[Audio Gap] MFIC or the BDC, and we will use MidCap Financial refer to the lender headquartered in Tanner Maryland. At this time, I'd like to turn the call over to our Chief Executive Officer, manner Powell.

Thank you, Elizabeth. Good morning, everyone, and thank you for joining us today. I will begin today's call by highlighting our results for the quarter, and we'll then provide thoughts on the current environment. Following my remarks, Ted will review our investment activity and provide an update on credit quality. Lastly, Greg will review our financial results in detail. We will then open the call to questions. Beginning with our financial results after market close yesterday, we reported a strong March quarter with net investment income per share of $0.45, well above the current $0.38 dividend benefiting from the positive impact of higher base rates, strong fee and prepayment income as well as our new fee structure, which became effective during the quarter. As a reminder, fee and prepayment income can fluctuate quarter-to-quarter. At the end of March, net asset value per share was $15. 18, an increase of $0.08 or 0.5% from the end of December, primarily due to net investment income in excess of the dividend as well as a slight net unrealized gain on the portfolio. Regarding investment activity, new corporate lending commitments made during the quarter totaled $110 million, all first lien floating rate and across 15 distinct borrowers as we continue to emphasize portfolio diversification. As discussed on last quarter's call, Merx executed a significant transaction during the March quarter by selling its interest in a joint venture which allowed Merx to repay $65 million during the quarter. At the end of March, our investment in Merx totaled $197 million, representing 8.3% of the total portfolio at fair value. We remain focused on reducing our investment in Merx and while we don't expect paydowns to occur evenly, we do expect to see some additional paydowns in the remainder of 2023, subject to market conditions. Shipping…

Thank you, Tanner. Good morning, everyone. Beginning with the portfolio. We believe the quality of our corporate lending portfolio continues to improve, which should allow us to mitigate some of the risks that could arise in a slower economy. We saw improvements on several important metrics during the period. Our average position size decreased, enhancing the diversification of the portfolio. The net leverage of our underlying borrowers decreased and the weighted average attachment point declined. Notably, we realized all of these improvements while also slightly increasing the spread on the portfolio. At the end of March, our investment portfolio had a fair value of $2.39 billion invested in 141 companies across 25 different industries. Corporate lending and other represented 92% of the total portfolio and Merx represented 8% of the portfolio at fair value. At the end of March, 94% of our corporate lending portfolio was first lien. The average funded corporate loan position was $16.2 million, down from $16.5 million last quarter. The overall weighted average portfolio net leverage declined slightly to 5.45x, down from 5.49x last quarter. The overall weighted average attachment point declined to 0.1x, down from 0.2x last quarter, demonstrating the true first lien nature of our loan book. The weighted average spread across the corporate lending portfolio was 613 basis points, up from 610 basis points last quarter. Despite a slowdown in new issue activity, MidCap Financial was active during the March quarter, closing approximately $3.5 billion in new commitments and $15.6 billion over the last 12 months. In the March quarter, MFIC's new corporate lending commitments totaled $110 million, all first lien across 15 different borrowers for an average new commitment of $7.4 million as we continue to focus on diversification by borrower. As mentioned, all new commitments were first lien floating rate loans…

Thank you, Ted, and good morning. Beginning with our financial results. Net investment income per share for the March quarter was $0.45. Net investment income benefited from higher base rates on our floating rate assets, strong fee and prepayment income and our new fee structure. Prepayment income was $2.6 million, essentially flat quarter-over-quarter. Fee income was approximately $2.2 million compared to $700,000 last quarter, driven by a slight pickup in amendment activity. There was a nominal amount of dividend income earned during the quarter. Payment in kind or PIK income remains very low, representing less than 1.2% of our total income for the quarter. All else equal, the new fee structure increased NII per share by approximately $0.065 for the quarter. The yield at cost of our corporate lending portfolio was 11.3% on average for the quarter compared to 10.3% last quarter driven by higher base rates. This yield figure is an average of the beginning and end of the quarter. As of the end of March, the yield on the corporate lending portfolio at cost was 11.5%, up from 11% at the end of December. NAV per share at the end of March was $15.18, an increase of $0.08 or 0.5% quarter-over-quarter. The increase was driven by $0.07 of net investment income of $0.45 relative to the $0.38 distribution recorded during the quarter. There was also a $0.01 per share increase due to net unrealized gains on the portfolio. Additional details on net gains and losses are shown on Page 16 in the earnings supplement. Total expenses for the quarter were $38.3 million, up from $35.3 million last quarter, primarily due to higher interest expense and higher incentive fees, partially offset by lower management fees. Gross management fees totaled $4.3 million compared to $8.8 million last quarter, a decrease…

