Good afternoon. My name is Margo, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the WhiteHorse Finance First Quarter 2025 Earnings Conference Call. Our hosts for today’s conference are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer. Today’s call is being recorded and I will be made available for replay beginning at 5:00 PM Eastern Time. The replay dial in number is (402) 220-0464. No passcode is required. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today to discuss WhiteHorse Finance’s first quarter 2025 earnings results. Before we begin, I’d like to remind everyone that certain statements, which are not based on historical facts made during this call, including any statements relating to financial guidance may be deemed forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, these are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. WhiteHorse Finance assumes no obligation or responsibility to update any forward-looking statements. Today’s speakers may refer to material from the WhiteHorse Finance first quarter 2025 earnings presentation, which was posted to our website yesterday afternoon. With that, allow me to introduce WhiteHorse Finance’s CEO, Stuart Aronson. Stuart, you may begin.

Thank you, Rob. Good afternoon, and thank you, everyone for joining us today. As you’re aware, we issued our earnings yesterday after market close and I hope you’ve had a chance to review our results for the period ended March 31, 2025, which can also be found on our website. On today’s call, I will begin by addressing our first quarter results and current market conditions. Joyson Thomas, our Chief Financial Officer will then discuss our performance in greater detail, after which we will open the floor for questions. Our results for the first quarter of 2025 were disappointing as our investment portfolio declined this quarter due to net realized and unrealized losses, which impacted our financial performance. Q1 GAAP net investment income and core NII was $6.8 million or $0.294 per share, compared with a quarterly distribution of $0.385 per share and was below Q4 GAAP and core NII of $8 million or $0.343 per share. NAV per share at the end of Q1 was $12.11 representing an approximate 1.6% decrease from the prior quarter. NAV per share was impacted by net realized losses and net markdowns in our portfolio totaling $2.6 million. Turning to our portfolio activity in Q1, we had gross capital deployments of $45.5 million, which was partially offset by total repayments and sales of $19.4 million, resulting in net deployments of $26.1 million. Gross capital deployments consisted of seven new originations totaling $40.8 million with the remaining $4.7 million used to fund six add-ons to existing investments. In addition, there was $600,000 of net fundings made on revolver commitments. Of our seven new originations in Q1, one was non-sponsor and six were sponsor deals with an average leverage of only approximately 4.0 times EBITDA. All of our Q1 deals were first lien loans with an…

Thanks, Stuart, and thank you, everyone, for joining today’s call. During the quarter, we recorded GAAP net investment income and core NII of $6.8 billion or $0.294 per share. This compares with Q4 GAAP NII and core NII of $8 billion or $0.343 per share, as well as our previously declared quarterly distribution of $0.385 per share. Fee income of approximately $0.5 million in Q1 was primarily due to a prepayment fee earned upon the full repayment in platform companies. For the quarter, we reported a net increase in net assets resulting from operations of $4.3 million. Our risk ratings during the quarter showed that approximately 74.1% of our portfolio positions either carried a 1 or 2 rating, slightly higher than the 72.5% reported in the prior quarter. As a reminder, a 1 rating indicates that a company has seen its risk of loss reduced relative to initial expectations and a 2 rating indicates a company is performing according to such initial expectations. Quarter-over-quarter, we downgraded our investments in MSI from a 3 to a 4 rating. Additionally, our 5 rated position slightly decreased from 1.3% to 1.2%. As Stuart mentioned earlier, American Crafts, a 5 rated position, which was written down to zero and part of our non-accruals as of the end of the first quarter has now been resolved. We expect these positions to be removed from our non-accruals and portfolio listing in the second quarter, although not with the outcome we had expected. Regarding the JV specifically, we continue to grow our investment. As Stuart mentioned earlier, in the first quarter, we transferred three new deals and one existing investment to the STR’s JV totaling $17 million. As of March 31, 2025, the JV’s portfolio held positions in 41 portfolio companies with an aggregate fair value of…

[Operator Instructions] While that queue builds, we’ll take our first question from Melissa Wedel with JPMorgan. Please go ahead.

Good afternoon. Thanks for taking my questions today. Wanted to start –Aron and make sure I’m understanding what you laid out for us in terms of Telestream and returning that back to accrual status. That sounded like potentially a near-term effect. Is that or a near-term development. Is that fair to say?

Yes. We’ve made progress. We thought we would have a restructuring completed on Telestream last quarter. But the situation did stretch out. We now hope to get the restructuring done by the end of May, which gives us a month of cushion vis-à-vis another month before the end of the quarter. And we would plan to convert a large portion of the existing debt back into cash paying debt that would go on accrual, and any amount that was not cash paid debt would be converted to equity where we have long-term upside in our ownership of the company.

Okay. I appreciate the context on that one. Given the way the investments listed on the statement of investments as of March 31st and based on the rate listed there, as well, it looks like in a full pay quarter at the current fair value, that could mean a couple cents per share in terms of incremental NII just by returning to accrual status. Are we thinking about that the right way?

Again, part of the debt would return to accrual status. We’re still working on how much of it would return and the rate on the debt would be set given that we’d be reducing the amount of debt on the company, the rate on the debt would be set at a more market rate to today’s market. Again, that number has not been confirmed yet. So…

Got it.

It certainly will be accretive, but it will not be accretive as it would have been had the rate stayed. I think it’s SOFR 975.

Right. Okay. Thank you so much for the context.

No problem.

Thank you. [Operator Instructions] We’ll take our next question from Robert Dodd with Raymond James. Please go ahead.

