Good afternoon, everyone. My name is Bo and I will be your conference operator today. At this time, I would like to welcome everyone to the WhiteHorse Finance Second Quarter 2025 Earnings Conference Call. Our hosts for today are Stuart Aronson, Chief Executive Officer; and Joyson Thomas, Chief Financial Officer. Today's call is being recorded and will be made available for replay beginning at 4:00 p.m. Eastern time today. The replay dial-in number is (402) 220-6986, no pass code is required. [Operator Instructions] It is now my pleasure to turn the floor over to Robert Brinberg of Rose & Company. Please go ahead, sir.

Thank you, Bo, and thank you, everyone, for joining us today to discuss WhiteHorse Finance's Second 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. Before these forward-looking -- I'm sorry, 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 Second Quarter 2025 earnings presentation, which was posted on our website this morning. With that, allow me to introduce WhiteHorse Finance's CEO, Stuart Aronson. Stuart, you may begin.

Thank you, Rob. Good afternoon, everyone. Thank you for joining us today. As you're aware, we issued our earnings this morning before the market opened, and I hope you've had a chance to review our results for the period ended June 30, 2025, which can also be found on our website. On today's call, I will begin by addressing our second 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 second quarter of 2025 were disappointing as our investment portfolio declined this quarter due to net realized and unrealized losses, which impacted our financial performance. Q2 GAAP net investment income and core NII was $6.6 million or $0.282 per share compared with a quarterly distribution of $0.385 per share and was below the Q1 GAAP and core NII of $6.8 million or $0.294 per share. NAV per share at the end of Q2 was $11.82 representing a 2.4% decrease from the prior quarter. NAV per share was impacted by net realized and unrealized losses in our portfolio that totaled $4.3 million. Turning to our portfolio activity in Q2. We had gross capital deployments of $39 million, which was partially offset by total repayments and sales of $36.2 million, resulting in net deployments of $2.8 million. Gross capital deployments consisted of 3 new originations totaling $33.1 million and the remaining $5.9 million was used to fund 3 add-ons to existing investments. In addition, there was $0.3 million in net fundings made on revolver commitments. Of our 3 new originations in Q2, 1 was nonsponsor and 2 were sponsor deals with an average leverage of approximately 4x EBITDA. All of our Q2 deals were first lien loans at…

Thanks, Stuart, and thanks, everyone, for joining today's call. During the quarter, we recorded GAAP net investment income and core NII of $6.6 million or $0.282 per share. This compares with Q1 GAAP NII and core NII of $6.8 million or $0.294 per share as well as our previously declared quarterly distribution of $0.385 per share. Fee income of approximately $0.8 million in Q2 was primarily due to prepayment fees earned on the full repayment in CleanChoice Energy as well as from other amendment fees. For the quarter, we reported a net increase in net assets resulting from operations of $2.3 million. Our risk ratings during the quarter showed that approximately 76.8% of our portfolio positions either carried a 1 or 2 rating slightly higher than the 74.1% 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 the company is performing according to such as initial expectations. Regarding the JV specifically, we continue to grow our investment. As Stuart mentioned earlier, in the second quarter, we transferred 3 new deals and 1 existing investment to the SRS JV totaling $22.8 million. As of June 30, 2025, the JV's portfolio helped positions in 43 portfolio companies with an aggregate fair value of $330.2 million compared to 41 portfolio companies with an aggregate fair value of $310.2 million as of March 31, 2025. The investment in the JV continues to be accretive for the BDC's earnings, generating a mid-teens return on equity. During Q2, income recognized from our JV investments aggregated to approximately $3.4 million, a slight decline from $3.7 million in Q1. As we've noted in prior calls, the yield on our investment in the JV fluctuate period-over-period as…

[Operator Instructions] We'll go first this afternoon to Christopher Nolan of Ladenburg Thalmann.

I guess on American Crafts, is it correct that, that was an exit or was there a restructuring?

It was a sale of the remaining piece of the company, and that sale yielded very little in terms of proceeds. So we have resolved that, taken the write-down, and there is no further downside on that account.

Got you. And on the CLO, and Joyson was going through some of the details, helpful. But what is the term of it for the reinvestment period?

Reinvestment period is through May 25, 2029.

We'll go next now to Melissa Wedel of JPMorgan.

