Good day, everyone and welcome to the Bain Capital Specialty Finance Fourth Quarter and Fiscal Year Ended December 31, 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note today's call may be recorded. It is now my pleasure to turn the conference over to Katherine Schneider. Please go ahead ma'am.

Thanks, Erica. Good morning, everyone and welcome to the Bain Capital Specialty Finance fourth quarter and year ended December 31, 2024 conference call. Yesterday after market closed, we issued our earnings press release and investor presentation of our quarterly results, a copy of which is available on Bain Capital Specialty Finance's Investor Relations website. Following our remarks today, we will hold a question-and-answer session for analysts and investors. This call is being webcast and a replay will be available on our website. This call and the webcast are the property of Bain Capital Specialty Finance and any unauthorized broadcast in any form is strictly prohibited. Any forward-looking statements made today do not guarantee future performance and actual results may differ materially. These statements are based on current management expectations, which include risks and uncertainties, which are identified in the Risk Factors section of our Form 10-K that could cause actual results to differ materially from those indicated. Bain Capital Specialty Finance assumes no obligation to update any forward-looking statements at this time unless required to do so by law. Lastly, past performance does not guarantee future results. So with that I'd like to turn the call over to our CEO, Michael Ewald.

Thanks, Katherine. Good morning and thanks to all of you for joining us here on our earnings call this morning. I'm joined today by Mike Boyle, our President; and our Chief Financial Officer, Amit Joshi. In terms of the agenda for the call, I'll start with an overview of our fourth quarter and 2024 full year results and then provide some thoughts on our performance, the overall market environment and our positioning. Thereafter, Mike and Amit will discuss our investment portfolio and financial results in greater detail. As usual, we'll also leave some time for questions at the end. So yesterday after market close, we delivered strong fourth quarter and full year 2024 results. Q4 net investment income per share was $0.52 representing an annualized yield on book value of 11.8%. Our net investment income continued to be well in excess of our regular dividend with 124% dividend coverage. Q4 earnings per share were $0.34 reflecting an annualized return on book value of 7.8%. For the full year 2024, net investment income per share was $2.09 equal to an 11.8% return on equity. Our NII covered our regular dividend by 124% during the full year. 2024 earnings per share were $1.85 representing a total return on equity of 10.9%. Our annual net earnings continue to exceed our dividend payout for the fourth consecutive year, demonstrating our consistently strong credit performance. Our results were driven by high-quality interest income earned from our middle-market borrowers and that stable credit performance across our portfolio during the fourth quarter and throughout the year. Our net asset value ended the year at $17.65 per share down from $17.76 from the previous quarter and up from $17.60 as of Q4 2023, reflecting the underlying portfolio strength. We also paid out record dividends to our shareholders during the year totaling $1.80 per share for 2024, an increase of 13% from 2023's dividends. Subsequent to quarter end, our Board declared a first quarter dividend equal to $0.42 per share to record date holders as of March 17, 2025. We very much value the dialogue and feedback from our existing shareholders when considering our dividend framework in setting an appropriate and attractive dividend level including in a higher interest rate environment like we've experienced in the past two years. As our 2024 earnings continue to produce strong levels of net investment income in excess of our regular dividend amount, our Board declared additional dividends to shareholders totaling $0.12 per share for 2025 to be distributed in four consecutive quarterly payments of $0.03 per share per quarter consistent with our approach last year. In conjunction with feedback from our shareholders, our Board also approved a change in the record date and payment date timing of our quarterly dividend such that the record date and payment date will occur during the same month. This will accelerate the payment of our dividend by approximately 30 days each quarter compared to our prior cadence. This change has no material impact on our financial results. First quarter dividends are payable on March 31, 2025 to stockholders of record as of March 17, 2025, including both the regular and additional dividend, total dividends for the first quarter are $0.45 per share or a 10.2% annualized rate on ending book value as of December 31, which we believe represents an attractive level for our shareholders. So turning now to the market. 2024 was marked by a more active year of middle-market loan volumes, although broader M&A activity still remains subdued. Despite this backdrop, both our private credit group platform and BCSF had their highest levels of calendar year originations. In 2024, our broader platform and BCSF originated over $6 billion and $1.7 billion respectively, which were more than double 2023 volumes. Nonetheless, we remain selective in our underwriting approach and importantly, continue to see attractive terms in the core middle market. Many of the base tenants that we value for direct lending activity are much more attainable within the segment of the market in our view. And Bain Capital's longstanding presence and scale in this market segment positions us well. We favor attributes such as higher spread premiums and stronger lending controls through credit agreement documentation containing financial covenants and we also seek out investments, where we can and have control positions by being the majority holder within a tighter lender group. Across our new direct originations to platforms during the fourth quarter, the median EBITDA of our borrowers was approximately $36 million. While we have seen some recent spread compression, terms and structure continue to be attractive with a weighted average spread of approximately 560 basis points, bringing the yield to 10.2% and median leverage levels of 4.4 times on these new originations. We also remain focused on investing in debt structures that provide us with strong lending controls, nearly 100% of our Q4 originations to new portfolio companies were structured with documentation containing financial covenants tied to management's forecast. And we have majority control positions in nearly 80% of these debt tranches, allowing us to drive eventual outcomes at our discretion. These statistics are consistent with our broader portfolio and exhibit our continued focus on these core tenants. Credit quality and fundamentals continue to be strong across our portfolio. Investments on non-accrual decreased quarter-over-quarter and represented 1.3% and 0.2% at amortized cost and fair value respectively, as of December 31. Since BCSF's inception in 2016, our average non-accrual rates have remained low at approximately 1% of cost, demonstrating the consistency of our long-term performance. These averages are below the BDC sector current and long-term averages of approximately 4%. PIK income is also less than 10% of our overall investment income. And notably, the vast majority of our PIK was structured at the outset of the investment versus being the result of later amendment activity. Lastly, we remain active with the right-hand side of our balance sheet in 2024, and thus far into 2025. In Q2 2024, we strengthened our liability structure by increasing the commitments and attracting new lenders to our revolving credit facility, while also extending the maturity date. And earlier this year, the company issued $350 million of unsecured notes maturing in March 2030 at a spread of 190 basis points, bringing the all-in coupon to 5.95%. We swapped these notes to floating at SOFR plus 190 basis points, which is close to parity with the weighted average spread on our floating rate debt of 187.5 basis points as of December 31. We are pleased to see strong investor demand levels for this paper in the institutional debt markets and as a result benefited from a tight new issue spread. This debt issuance positions us well ahead of our debt maturities in 2026. Our overall liquidity is strong with $170 million of total available liquidity, across undrawn capital on our revolving credit facility, cash, net settled trades and pro forma for our recent unsecured notes issuance. At the end of the fourth quarter, our gross and net leverage ratios were 1.22 times and 1.13 times respectively, which falls in the middle of our target range of 1.0 times to 1.25 times on a net basis. With the outlook for increased M&A activity in 2025, we are optimistic for middle market loan volumes to increase as well and we believe we are well positioned in the current market environment to execute on these opportunities and drive further value for our investors. I'll now turn the call over to Mike Boyle, our President to walk through our investment portfolio in greater detail.

