Fidus Investment Corporation

And welcome to the FIDUS Second Quarter 2023 Earnings Conference Call. I will now turn the call over to Jody Berfening.

Thank you, Savi, and good morning, everyone. And thank you for joining us for FIDUS Investment Corporation's Second Quarter 2023 Earnings Conference Call. With me this morning are Ed Ross, FIDUS Investment Corporation's Chairman and Chief Executive Officer, and Shelby Sherrod, Chief Financial Officer. Finest Investment Corporation issued a press release yesterday afternoon with the details of the company's quarterly financial results. A copy of the press release is available on the investor relations page of the company's website at fdus.com. I'd also like to call your attention to the customary safe harbor disclosure regarding forward-looking information included on today's call. Conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results, cash flows of Finest Investment Corporation. Although management believes these statements are reasonable based on, as of today, August 4th, 2023, these statements are not guaranteed the future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the Securities and Exchange Commission. FIDUS undertakes no obligation to update any of these forward-looking statements. With that, I would now like to turn the call over to Ed. Good morning, Ed.

Good morning, Jody. Good morning. And good morning, everyone. Welcome to our second quarter 2023 earnings conference call. On today's call, I'll start with a review of our second quarter performance and our portfolio at quarter end, and then share with you our outlook for the second half of 2023. Shelby will cover the second quarter financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. For the second quarter, we continued to enhance the earnings power of our healthy and high-performing portfolio by further building our portfolio of income-producing assets and benefiting from a widened spread. We grew our total portfolio to $928.7 million on a fair value basis at quarter end, putting a fair amount of capital to work in a reasonably active second quarter. Although deal activity is still spotty, our relationships with deal sponsors, experience, and industry knowledge continue to enable us to invest selectively in companies with predictable revenues, strong cash flow generation, and positive long-term outlooks that meet our strict underwriting standards. In addition, we continue to generate adjusted net investment income well in excess of the base dividend for the quarter. Adjusted net investment income, which we define as net investment income excluding any capital gain incentive fee, attributable to realized and unrealized gains and losses, increased 50.1% to $15.6 million, or 62 cents per share, compared to $10.4 million, or 43 cents per share, last year. Interest income increased due to growth in our debt portfolio and a debt yield that expanded 260 basis points to 14.5% compared to the second quarter last year. We pay dividends totaling $0.70 per share consisting of a base dividend of $0.41 per share, a supplemental dividend of $0.19 per share, and a special cash dividend of $0.10 per share. As a reminder, we are distributing a special cash dividend of $0.10 per share each quarter this year to satisfy RIC requirements and to bring our spillover income in line with our target level. For the third quarter, on July 31, 2023, the Board of Directors declared dividends totaling $0.72 per share, consisting of a base dividend of $0.41 per share, a supplemental dividend of $0.21 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, and a special cash dividend of $0.10 per share, which will be payable on September 27, 2023, to stockholders of record as of September 20, 2023. Net asset value is $483.3 million, or $19.13 per share, as of June 30. Originations for the quarter total $95.8 million, about two-thirds of which, or $64.6 million, was invested in five new portfolio companies that were added to the portfolio through M&A financing. Drilling down further, we invested a total of $47.2 million in first lien investments in four of the five new portfolio companies. The remaining portion of originations was invested in add-ons in support of our existing portfolio companies. We continue to build our portfolio of debt securities that generate recurring interest income and co-invest it in equity securities as a means of adding a margin of safety and creating the opportunity to enhance returns. We receive proceeds totaling $60.6 million, primarily from the exit of four companies, including $7.6 million in proceeds from equity sales resulting in net originations of $35.2 million for the quarter. Our portfolio of debt investments on a fair value basis grew to $808.3 million, or 87% of the total portfolio at quarter end. First lien investments continue to account for the largest piece of the debt portfolio at 65%. including the fair value of our equity portfolio of $120.4 million, the fair value of the total portfolio at quarter end stood at $928.7 million, equal to 103.7% of costs, and representing a 3.5% increase compared to the end of the first quarter. We ended the second quarter with 79 active portfolio companies and two companies that have sold their underlying operations. Subsequent to quarter end, we invested $19 million in first lien debt, subordinated debt, and equity in a new portfolio company. Overall, our portfolio remains healthy from a credit perspective, and for the most part, our portfolio companies continue to perform well. As always, there are some puts and takes that you would expect for a portfolio of our size. A few portfolio companies have been struggling, while others have seen improved performance and outlooks. To that end, we removed already from non-accrual during the quarter and placed Vertex on non-accrual. Already is performing materially better and has a positive outlook, while Vertex has had a few hiccups, but we expect performance to improve in both the near and medium term. In addition, we wrote off our investment in Eblens and recognized an $11.5 million loss. As of June 30th, non-accruals represented 1.5% of the total portfolio on a fair value basis. Looking ahead to the second half of 2023, we continue to see ample opportunities in the lower middle market to invest in high-quality companies that possess defensive characteristics, strong cash flow generating business models, and positive long-term outlooks. further building our debt portfolio and co-investing in equity investments. With a healthy and growing portfolio of debt investments generating strong recurring income, we remain positioned to generate adjusted NII growth well in excess of base dividends. As always, we intend to adhere to our proven investment strategy and to remain focused on our long-term goals of growing our net asset value over time preserving capital, and generating attractive risk-adjusted returns for our shareholders. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?