Fidus Investment Corporation

Good day and welcome to the FIDA's third quarter 2024 earnings conference call. All participants will be in a 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 touchtone phone. And 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 Ms. Jodi Berfening. Please go ahead, ma'am.

Thank you, Chuck, and good morning, everyone, and thank you for joining us for FIDUS Investment Corporation's third 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 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, and cash flows of Finest Investment Corporation. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, November 1, 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. Binus undertakes no obligation to update or revise any of the 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 third quarter 2024 earnings conference call. On today's call, I'll start with a review of our third quarter performance and our portfolio at quarter end, and then share with you our outlook for the remainder of 2024. GLB will cover the third quarter financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. Despite lighter investment activity levels overall during the third quarter, we continue to build our portfolio through a combination of our strong relationships with deal sponsors, industry knowledge, and investment expertise in the lower middle markets. Our debt portfolio, which has grown 20% over the past 12 months, generated record interest income of $33.7 million and continued to amply cover our base dividend. Through our strategy of selectively investing in high-caliber companies that generate high levels of free cash flow, have defensive characteristics, and positive long-term outlooks, we continue to build a healthy and high-performing portfolio. At quarter end, net asset value stood at $658.8 million, 11.8% higher than net asset value of $589.5 million as of December 31st, 2023. On a per share basis, That asset value was $19.42 per share at quarter end, compared to $19.37 per share as of December 31, 2023. Before I start my review of our performance for the quarter, I am pleased to report that the SBA has approved our new SBIC license, effective on the last day of the quarter, September 30, 2024. Adjusted net investment income for the quarter grew 12.3% to $20.4 million compared to $18.2 million last year, primarily reflecting higher interest and fee income for the quarter along with a one-time dividend income lift. On a per share basis, adjusted net investment income was 61 cents per share compared to 68 cents per share for the same period last year, which also reflects the higher average share count from ATM issuances. Adjusted NII per share amply covered the base dividend of 43 cents per share for the quarter. In addition, we paid a $0.14 per share supplemental dividend for a total dividend to shareholders of $0.57 per share. For the fourth quarter of 2024, the Board of Directors declared dividends totaling $0.61 per share, consisting of a base dividend of $0.43 per share and a supplemental dividend of 18 cents per share equal to 100 percent of the surplus and adjusted NII over the base dividend from the prior quarter, which will be payable on December 27, 2024, to stockholders of record as of December 17, 2024. Originations totaled $65.9 million for the third quarter, including $38.1 million in three new portfolio companies. The remaining $27.8 million in follow-on investment activity reflects a combination of portfolio company acquisitions and refinancing. Debt investments totaled $62.7 million, the vast majority of which were in first lien securities. Equity investments totaled $3.2 million, of which $2.3 million was invested in three new portfolio companies. We continued to structure our debt investments with a high degree of equity cushion, which gives us a margin of safety. while our equity investments give us the potential for enhanced returns. As expected, repayments were a larger portion of deal activity during the third quarter compared to the first half of the year. Proceeds from repayments and realizations totaled $50.8 million for the third quarter, including $8.6 million in proceeds from the monetization of equity investments. We've mentioned on previous calls this year that a number of our portfolio companies were evaluating strategic alternatives, and that accounted for three of the exits this quarter. Subsequent to quarter end, we invested $21.1 million in first lien debt and common equity in two new portfolio companies and received $18.5 million in proceeds from the exit of debt investments in two portfolio companies. Our portfolio stood at $1.1 billion on a fair value basis as of September 30, 2024, equal to 101.5% of costs and consisting of a debt portfolio totaling $959.4 million and an equity portfolio of $131.3 million at quarter end. With first lien investments accounting for nearly all of debt originations for the third quarter, this security accounted for 73% of debt investments on a fair value basis at quarter end. We ended the quarter with 85 active portfolio companies. Overall, our portfolio remains healthy with sound credit quality and a well-positioned equity portfolio. Furthermore, the portfolio is structured to absorb losses through net realized gains on equity investments over the long term. As an example, in the third quarter, we realized a loss on a debt investment that was nearly offset by a realized gain on an equity investment for a net realized loss of $0.4 million. For the first nine months of this year, we've realized net gains of $10.6 million, well in excess of any realized losses, extending our track record of generating enhanced returns. Non-accruals on a fair value basis were unchanged from the first and second quarters of the year and remained under 1% for the third quarter. For the remainder of the year, we expect a modest year-end uptick in M&A activity levels. In other words, another quarter of reasonable investment activity. Having said that, as some portfolio companies are still evaluating strategic alternatives, we do still expect to see a higher level of repayments in the last quarter of the year. New originations may outpace repayments, as they did in the third quarter. As we evaluate investment opportunities, we continue to apply our strict underwriting standards to investment selection, focusing on strong cash flow generating businesses with resilient business models and positive long-term outlooks. Our goal is to maintain a healthy portfolio that produces both high levels of current and recurring income and the potential for incremental returns from monetizing equity investments. Adhering to both our investment strategy and underwriting disciplines will enable us to stay focused on our long-term goals of generating attractive risk-adjusted returns for our shareholders and growing net asset value over time. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?