Thanks, Michael. Good morning, everyone. I'll start with our investment activity for the fourth quarter and then provide an update in more detail on our portfolio. New fundings during the fourth quarter were $547 million in 88 portfolio companies including $317 million into 15 new companies and $230 million into 73 existing companies. Sales and repayment activity totaled approximately $505 million, resulting in net investment fundings of $42.7 million quarter-over-quarter. For the full year, fundings were $1.7 billion and more than double our volumes in 2023. Total sales and repayment activity for the year were $1.5 billion. As a result of this activity, the size of our total investment portfolio increased 6% year-over-year. Our new investing activities for the fourth quarter and full year were comprised of a mix of fundings to new portfolio companies and existing portfolio companies. During the fourth quarter, new investment funding to new portfolio companies represented 58% of total fundings versus 42% to existing companies. And for the full year, 62% were to existing portfolio companies and 38% to new companies. In 2024, our platform benefited from its strong sponsor relationships to source new investments and our incumbency advantage from our existing portfolio companies to help them grow. During the quarter, we remain focused on investing in first lien senior secured loans, with 95% of our new investment fundings into first lien structures, 1% into subordinated debt structures and 4% in preferred and common equity. Turning now to the investment portfolio. At the end of the fourth quarter, the size of our portfolio at fair value was approximately $2.4 billion across a highly diversified set of 168 portfolio companies, operating across 30 different industries. Our portfolio primarily consists of investments in first lien senior secured loans given our focus on downside management and investing in the top of capital structures. As of December 31, 64% of the investment portfolio at fair value was invested in first lien debt, 1% in second lien debt, 2% in subordinated debt, 7% in preferred equity, 10% in equity and other interests and 16% across our joint ventures, including 10% in the ISLP and 6% in the SLP, both of which the vast majority of our underlying investments in those joint ventures are first lien loans. As of December 31, 2024, the weighted average yield on the investment portfolio at amortized cost and fair value were 11.7% and 11.8% respectively, as compared to 12.1% and 12.1% respectively as of September 30, 2024. This decline in yield was primarily driven by a decrease in base rates and to a lesser extent spread compression from our new investments. 92% of our debt and investments bear interest at a floating rate positioning the company favorably in today's higher interest rate environment. Moving on to portfolio credit quality trends. Our credit fundamentals remain healthy. Median net leverage ratios were 4.8 times across our borrowers unchanged from the prior quarter end and year-end 2023. The median EBITDA across our portfolio companies was $40 million as of December 31. We saw stable trends within our internal risk rating scale quarter-over-quarter, risk rating one and two investments which indicate the company was performing in line or better than expectations relative to our initial underwriting totaled 96% of the portfolio as of December 31. No change from the prior quarter end. Risk rating three and four are underperforming investments comprise 4% of our portfolio at fair value. Investments on non-accrual represented 1.3% and 0.2% of the total investment portfolio at amortized cost and fair value respectively as of December 31, a decrease from 1.9% and 1.1% respectively as of September 30. We did add one name to non-accrual this quarter and wrote down this position to a level consistent with our expected recovery. The Aimbridge Hospitality second lien loan was impacted by meaningful company underperformance within the third-party hotel management industry and this was the primary driver of BCSF's modest NAV decline in the fourth quarter. Subsequent to quarter end, we exited this name slightly above the fair value mark as of December 31. Given the substantial diversity in the portfolio, underperformance of any individual portfolio company has a minimal impact on the performance of the portfolio overall. Subsequent to quarter end, we did exit this name slightly above the fair value mark as of December 31. We would also mention that performance across our 100-plus companies within our underlying JVs continue to perform well, consistent with our broader portfolio.