Hi, guys. I apologize for the background noise. On the dividend, could you give us an update on spillover, and if I recall correctly, I mean, basically, that spillover effectively mandate near maintenance of the covered base. So when you talk about reviewing the dividend in in the near term, can you give us any color? I mean, obviously, you could lower that then distribute spillover some other way or what’s the thought process on where that might shake out for 2025? Obviously, if the spillover gets dealt with this year then 2026 is different.

Robert, can you start with the spillover? Yeah.

Yeah. Absolutely, Robert. So, as of the end of last year and as we had mentioned in last quarter’s earnings call, the spillover income was approximately $28.4 million and I think the way to think about it is currently right now with $0.385 per share dividend run rate that equates to approximately $8.95 million of distributions being currently distributed. I would also just highlight maybe the dividend shortfall for Q1 meaning the $0.294 per share NII versus the $0.385 per share current dividend, which equates to about a $2.1 million shortfall. So hopefully that helps in maybe framing the discussion. And, Stuart, I don’t know if you want to touch on maybe just thoughts with the Board and our discussions around the dividend.

Yes. We have some upside in our earnings from the continued deployment of balance sheet assets, which, are planned with the mandated deals, but not certain because we’re not sure those deals will close. We also pick up some income from the JV. We see an opportunity that we may take advantage of to lower our borrowing cost, which would also be accretive to the dividend. And as we discussed, there is the likelihood that Telestream comes partially back onto accrual and MSI fingers crossed, will potentially come back on accrual, which would all help the earnings stream of the BDC. That said, as I said in my prepared remarks, there are a number of accounts that will not be coming back on accrual in the near term. And so the Board is evaluating all of these things I just mentioned vis-à-vis what the distribution rate is to come up with a view on what the proper dividend is, whether it’s the current $0.385 or some different level. And we are waiting for more of this information to play out to have a clearer picture of the core earnings stream of the BDC before making any decisions on the dividend. But we’ve had active conversation with our shareholders, sorry, with our board.

Got it. Thank you. And then just one more, if I can. I mean, what are you seeing and again, I apologize for the back numbers, in kind of the market in terms of bid ask spread between buyers and sellers? I mean, in a period of it looked early in the year that we might see more activity. I’m not talking about generally market, but just don’t use you guys at this point. But then, additional volatility sometimes, it pulls back the bid, but the ask doesn’t necessarily move as quickly. I mean, what are your thoughts on how that might play out in terms of volatility between what I mean, buyers are willing to pay, but maybe the sellers are more sticky on their asking prices?

Robert, what we’re seeing right now is for companies that are in the market that are good companies that don’t have significant tariff risk or recession risk. Those companies are trading at very high multiples. There’s a lot of capital - unused capital sitting in the private equity community. And there is a strong motivation for private equity firms to get that capital deployed. So, if you have a good company to sell, we are seeing good prices on those and buyers and sellers are meeting in the middle. That said, there are a lot of companies that have recession risk involved in their operations and/or tariff risk and we’re finding buyers are being very careful and conservative. And so, in those cases, buyers and sellers are not necessarily reaching agreement. And then ever since the announcements on Liberation Day, the M&A market has backed up a lot. We are led to understand from the bankers that we talked to that there was a pretty solid pipeline of M&A activity that was scheduled for the balance of the year. Many of those deals have been put on the shelf for the moment, waiting for more clarity in the market to come out based on the tariff negotiations and the announcements of underlying economic activity in the economy. Based on that, we largely expect that M&A activity is going to remain muted for the next 60 to 90 days. And then if M&A does start to pick up in Q3, there is typically a four to twelve week delay between the time the M&A activity picks up and any financing activity gets going. So, even though our pipeline on the strength of our 25 originators and 13 local markets is reasonably strong. We have a 175 deals in pipeline, which is more or less normal for this time a year. The quality of the deals is not as high as we’ve seen in the past and we think of new m and a transactions with new money equity coming in as being typically the highest quality of deals. And so, we think closure rates are going to be slower. And, therefore, when you look from Q2 into Q3, we expect a relative quiet period in terms of new deal closure. Q2 so far is shaping up to be a solid quarter with the one deal closed and five deals mandated and three more add-ons, but we are cautious as to the environment for deals to close in Q3.

Thank you for that color. Thanks a lot.

No problem, Robert. Thank you.

[Operator Instructions] We’ll go next again to Melissa Wedel with JPMorgan.

Hi, thanks. One quick follow-up. I know that last quarter you talked about anticipating some elevated repayment activity this year. Wondering how you’re thinking about that now and whether those expectations have moderated. Thanks.

Melissa, when the markets got unsettled about a month ago and spreads moved up, we saw repayment activity - forward repayment activity slow down. The marks, as I indicated in the prepared remarks have largely recovered and spreads are back to where they were a couple months ago. So we do think that there will be a decent amount of refinancing activity in the second half of the year, as prepayment penalties on higher rate deals expire. On - in the case of credits that we like, we will try to keep those credits at the current market pricing. And in the case of credits that we think do not deserve the lower pricing, we will let those credits go. But it’s too early to indicate now what will happen over the course of the balance of the second quarter into Q3 and Q4. I will tell you that right now, the visible repayment pipeline that we have is pretty light. So, I can think of a couple companies that are potentially coming out for sale over - either now or over the next couple of months. And if those sales transact, they will result in repayment activity. But that’s only two or three of the companies in portfolio. So we’re not we’re not seeing really heightened repayment activity at the moment.

Thank you.

As there are no further questions at this time, that will conclude our question-and-answer session and the WhiteHorse Finance first quarter 2025 earnings call. You may now disconnect.