Good day, and welcome to the OFS Capital Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would like now to turn the conference over to Steve Altebrando, Vice President of Capital Markets. Please go ahead.

Good morning, everyone, and thank you for joining us. Also on the call today are Bilal Rashid, our Chairman and Chief Executive Officer; and Jeff Cerny, the company's Chief Financial Officer and Treasurer. Before we begin, please note that the statements made on this call and webcast may constitute forward-looking statements as defined under applicable securities laws. Such statements reflect various assumptions, expectations and opinions by OFS Capital management concerning anticipated results, are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from such statements. The uncertainties and other factors are in some way beyond management's control, including the risk factors described from time to time in our filings with the SEC. Although we believe these assumptions are reasonable, any of those assumptions could prove inaccurate, and as a result, the forward-looking statements based on those assumptions also could be incorrect. You should not place undue reliance on these forward-looking statements. OFS Capital undertakes no duty to update any forward-looking statements made herein, and all forward-looking statements speak only as of the date of this call. With that, I'll turn the call over to Chairman and Chief Executive Officer, Bilal Rashid.

Thank you, Steve. Earlier this morning, we announced our first quarter results. Our net investment income in the first quarter was $0.42 per share representing a 20% increase over the prior quarter. This increase is primarily due to certain nonrecurring items. We continue to cover our distribution of $0.34 per share. As we discussed recently on our prior call, we believe the overall health of the portfolio remains solid. We placed 1 borrower on nonaccrual status this quarter, representing approximately 2% of the portfolio at fair value. We believe that we continue to benefit from our balance sheet positioning with the majority of our debt being fixed rate and the vast majority of our loan portfolio being floating rate. Our net asset value in the first quarter declined to $11.08 per share from $12.09 at year-end, primarily due to unrealized depreciation concentrated in a couple of positions, most notably, our equity investment in Pfanstiehl Holdings, which Jeff will describe in more detail. Noting this decline, we remain comfortable with our portfolio and believe it is well positioned for the current macroeconomic environment. As part of our long-standing investment discipline we remain committed to avoiding highly cyclical industries. We believe that our portfolio remains well diversified and defensively positioned with our largest sector exposures being manufacturing, healthcare, wholesale trade and business services at fair value at quarter end. Another key part of our investment discipline is investing higher in the capital structure with approximately 100% of our loan portfolio at fair value in first and second lien senior secured loans. We believe that this positioning will continue to benefit us in this uncertain macroeconomic environment. In terms of new originations, M&A activity remains subdued, though we anticipate that an increase in activity later in the year may occur as we get…

Thanks, Bilal. Good morning, everyone. As Bilal mentioned, we posted net investment income of $0.42 per share for the first quarter once again covering our $0.34 per share distribution declared during the quarter. Our current distribution rate represents a 13.7% annualized yield based on the price of our common stock at quarter end. We also announced that our quarterly distribution for the second quarter will remain at $0.34 per share. Our net asset value per share decreased by approximately $1 to $11.08. As Bilal mentioned, this decline was primarily due to unrealized depreciation concentrated in a couple of positions, most notably our equity position in Pfanstiehl Holdings, which declined $7.9 million or $0.59 per share. Pfanstiehl is a manufacturer of specialized products for leading biopharmaceutical firms. We believe its recent decline in value is due to a cyclical downturn in the life sciences industry. However, we remain positive about the long-term outlook for the business. This is a position we invested in more than 10 years ago at a modest cost of only $200,000. To date, we have received approximately $3.4 million in distributions or approximately 17x our cost and as of quarter end, our fair value is $63.1 million. As you know, we have experience in making these kind of selective equity investments alongside certain of our initial debt investments. This quarter, we had another equity realization in TRS Services for gross proceeds of $3.9 million, recognizing a realized gain of $1.4 million. In addition, we recognized $1.9 million of accumulated preferred dividends from this investment during the quarter. As mentioned, we placed on borrower on nonaccrual status during the quarter. SSJA Bariatric, a provider of bariatric surgery and weight management solutions. The sponsor as well as the founder and CEO, have recently contributed meaningful additional capital into the…

Thank you, Jeff. In closing, we believe our portfolio remains in good shape with just 1 new nonaccrual in the quarter. Our focus remains on capital preservation with approximately 100% of our loan portfolio at fair value being senior secured, and we remain confident in the overall quality and fundamentals of our portfolio. We have relied on our long-standing experience and investment discipline, which we believe has served us well. Since the beginning of 2011, the BDC has invested more than $1.9 billion with a cumulative net realized loss of just 2.5% over the past 13 years, while generating attractive risk-adjusted returns on our portfolio. We believe our business is especially equipped to navigate this market successfully due to the size, experience and reputation of our adviser. With a $4 billion corporate credit platform affiliated with a $30 billion asset management group. Our adviser has broad expertise including long-standing banking and capital markets relationships. Our corporate credit platform has gone through multiple credit cycles over the last 25-plus years. Our adviser and affiliates are also strongly aligned with shareholders as they maintain an approximately 23% ownership in the company. With that, operator, please open up the call for questions.

[Operator Instructions] Our first question comes from Mitchel Penn of Oppenheimer.

A quick question. Do you guys feel -- with the interest income down this quarter, do you feel like that can come back? Or do you see a path to covering the dividend? Or are they going to -- or do you think there's going to be some gains to make up any shortfalls.

Mitchel, this is Jeff. Thanks for the question. Yes. There is a path, absolutely. As you know, we are continuing to realize on certain equity investments in one of our largest positions is a noninterest-earning asset. So certainly, as we think about converting that to an interest-earning asset, we should be able to cover our dividend going forward.

This concludes our question-and-answer session. The conference is now finished. Thank you for attending today's presentation. You may now disconnect.