Fidus Investment Corporation

Good day, and welcome to the FIDUS Fourth 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 Berfenning. Please go ahead.

Thank you, Michael, and good morning, everyone. And thank you for joining us for FIDUS Investment Corporation's fourth 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 The 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. The conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results, and cash flows of Vitus Investment Corporation. Although management believes these statements are reasonable, Based on estimates, assumptions, and projections, as of today, March 7, 2025, 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. Finest 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. Good morning, everyone. Welcome to our fourth quarter 2024 earnings conference call. On today's call, I'll start with a review of our fourth quarter performance in our portfolio at quarter end. and then share with you our outlook for 2025. Shelby will cover the fourth quarter financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. As expected, the fourth quarter was active for both an investments and repayments and realizations perspective. Although deal flow remained at a reasonable but not robust levels during the quarter, as it did all year, our sponsor relationships, investment experience, and industry knowledge in the fragmented lower middle market differentiate FIDUS. As a result, we continue to find opportunities to selectively invest in high-quality companies with durable and defensible business models that generate recurring revenue and cash flow and have strong prospects for growth. We grew our portfolio by 14% to $1.1 billion on a fair value basis as of December 31, 2024, versus year-end 2023, adhering to our underwriting discipline and our strategy of co-investing in the equity of a large majority of our portfolio companies, which gives us the potential for enhanced returns. From our perspective, our strategy is clearly working. Overall, our portfolio is healthy, our debt portfolio continues to perform well with sound credit quality, and our equity portfolio, which is quite strong and promising, continues to deliver net realized gains. Adjusted net investment income for the quarter was $18.4 million compared to $18.8 million last year. As our portfolio has grown over the past year, debt investments under management have increased, while yields have declined due in large part to a decline in SOFR. Including the higher average share count from ATM issuances earlier in the year, adjusted NII on a per share basis was 54 cents per share compared to 65 cents per share for the same period last year. That asset value was $655.7 million, or $19.33 per share, at quarter end. In the fourth quarter, dividends totaled 61 cents per share, consisting of a base dividend of 43 cents per share and a supplemental dividend of 18 cents per share. For the first quarter of 2025, the Board of Directors declared a total dividend of $0.54 per share, which consists of a base dividend of $0.43 per share and a supplemental dividend of $0.11 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, which will be payable on March 27, 2025, to stockholders of record as of March 20, 2025. Originations totaled $120.3 million for the fourth quarter, including $43.9 million in five new portfolio companies. The remaining $76.4 million was invested in existing portfolio companies, primarily facilitating add-on acquisitions. Debt investments totaled $115.5 million, nearly all of which were in first lien securities. we co-invested in the equity of the five new portfolio companies for a total of $3.8 million. Proceeds from repayments and realizations totaled $122.8 million for the fourth quarter, including the exit of four portfolio companies, one of which had been evaluating strategic alternatives. Subsequent to the quarter end, We invested $50.7 million in first lien debt and common equity in three new portfolio companies. In addition, two of our portfolio companies completed strategic reviews and were sold. In connection with the sale transactions, we realized a $3.2 million gain on the distribution of our preferred equity investment in health views and an $8.2 million gain on the distribution of our equity investment and MedShare Holdings, LLC. With originations equivalent to repayments this quarter, our portfolio of debt and equity investments on a fair value basis as of December 31st, 2024, was $1.1 billion, unchanged from September 30th, 2024, and equal to 101.4% of cost. Our debt portfolio totaled $944.5 million, 76% of which consisted of first lien investments, and our equity portfolio was $146 million, or 13.4% of the total portfolio at quarter end. We ended the quarter with 87 active portfolio companies, a net addition of two from the third quarter. Our portfolio overall has remained sound from a credit quality perspective throughout the year, even as we have grown the debt portfolio by 13% on a fair value basis. Non-accruals on a fair value basis for the fourth quarter stayed under 1% of the portfolio and were 4.1% of the total portfolio on a cost basis. With an active portfolio, we do, of course, always have some companies that are experiencing or exceeding expectations and others that are underperforming. This quarter, for instance, we added quantum IR technologies to our non-accruals and wrote down its fair value to zero. This reflects the risk associated with a series of company-specific and very negative events, particularly given our position in the cap structure as holders of a last-dow first lien loan. Questioning the impact of this write-down was some appreciation and the fair value of our equity portfolio. By maintaining a well-diversified portfolio and structuring it to hold both debt and equity investments, we are able to sustain its overall health over the long term. This illustrates the benefits of both our strategy and our long-term approach to managing In summary, in 2024, we continued a five-year period of extremely high activity at FIDUS from both a new investment and realization perspective and of building a portfolio with strong resiliency characteristics and with the opportunity for enhanced returns from capital gains. Looking back over the past five years, we are proud to report a 7.5% compound annual growth rate in the investment portfolio from $766.9 million to $1.1 billion. First lien debt investments represent 76% of our debt portfolio on a fair value basis versus 16.8% in 2019. Net asset value per share has grown from $16.85 per share at year-end 2019 to $19.33 per share as of 12-31-2024. Over the past five years, we have generated $208 million in net realized capital gains from equity investments, or said differently, $155 million in net realized gains across the total portfolio, taking into account any losses on debt and equity investments. For 2025, we intend to continue to find ways to build our portfolio in a methodical and disciplined way, independent of the strength of the overall M&A market. We know the year will bring us both opportunities and inevitable headwinds. But we also know that our investment strategy is working, sustaining a healthy portfolio that combines a debt portfolio that generates high levels of current and recurring income with an equity portfolio that can enhance returns. We remain committed to this strategy and to our long-term goals of generating attractive risk-adjusted returns for our shareholders and growing our 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?