[Operator Instructions] We'll take our first question from Mark Hughes from Truist Securities.

You mentioned how the revenue and EBITDA growth within the portfolio was sustained through Q1. I wonder if you saw any kind of deceleration there? And if that leads to any conclusions about how the economy is performing here recently, particularly around the bank crisis. Just any thoughts on that topic would be great.

Yes, sure. We did see a slight deceleration relative to the last few quarters. Revenue growth was in the double digits, although just barely, and EBITDA growth was in the single digits, high single digits. What we do continue to see is that there are -- margins are not growing as fast as revenue. And as we look out across the spectrum, and we think about the impact of what the banking crisis would be. I think it's kind of a double-edged sword. You've got, on one hand, from an economic standpoint, you're going to have continued pressure on consumers, small businesses and their ability to obtain credit and continue to spend. And then on the other side of the coin, you have private lenders like ourselves who will be able to take advantage of opportunities that pop up and continue to drive good pricing and importantly, good terms in terms of covenants and low advance rates in terms of leverage.

And then just to add to that, that data is mostly as of December, and then it's not consistent across the portfolio who actually reports monthly. But when we looked at those numbers and rolled forward since December, that'd be a continuation of the trend of a slight moderation, but still healthy overall fundamentals.

Understood. And then with the economy, perhaps absorbing the banking crisis, are you seeing any kind of truly signs of a bit of a recovery. You said the first quarter started to show signs of life and then slow down as the news emerged, -- are you seeing any inflection here recently? I wouldn't say we're seeing any inflection.

Obviously, the quarter started off with a kind of more benign, more constructive environment. And then we had the events with the regional banking issues emerge. And I think the way we look at it, Mark, is certainly, as we look forward, I think the volatility of outcomes has probably been enhanced from here. We are experiencing a market that was arguably very compelling from a private debt standpoint, even prior to the regional banking stress. And we think over the longer term, are encouraged by the opportunities that, that could help the nice secular trends that are benefiting private credit, but are absolutely taken into account that increased potential for volatility of outcomes given the regional banking stress.

Yes. And just to add on how we approach that from an underwriting perspective. we have always done stressed underwriting. We run stress cases about how rates or costs or other parts of the economy could adversely impact the companies. So we do not underwrite to -- up and to the right hockey stick in terms of our approach to credit. And so while we do hope that there will be some rebound from an underwriting standpoint, it's kind of hope for the best, but we always plan for the worst and are very diligent in those stressed underwriting approaches.

Our next question comes from Kenneth Leon from RBC Capital Markets.

Just one on Merx I think in the prepared remarks, you mentioned that you could expect some payments this year. I just wanted to see if you could just further expand upon that some details on that.

Yes. Thanks, Ken. And as we mentioned in the prepared remarks, we were very pleased to report, as we did last quarter, a significant pay down to take us down to roughly 8%. And I think the emphasis from here is we have assets in all stages of the disposition process. That will be market contingent and obviously, also depending on the underlying financing arrangements. And so from here, while payments and repayments and reducing the exposure of MFIC's investment in Merx will continue. It won't be linear, and it will be dictated by those dynamics. From an industry perspective, we do remain encouraged by the fundamentals within the aviation space and aircraft leasing, in particular, in terms of good supply dynamics with all the canceled orders during COVID and demand that's approaching 90% of pre-COVID levels and then more recently, the opening up of China and better traffic volumes in Asia. And so while -- and so we believe that those dynamics should help to help us to reduce that exposure to Merx. And then the emphasis, though, as I started with is it's not going to be linear, but as we've mentioned in recent quarters, very focused on doing everything we can to pull the exposure down.

