Greetings, and welcome to the CION Investment Corporation First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Charlie Arestia, Managing Director and Head of Investor Relations at CION Investment Corporation. Thank you. You may begin.

Good morning, and welcome to CION investment Corporation First Quarter 2024 Earnings Conference Call. An earnings press release was distributed earlier this morning before market open. A copy of the release, along with the supplemental earnings presentation is available on the company's website at www.cionbdc.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 Michael Reisner, CION Investment Corporation's Co-Chief Executive Officer; Gregg Bresner, President and Chief Investment Officer; and Keith Franz, Chief Financial Officer. With that, I would like to now turn the call over to Michael Reisner. Please go ahead, Michael.

Thank you, Charlie, and good morning, everyone. We reported another strong quarter this morning, continuing our momentum from 2023. The earnings power of our conservatively positioned portfolio remains robust, generating an annualized net investment income ROE of approximately 15% in Q1. Since our direct listing in 2021, CION has continued to generate a strong net investment income ROE in line with many of our BDC peers that are trading at or above their net asset value. While our net asset value declined modestly quarter-over-quarter driven mostly by unrealized mark-to-market adjustments in the equity portion of our portfolio, we have grown net asset value over 6% versus the same quarter last year, driven by sustained earnings, disciplined portfolio management and accretive share repurchases. Net investment income for the quarter totaled $0.60 per share, up sharply from $0.40 last quarter, driven by strong underlying performance of our portfolio companies and yield-enhancing provisions that we noted on our previous earnings call and realized during the quarter. As a result, we once again outearned our base dividend of $0.34 per share in the quarter. Given our strong distribution coverage and outlook for the long-term earnings power of our portfolio, I am pleased to announce an increase to our quarterly base dividend to $0.36 per share, up from $0.34 last quarter. Additionally, as mentioned on our last call, we intend to declare a supplemental dividend next month. Underlying credit performance in our portfolio remained strong in Q1, with nonaccruals improving at 0.86% of fair value. At a high level, we remain optimistic about the credit performance in our portfolio with only 1% of our portfolio, risk-rated 4 or 5 on our internal risk rating scale. With recent Fed commentary suggesting that interest rates may remain elevated for longer, there is a persistent focus on closely…

Thank you Michael, and good morning everyone. Our Q1 net investment income benefited from a diverse combination of the higher floating interest rates on our loan assets, origination and transaction fees from our investment activity and a plethora of structured yield-enhancing provisions embedded within our portfolio, such as make-wholes [ MOICs ] and prepayment premiums. We remain highly selective with new investments as market conditions change rapidly at the beginning of 2024 with the market risk on switch being abruptly flipped as substantial capital inflows into the large-cap direct loan platforms, CLO and syndicated market vehicles has resulted in a dynamic of capital chasing transactions, particularly in the larger cap markets. This has resulted in lower coupon spreads, higher leverage attachment levels and looser credit terms throughout the larger capital loan markets. We have seen this dynamic creep into the upper middle market, where spreads have tightened and leverage level expectations have increased for companies with $60-plus millions of EBITDA. We continue to stick to our knitting and focus on what we consider to be the traditional middle market; companies with $20 million to $50 million of annual EBITDA. We continue to see a nice pipeline of opportunities in this range. While competitive spread levels for new issue have trended 50 to 75 basis points below the comparable period last year, we still believe favorable versus the 150-plus basis point compression more prevalent in the larger cap market. We remain defensive and cautious with respect to the U.S. consumer, particularly in light of slowing GDP and the persistence of higher interest rates and inflation levels. Traditional leverage finance M&A activity began to pick up in Q1 from the relatively subdued market levels of 2023. We continue to see refinancing and add-on acquisition activity where additional debt capital is required that…

Okay. Thank you, Gregg, and good morning, everyone. As Michael mentioned, we reported another quarter of strong financial results, driven by a combination of income generated from our quarterly investment activity and yield-enhancing provisions realized within the portfolio. During the quarter, net investment income was $32.6 million or $0.60 per share compared to $21.8 million or $0.40 per share reported in the fourth quarter, an increase of $10.8 million or $0.20 per share. Total investment income was $73.6 million during Q1 as compared to $60 million reported in Q4. This is an increase of $13.6 million or about 23% from the prior quarter. This increase was driven by additional income related to our quarterly restructuring activities, make whole payments received and prepayment premiums earned in connection with the repayment of certain investments in our portfolio during the quarter. On the expense side, total operating expenses were $41 million as compared to $38.2 million reported in the fourth quarter. The increase was driven by higher interest expense and advisory fees when compared to the prior quarter. At March 31, we had total assets of approximately $2 billion and total equity or net assets of $863 million with total debt outstanding of $1.07 billion and 53.8 million shares outstanding. At the end of the quarter, our net debt-to-equity ratio was 1.03x, which is slightly lower than 1.1x at the end of Q4. Our portfolio at fair value ended the quarter at $1.7 billion, down $100 million from the fourth quarter, reflecting a combination of price declines, mostly in our equity investments and large repayments received at the end of the quarter. The weighted average yield on our debt and other income-producing investments at amortized cost was 12.9% at March 31, which decreased 48 basis points from 13.4% at the end of Q4.…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first questions come from the line of Erik Zwick with Hovde Group.

You noted in the prepared remarks that there were a number of transactions in the quarter that drove some revenue from realization fees and exit fees and things of that nature. Curious if you could kind of quantify that revenue that occurred in 1Q that would not be expected to occur in 2Q, fully understanding that there could be additional transactions going forward as well.

Yes, Erik. It's Keith. So in terms of some of the transaction income and restructuring income that we had during the quarter, it was about between $7 million and $8 million in total.

Okay. Great. That's helpful. And then you continue to note that you look to diversify your funding and from that perspective, both in terms of the mix. Curious, you mentioned also desire to extend some of your current facilities and wondering if that $30 million unsecured term loan that matures at the end of the 3Q is one that you're looking to extend? And then also whether your preference today for any new kind of funding would be if preference in terms of fixed or floating kind of given where we are in the interest rate cycle at this point?

Yes. At this point, we continue to evaluate opportunities within the capital -- debt capital markets. So we're evaluating everything at this point. But right now, the focus is to continue to work with our commercial banking lenders to get those 2 facilities extended.

Got it. And then last one for me. You've done a commendable job working down the nonaccrual list over the past year, and it's also good to see that the percentage of investments on your internal ratings that have 4 or 5 have decreased as well. I'm actually a little bit curious about the top end of the rating scale. It looks like in 4Q, you had one or more investments that were upgraded to one. It may have been kind of downgraded maybe back to where they were prior based on the Q1 profile. So I'm curious kind of what happened there in that one category?

I think -- this is Michael. We only really upgrade something to one when we have knowledge of a loan that's going to be exited. So we -- for the reporting period. So you should expect most of our names will be 2 when we do a deal and only upgrade it to 1, if we have knowledge of something that's going to happen to that name.

Got it. That makes sense. So given kind of the transactions that were reported here in 1Q, you had a pretty good sense of that in 4Q, they are upgraded. Perfect. That's all for me today.

This concludes our Q&A session. I would now like to turn the floor back over to Michael Reisner for closing remarks.

Thank you. In closing, I just want to reiterate that CION continues to perform well and that we believe the current discount to NAV remains unwarranted. On a total return basis, based on the market price, CION ranked in the top 10 of 42 publicly traded BDCs over the past 12 months. A similar analysis based on NAV rather than market price places CION in the top 5 total return metrics over the same time period. We are focused on building a durable franchise here at CION that seeks to deliver strong results in all market environments. We look forward to speaking to you again next quarter. Thank you.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.