structures, 1% into subordinated debt structures and 4% in preferred and common equity. Turning now to the investment portfolio. At the end of the fourth quarter, the size of our portfolio at fair value was approximately $2.4 billion across a highly diversified set of 168 portfolio companies, operating across 30 different industries. Our portfolio primarily consists of investments in first lien senior secured loans given our focus on downside management and investing in…

Thank you, Mike, and good morning, everyone. I'll start the review of our fourth quarter 2024 results with our income statement. Total investment income was $73.3 million for the three months ended December 31, 2024 as compared to $72.5 million for the three months ended September 30, 2024. The increase in investment income was primarily driven by an increase in the investment portfolio size, which was partially offset by a decrease in portfolio yield, driven primarily by the lower base rates. Our investment income continues to benefit from high-quality sources of investment income, largely driven by contractual cash income across its investments. Interest income and dividend income, represented 94% of our total investment income in Q4. Total expenses before taxes for the fourth quarter were $38.4 million as compared to $37.5 million in the third quarter. Net investment income for the quarter was $33.6 million or $0.52 per share as compared to $34 million or $0.53 per share for the prior quarter. Net investment income for the full year 2024 was $2.09 per share. During the three months ended December 31, 2024, the company had a net realized and unrealized losses of $11.5 million. Net losses were primarily driven by our markdown in Aimbridge Hospitality, which Mike mentioned earlier. Net income for the three months ended December 31, 2024 was $22.1 million or $0.34 per share. Moving over to our balance sheet. As of December 31st, our investment portfolio at fair value totaled $2.4 billion and total assets of $2.6 billion. Total net assets were $1.1 billion as of December 31st. NAV per share was $17.65, a slight decrease of $0.11 per share from $17.76 at the end of third quarter. At the end of Q4, our debt-to-equity ratio was 1.22 times as compared to 1.14 times from the end…

Thanks, Amit, and thanks Mike as well. Look, in closing, we are pleased with the execution of our investment strategy on behalf of our shareholders during the fourth quarter and throughout 2024. We demonstrated attractive levels of investment income earned across our portfolio and stable credit quality across our middle-market borrowers. As we look forward into 2025, we believe we are well positioned to capitalize on attractive growth opportunities. We remain committed to delivering value for our shareholders by producing attractive returns on equity and thank you for the privilege of managing our shareholders' capital. Erica, please open the line for questions. Thanks.

Certainly. [Operator Instructions] We'll go first to the line of Finian O'Shea with Wells Fargo. Please go ahead.

Hi, everyone. Good morning. Thanks. Can you talk about Michael the sort of real-time spread deployment and spread dynamics. How much is stabilized perhaps or still tightening? And then what level the core middle market gets you as a premium to large market now versus historically?

Sure. Thanks for the question, Fin. So if we look at the fourth quarter originations we were originating at a spread over SOFR about 560 basis points. And that's about 20 basis points tighter than where we were on our Q2 originations, which was about 580 basis points over SOFR. So the spread tightening that we saw over the course of the last two years has stabilized quite a bit as we look at the numbers and what we're able to originate today. If we think about that as a premium versus the larger market. We do think it commands a 50 to 75 basis point premium on a spread basis for originating at similar leverage levels to companies north of $100 million of EBITDA, which again is why we've doubled down in this core middle market, because we do think the lender controls we get as Mike highlighted we get financial maintenance covenants across all the deals that we do but also the spread levels we think really highlight the premium that we're able to get in our market segment.

Yes, that's helpful. And just to clarify like the fourth quarter, I think you said 460 or 480...

460 -- 560, sorry. 560.

Sorry about that. It's been a lot of earnings. How does that compare to the say term sheets you submitted last week, just understanding the fourth quarter that was probably those were committed in the second quarter and third quarter right?

Sure. Yes. I'd say pretty similar. I'd say we're in the 525 to 550 level for term sheets depending on the credit risk underlying. So we do think much of the spread tightening that marked a year ago. The course of 2023, we saw a whole lot of spread tightening. I think 2024 particularly Q2 through Q4 and what we're seeing now has been fairly stable. Q – Finian O'Shea: Okay. And then what is there a meaningful difference on a new LBO or platform, a real new money opportunity versus follow-on like when M&A comes back and whichever one is waiting for, and you have all this clean well-capitalized new paper. Like is the stuff that fits in that box, really much tighter in blending things down, if you follow.

Yes. Fin, it's Mike Ewald. Look, I think generically speaking, those sorts of deals might be on the lower end of what Mike was talking about maybe those are the 525 deals. And some of the add-on activity on some of the deals that were originated earlier, so that might be the 550 or 575. But if you think about -- one of your questions was historical context, as well. Clearly, the end of 2022, beginning of 2023, were at least in my career of over 25 years of doing this were the highest spreads that we'd ever witnessed, and something in the 500 be it 500 for a top-notch crystal clean company, with no EBITDA adjustments 550 575 for the more regular way deal -- those are really levels that we saw in 2017, 2018, 2019 and that's kind of what we're back to today. So, while there's been a lot of handwringing over spread compression I think, we're pretty much in line today, with more historical averages. Q – Finian O'Shea: Great. Awesome. Thanks so much.

Thanks, Fin

Thank you. [Operator Instructions]

Great. Well, it does look like there are any other questions, at this point. Thanks again, for everyone's time today. We certainly appreciate your continued support and look forward to seeking again next quarter. Do please feel free to reach out, in the meantime of any questions and certainly have a great weekend. Thanks.

We'd like to thank everybody for their participation on today's conference. Please feel free to disconnect your line at any time.