Got you. Very helpful there. And then one follow-up, if I may. I wonder if there's any updated thoughts around leverage targets in the near term, just given the current macro backdrop?

Yes. We are not amending our leverage guidance. We ended kind of at the lower end of it. Our approach in this market is obviously balancing our liquidity with what is what is clearly and likely to continue to be a very good vintage for private credit. So I would expect we're not amending our leverage target. Again, Ken, I would emphasize that our new fee structure has changed, and we're only charging fees on equity. So increases in leverage do not affect the manager. And so we're very comfortable with our range. And again, the -- where we operate in terms of leverage will be a balance of the very attractive environment and then operating within that range.

The next question comes from Kyle Joseph from Jefferies.

Just kind of a follow-up there in terms of the deal environment versus, I think you guys referenced kind of your undervalued stocking how you're thinking about in capital into new deals versus buybacks weighing leverage at the same time.

Yes. Thanks, Kyle. I mean I think we're balancing the opportunity and that we see in the marketplace versus keeping our leverage at the lower end of our target range at this point. So I think we'll continue to evaluate it as we move forward.

Okay. And then a quick modeling question for Greg. Probably in terms of interest dividend and other income are we -- is this kind of the run rate we should expect going forward? Or were there any sort of onetime items in terms of dividend income being well?

Well, no, there aren't any. I mean, I think you can look at our recurring income -- interest income and pro forma that out. And obviously, the fee income and prepayment income does bounce around quarter-to-quarter.

Yes, I would just -- and without going into the specifics, Kyle, broadly speaking, dividends have historically correlated with noncore, some of our noncore investments and that those have come down, we would expect dividend income to come down. As it relates to our current earnings, and we did call this out in our script, there was enhanced prepayment income, and that's a line item that, as you know and we know can be volatile quarter-to-quarter depending on transaction activity, which is sometimes beyond our control.

Our next question comes from Sean-Paul Adams from Raymond James.

Regarding your interest coverage, the portfolio average kind of sits at 1.7x right now. Some portion of that had to be significantly lower, but your PICC didn't rise. So have you guys had any discussions with sponsors regarding amendments by them or any incremental support from sponsors?

Yes. Again, this is Howard. I mean the -- so no, our PICC hasn't risen nor do we sort of necessarily expect it to rise. I mean we -- it's generally not sort of part of our like part of the normal course of things that we provide. Obviously, if the loan is on nonaccrual, it may not be paying, it may be paid. But we generally -- like if something is picking and it's a first lien loan, it generally will be on nonaccrual, right? So -- and so there hasn't been an uptick in that. Obviously, as interest coverage gets tighter, there are more companies that potentially get tighter. But as Ted said, there hasn't really been a pickup in amendment activities and there's still EBITDA growth, and there's still sort of coverage. That doesn't mean anecdotally, there aren't loans that we're always talking to because they're underperforming as there were prior to this environment. So the answer is we have very little pick. We don't expect it to tick up. We hope and expect nonaccruals not to pick up that much and certainly less than sort of are the market and our competitors because of the quality of our portfolio. But we are not seeing or expecting our pick to pick up at least with regard to what is in our NII.

We'll take our next question from Paul Johnson from KBW.

Just taking on Kyle's question a little bit. I'm just trying to get a sense of, obviously, fee income a little bit higher. It sounds like this quarter, a little bit of prepayment income in there as well. Maybe just balancing that out a little bit with obviously, the expected increase from higher base rates. How do you guys, I guess, really look at this quarter's earnings run rate level based on this quarter? I mean are you looking at this as kind of a pre-secured level of earnings that you think you can kind of generate into the future as far as this year is concerned or are we kind of looking at sort of a peak [Indiscernible] level, again, based on this Q1?