Thank you, Mike, and good morning, everyone. I will begin the review of our fourth quarter 2024 results with the income statement. Total investment income reached $73.3 million for the three months ending December 31, 2024, compared to $72.5 million for the three months ending September 30, 2024. This increase in investment income was mainly due to a larger investment portfolio, although it was partially offset by a decrease in portfolio yield resulting from lower base rates. Our investment income continues to benefit from high-quality sources, mainly through contractual cash income from our investments. In the fourth quarter, interest income and dividend income accounted for 94% of total investment income. Total expenses before taxes for the fourth quarter were $38.4 million, up from $37.5 million in the third quarter. Net investment income for the quarter was $33.6 million or $0.52 per share, down slightly from $34 million or $0.53 per share in the previous quarter. For the entire year 2024, net investment income was $2.09 per share. For the three months ending December 31, 2024, the company experienced net realized and unrealized losses of $11.5 million, primarily due to our markdown in Aimbridge Hospitality, which Mike mentioned earlier. Net income for the three months ending December 31, 2024, was $22.1 million or $0.34 per share. Turning to our balance sheet, as of December 31st, our investment portfolio at fair value totaled $2.4 billion, with total assets of $2.6 billion. Total net assets were $1.1 billion as of December 31st. NAV per share was $17.65, reflecting a slight decrease of $0.11 per share from $17.76 at the end of the third quarter. At the end of Q4, our debt-to-equity ratio was 1.22 times, compared to 1.14 times at the end of Q3. Our net leverage ratio, which considers principal debt outstanding minus cash and unsettled rates, was 1.13 times at the end of Q4, versus 1.09 times at the end of Q3. As of December 31st, approximately 57% of our outstanding debt was floating rate, and 43% was fixed rate. The weighted average interest rate on our outstanding debt for the three months ending December 31, 2024, remained unchanged at 5.1%. The weighted average maturity for our total debt commitments was about 4.3 years at December 31, 2024. Based on our current debt levels and assuming stable base rates, we do not anticipate our recent unsecured note issuance to significantly affect the weighted average interest rate on our outstanding debt, as the note's ratio is close to parity with our borrowing from our secured facility, and we converted our fixed rate exposure on new issuances to floating rate at SOFR plus 190 basis points. As of quarter end, liquidity totaled $520 million, which includes $412.3 million of undrawn capacity on our revolving credit facility, $99.1 million in cash and cash equivalents (including $45.5 million of restricted cash), and $8.3 million in unsettled trades, net of receivables and payables of investment. Pro forma for the note issuance, total liquidity is $817 million. Given the company's strong earnings throughout the year, we generated sufficient income to exceed the dividend paid in 2024, leading to an increase in our undistributed taxable income, or spillover income. We currently estimate that our spillover income is approximately $1.36 per share at year-end, which is an increase of $0.49 per share from 2023 levels and represents over three times our quarterly regular dividend. As Mike mentioned earlier, our Board declared an additional dividend for 2025 totaling $0.12 per share, to be distributed in four equal consecutive quarterly payments, due to the expansion of spillover income in 2024. Overall, we believe maintaining a strong amount of undistributed income is advantageous for the stability of our dividend in varying market conditions, and we will continue to evaluate our undistributed earnings against responsible capital management practices. With that, I will turn the call back over to Michael Ewald for closing remarks.