I appreciate the reminder on the portion of the portfolio where companies are facing tariff pressure. I'm wondering if you can expand on that a little bit. I'm curious if there are -- the extent to which any mitigating actions can be taken or have been taken. Can you elaborate on -- I assume some of it's supply chain pressure. If not, could you explain a bit more on that?

Yes. I mean it varies company by company. In some cases, the companies are actively negotiating to have their suppliers absorb a portion of the tariff amount. What we're seeing in a decent number of cases, about half the tariff amount is being absorbed. In some of the cases, the tariff amounts are still not clear based on ongoing negotiations and changes week to week. And then in some other cases, particularly where we've had companies that source out of China, they have been moving their sourcing. One of our companies is in the toy business. and they've moved a lot of their sourcing from China to Vietnam. So people are taking the information that exists in the market, trying to optimize based on whatever is going on. But as we all recognize, the tariff situation changes every week and in some cases, every day. So people are having to be nimble to keep up with what's going on, Melissa.

That certainly makes sense. I also appreciated the update on sort of post-quarter end activity and I guess, a couple of things jumped out there. First of all, it seemed like the mandate -- I'm not sure if you sized it in terms of dollars, but the number of mandates that you referenced seems to be certainly higher than last quarter, though that might not be too surprising given the volatility last quarter. But given the higher number of mandates, should we be thinking about that as you also have in line of sight to some elevated repayment activity given the constraints on leverage within the general portfolio?

We think that we're right now in a pretty good balance between repayment and new mandates. There are companies that are either in the midst of being sold or expected to be sold in Q4. In the cases where we like those companies, we will attempt to pursue them with the new owners. But I would say, in general, Melissa, the messages that the BDC balance sheet is expected to be fully deployed this quarter based on the mandates that we have now and based on what we're seeing in terms of repayment activity and then as I mentioned earlier, the JV has about $20 million of additional capacity, which would be, on the average deal allocation, about 3 deals that we could add to the JV, which would create more income.

Well, and I guess, I'll sneak in 1 more follow-up on that, in particular, given the, I'd characterize as fairly limited, extra capacity in the JV. Do you have any plans on either upsizing the existing JV or perhaps pursuing additional joint ventures with other partners?

No, there are no plans to increase the JV at this time. If we decide that makes sense, we'll certainly let you know but we think the JV is sized appropriately, and we're doing our best to keep it as close to full as we can.

[Operator Instructions] We'll go next now to Heli Sheth of Raymond James.

In regards to the dividend, I know you mentioned prior year spillover of $9.7 million. Any update on any idea on thought processes for working down spillover through 2025 and into 2026?

Joyson, can you take that?

Certainly. Yes, as we mentioned before, the undistributed spillover income related to 2024, that still remains at $9.7 million. And so as we've discussed in prior calls, that factors into the dividend distribution for the remainder of this year into next. So I think the way to think about it is thinking about the October distribution that will be made of approximately $8.9 million, there's still a small amount, less than $1 million, that would be undistributed. And so factors to consider there would be a potential special dividend, otherwise, that would go undistributed for the year and roll into tax incurrence for the year. So I think from that standpoint, we're looking at that undistributed taxable income in combination with other factors related to just shortfall of the earnings in the current year when we think about the dividend for 2026.

We go next now to Sean-Paul Adams of B. Riley Securities.

On the portfolio companies that you mentioned were suffering tariff impacts, are you seeing any incremental bottom line flow-through to just the net consumer? Historically, during the COVID period, it was passed through to the end user with little to no issue after the 6- to 12-month volatility period.

And the answer is, yes, to the extent that tariffs are not being fully absorbed by the suppliers. Our companies are raising prices, and they are seeing competing companies raise prices as well. So far, what we don't know is how the consumer will react to those higher prices. And a good example of that is the toy and game company that we're lending to. We won't know the consumer reaction to higher prices until we get through the holiday season and see what the sales look like. But in general, anything not being absorbed by the suppliers is being attempted to be passed through to the final users or consumers.

[Operator Instructions] And gentlemen, I have no further questions coming in today. So that will bring us to the conclusion of today's conference call. We would like to thank everyone for joining today's WhiteHorse Finance Second Quarter 2025 Earnings Conference Call. Again, thanks so much for joining us, everyone, and we wish you all a great afternoon. Goodbye.

Bye-bye.