So we have guided before that we expect prepayment and fee income to be around on average $3 million a quarter. It can be more or less based on what Tanner said is timing, but it isn't a hugely volatile part of our earnings or high percentage part as opposed to sort of like some BDCs take transaction fees on closed deals as they originate things. We do not do that. So we are not -- our fee income is in driven by origination. It's only driven by sort of either amendments or onetime events or exits or things like that. And it has been pretty consistent if you look over the last 3 or 4 years around $12 million to $14 million a year. So putting that -- putting that aside, you then would expect our -- if you pull that number out, with full fees being paid, which they were this quarter, you would expect our net income to go up marginally because interest rates are going up and because we are incrementally redeploying capital that's under earning. So the answer is in this interest rate environment and even a slightly more benign one, we expect to sort of have to continue coverage. And those fees are -- I don't know they can fluctuate from, I don't know, $0.01 to $0.05 a share during a given quarter.

Got it. That's very helpful. Last question, just kind of bigger picture, but you talked about it, obviously, a little bit on the call here, but just the broader corporate lending world, at this point, I'm just trying to get a sense of, I guess, what the sponsor appetite really is, I guess, for deal activity today? We're talking about EBITDA growth that's still in place for a lot of these portfolio companies. But obviously, the cost of financing is going up as the just risk in general. But -- so what are sponsors doing at this point? Is it mainly just kind of sitting tight, waiting to see what happens with the company? Or is there just a very wide disparity between valuations between buyers and sellers kind of getting a sense of what the appetite is, I guess, for corporate activity.

Yes. Thanks, Paul. I'll make 2 comments there. First, as it relates to the environment, I think the sponsor community is certainly trying to digest higher rates than what the impacts are on valuation. We've seen -- I think the numbers for Q1 were M&A down kind of 10% and if you compare it to peak down as much as 30%. And I think that bears out to that point about digesting different cost of capital. Within that environment, private credit is certainly taking share, and you've seen what is relatively muted leverage loan market and the size of deal or the quality of the deal that's required to access that market, which is increased opportunity for private credit lenders. In terms of our business and more specifically, what sponsors are looking at, this goes back to a theme that we've talked about quite a bit in these calls is the power of incumbency. And so while undertaking a new LBO is difficult, you are seeing a lot of activity or sponsor focused on add-ons. And whether we have delayed draws to these existing companies and/or they're looking for incremental commitments, that's one aspect of the over 500 borrowers that we have within the mid-cap MFIC system enables a nice sourcing engine and what is, to your point or to the nature of your question, a more muted environment in terms of M&A and a higher cost of capital and sponsors digesting different valuation expectations?

Our next question comes from Melissa Wedel from JPMorgan.

I wanted to go back to your declared dividend, which you maintained at $0.38 a share. But also keeping in mind your earlier comment about expecting to over-earn that amount for the foreseeable future, just sort of based on the forward rate curve, I believe, in sort of current portfolio positioning. Is that something that we should expect to persist? Would you -- and I guess, put differently, would you look to continue to use any out earnings to sort of support NAV through any volatility that we may face going forward?

Well, we do not expect to be pay attacks. So we will distribute special dividends at least consistent with that, whether that's 90% or 98% we may to be seen. So I think it's a little bit of both. If we have this level of out earnings consistently, which we -- as we said, we sort of expect -- we would expect that there will be special dividends, but we don't necessarily expect they'll be quarterly. And so we will use some to support that. But at this level, we would expect to be paying for special dividends as well.

Okay. In terms of timing, I take your point, that won't be a quarterly consideration, but should we expect something around -- is that part of a year-end planning process that you guys would approach that?

Yes, that makes sense. That's probably from a timing point of view makes sense, yes.

Next question comes from John [indiscernible] from Wells Fargo.

So in recent quarters, you've had kind of more of a tilt towards Life Sciences. This quarter, we don't really see much in new originations. Should we be reading anything into that?

No, no. I think we're very lucky to have the various origination channels and what presents itself can modulate. Obviously, in Life Sciences, MidCap has a tremendous franchise there and quite a bit of opportunity we would expect over the next several years, but I wouldn't take from that anything thematic or indicative of a trend. We show no further comments at this time.

I will now turn it back to management for closing remarks. Thank you, operator.

Thank you, everyone, for listening to today's call. On behalf of the entire team, we thank you for your time today. Please feel free to reach out to us if you have any other questions, and have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.