Thanks, Amit, and thanks Mike as well. Look, in closing, we are pleased with the execution of our investment strategy on behalf of our shareholders during the fourth quarter and throughout 2024. We demonstrated attractive levels of investment income earned across our portfolio and stable credit quality across our middle-market borrowers. As we look forward into 2025, we believe we are well positioned to capitalize on attractive growth opportunities. We remain committed to delivering value for our shareholders by producing attractive returns on equity and thank you for the privilege of managing our shareholders' capital. Erica, please open the line for questions. Thanks.

Certainly. We'll go first to the line of Finian O'Shea with Wells Fargo. Please go ahead.

Hi, everyone. Good morning. Thanks. Can you talk about Michael the sort of real-time spread deployment and spread dynamics. How much is stabilized perhaps or still tightening? And then what level the core middle market gets you as a premium to large market now versus historically?

Sure. Thanks for the question, Fin. So if we look at the fourth quarter originations we were originating at a spread over SOFR about 560 basis points. And that's about 20 basis points tighter than where we were on our Q2 originations, which was about 580 basis points over SOFR. So the spread tightening that we saw over the course of the last two years has stabilized quite a bit as we look at the numbers and what we're able to originate today. If we think about that as a premium versus the larger market. We do think it commands a 50 to 75 basis point premium on a spread basis for originating at similar leverage levels to companies north of $100 million of EBITDA, which again is why we've doubled down in this core middle market, because we do think the lender controls we get as Mike highlighted we get financial maintenance covenants across all the deals that we do but also the spread levels we think really highlight the premium that we're able to get in our market segment.

Yes, that's helpful. And just to clarify like the fourth quarter, I think you said 460 or 480...

560, sorry.

Sorry about that. It's been a lot of earnings. How does that compare to the say term sheets you submitted last week, just understanding the fourth quarter that was probably those were committed in the second quarter and third quarter right?

Sure. Yes. I'd say pretty similar. I'd say we're in the 525 to 550 level for term sheets depending on the credit risk underlying. So we do think much of the spread tightening that marked a year ago. The course of 2023, we saw a whole lot of spread tightening. I think 2024 particularly Q2 through Q4 and what we're seeing now has been fairly stable.

Okay. And then what is there a meaningful difference on a new LBO or platform, a real new money opportunity versus follow-on like when M&A comes back and whichever one is waiting for, and you have all this clean well-capitalized new paper. Like is the stuff that fits in that box, really much tighter in blending things down, if you follow.

Yes, it's Mike Ewald. Generally speaking, those kinds of deals might be on the lower end of what Mike mentioned, possibly around the 525 range. Some of the additional activity from earlier deals could be in the 550 to 575 range. If we consider historical context, the end of 2022 and the beginning of 2023 witnessed some of the highest spreads I've seen in my 25 years in this industry. A top-quality company might see a spread around 500, while more typical deals could range from 550 to 575. These levels are similar to what we experienced in 2017, 2018, and 2019, and we seem to be back at those levels today. Despite concerns about spread compression, I believe we're aligned with historical averages at this point.

Great. Awesome. Thanks so much.

Thanks, Fin.

Thank you. We'll go next to Mike Boyle.

Great. Well, it does look like there are any other questions, at this point. Thanks again, for everyone's time today. We certainly appreciate your continued support and look forward to seeking again next quarter. Do please feel free to reach out, in the meantime of any questions and certainly have a great weekend. Thanks.

We'd like to thank everybody for their participation on today's conference. Please feel free to disconnect your line at any time.