Fidus Investment Corporation

Good day and welcome to the FIDUS second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Jody Buffering. Please go ahead.

Thank you, Cindy, and good morning, everyone. And thank you for joining us today for FIDUS Investment Corporation's second quarter 2024 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. FIDUS 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 statements included on today's call. The conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results, and cash flows of Finest Investment Corporation. Although management believes these statements are reasonable, based on estimates, assumptions, and projections as of today, August 2, 2024, these statements are not guarantees of 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. Vitus undertakes no obligation to update or revise 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. And good morning, everyone. Welcome to our second quarter 2024 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 2024. Shelby will cover the second quarter financial results in our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. Our second quarter results demonstrate the strength of our portfolio and the power of our investment strategy. Our debt portfolio generated high levels of adjusted net investment income, amply covering our base dividend. Our equity portfolio produced net realized gains of $9.2 million. In the face of a less than robust M&A environment, we stayed focused on deals in the lower middle market that met our underwriting standards, investing in companies with strong competitive advantages and resilient business models. Adjusted net investment income for the quarter grew 17.7% to $18.4 million, compared to $15.6 million last year. primarily reflecting higher interest income for the quarter. Taking into account the higher average share count from ATM issuances, adjusted net investment income was $0.57 per share compared to $0.62 per share for the same period last year and well in excess of our base dividend. In Q2, in addition to the base dividend of $0.43 per share, We paid a $0.16 per share supplemental dividend for a total distribution to shareholders of $0.59 per share. For the third quarter of 2024, the Board of Directors declared dividends totaling $0.57 per share, consisting of a base dividend of $0.43 per share and a supplemental dividend of $0.14 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, which will be payable on September 26, 2024, to stockholders of record as of September 19, 2024. At quarter end, net asset value stood at $646.8 million, 9.7% higher than net asset value of $589.5 million, as of December 31, 2023. On a per-share basis, net asset value was $19.50 at quarter end and compared to $19.37 per share as of December 31, 2023. Originations totaled $62.4 million for the second quarter, including $17.8 million in one new portfolio company. Our portfolio as a whole continued to be very acquisitive in the second quarter, resulting in $44.6 million in follow-on investment activity. That investment totaled $58.1 million, all of which were in first lien securities. Equity investments totaled $4.3 million as we continued to co-invest in the equity of portfolio companies. Proceeds from repayments and realizations totaled $43.1 million for the second quarter, including $12.6 million in proceeds from the monetization of equity investments, primarily in two portfolio companies, Houlin Electrical Products and Virginia Tile, resulting in net realized gain of $9.2 million. Subsequent to quarter close, we exited one first lien debt investment and received payment in full of $23.1 million, including prepayment fees. Our portfolio grew to $1.1 billion on a fair value basis as of June 30, 2024, equal to 101.9% of cost, and consisting of a debt portfolio totaling $945.7 million, and an equity portfolio of $132.7 million at quarter end. With debt originations consisting entirely of first lien investments for the second quarter, first lien securities grew to 71% of the debt portfolio at quarter end. We ended the quarter with 86 active portfolio companies. In terms of credit quality, our portfolio remains healthy and in good shape overall. We continue to manage through the issues of two operating companies on non-accrual. As a percentage of the total portfolio on a fair value basis, non-accrual stayed under 1% for the second quarter. Turning to our outlook, we still expect deal flow and M&A activity for the remainder of the year to be at reasonable levels. While we expect to see higher investment activity levels, we do also expect to see a pickup in repayments as numerous portfolio companies are evaluating strategic alternatives. We remain focused on opportunities that meet our strict underwriting standards, leveraging our relationships with deal sponsors and our industry expertise within the lower middle market. We continue to invest in businesses with strong and sustainable cash flow generating business models and positive long-term outlooks. At the same time, we continue to structure our debt investments with a high degree of equity cushion, maintaining a portfolio that produces both high levels of current and recurring income and the potential for enhanced returns from the monetization of equity and securities. With a healthy and growing portfolio, we remain focused on our long-term goals of growing 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?