Good day and welcome to the Fidus's first 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 touch-tone phone. 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. Jody Burfening. Please go ahead, ma'am. Thank you, Chuck, and good morning, everyone. Thank you for joining us for Fidus Investment Corporation's first quarter 2024 earnings conference call. With me this morning are Ed Ross, Fidus Investment Corporation's Chairman and Chief Executive Officer, and Shelby Sherard, 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. The conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results, and cash flows of Fidus Investment Corporation. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, May 3rd, 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. Fidus 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 first quarter 2024 earnings conference call. On today's call, I'll start with a review of our first quarter performance and our portfolio at quarter end, and then share with you our outlook for the remainder of 2024. Shelby will cover the first 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 first quarter shaped up to be a very active from a new investment perspective. While repayments were on the lighter side, we put a fair amount of capital to work redeploying proceeds from the fourth quarter. With net originations totaling $85.7 million, the total portfolio on a fair value basis grew to over $1 billion. To put our investment activity for the quarter in perspective, originations of $145.9 million nearly equaled the total amount invested in the first half of 2023. Consistent with our established practice, we grew the portfolio with a focus on capital preservation and the generation of attractive risk-adjusted returns. We continued to invest in industries in the lower middle market we know well, leveraging our relationships with deal sponsors and carefully selecting businesses with defensive characteristics and sustainable business models and positive long-term outlooks that generate cash to both service debt and support growth. Our debt portfolio generated adjusted net investment income of $18.1 million, an increase of 21.8% compared to $14.9 million last year, primarily reflecting higher interest income and fee income for the quarter. Taking into account the higher average share count resulting from the equity raises over the past 12 months, adjusted net investment income on a per-share basis was $0.59 per share compared to $0.60 per share for the same period last year. In Q1, we paid a base dividend of $0.43 per share plus a $0.22 per share supplemental dividend for a total distribution to shareholders of $0.65 per share. For the second quarter of 2024, the board of directors declared dividends totaling $0.59 per share, consisting of a base dividend of $0.43 per share and a supplemental dividend of $0.16 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, which will be payable on June 26th, 2024, to stockholders of record as of June 19th, 2024. Net asset value grew 3.2% to $608.3 million compared to $589.5 million. On a per-share basis, net asset value was $19.36 at quarter end compared to $19.37 as of December 31st, 2023. As I mentioned earlier, originations totaled $145.9 million for the first quarter. We stayed focused on investing in first lien investments, on structuring investments with a high percentage of equity cushion, and on co-investing in the equity of portfolio companies. Debt investments totaled $137.5 million, of which first lien amounted to $96.1 million or 70%. Equity investments totaled $8.4 million. Of the $145.9 million total in originations, $94.6 million was invested in seven new portfolio companies, which were added to the portfolio primarily through M&A transactions. Proceeds from repayments and realizations totaled $60.2 million for the first quarter, consisting of debt repayments of $57 million and proceeds from the sale of equity investments of $3.2 million, resulting in net realized gains of $1.7 million, primarily from the exit of Applied Data Corporation. Our portfolio of debt investments on a fair value basis was $916.4 million or 87% of the total portfolio at quarter end. First lien investments are still the largest portion of the debt portfolio at 69%. Including the fair value of our equity portfolio of $131.7 million, the fair value of the total portfolio at quarter end stood at $1.05 billion, equal to 102.2% of cost, and we ended the first quarter with 87 active portfolio companies. Our portfolio remains well-structured, positioned to produce high levels of recurring income and the potential for enhanced returns from the sale of equity securities. Overall, our portfolio from a credit perspective remains solid, with no change in the companies we have on non-accrual from the fourth quarter. While the performance of the two operating companies on non-accrual continued to improve, each of them remained higher-risk situations. As a percentage of the total portfolio on a fair value basis, non-accruals represented under 1% for the first quarter. The health of our portfolio is attributable to our strict underwriting disciplines focused on carefully investing in businesses with strong and sustainable cash flow-generating models and positive long-term growth prospects. With capital preservation in mind, we remain very deliberate in our investment selection process. As we look ahead to the remainder of 2024, we are positioned to continue to grow the portfolio. Deal flow and M&A activity are at reasonable levels and slowly improving relative to 2023. That said, quality is spotty at the present time. As a result, originations for the second quarter are expected to be meaningfully lighter than the first quarter. Nevertheless, our portfolio is healthy and positioned to continue to generate adjusted NII well in excess of our base dividend, to generate attractive risk-adjusted returns, and grow net asset value over the long term. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby? Thank you, Ed, and good morning, everyone. I'll review our first quarter results in more detail and close with comments on our liquidity position. Please note I will be providing comparative commentary versus the prior quarter, Q4 2023. Total investment income was $34.7 million for the three months ended March 31st, a $1.7 million decrease from Q4 primarily due to a $1.3 million decrease in interest income including PIK, a $1.2 million decrease in fee income given higher prepayment fees in Q4. The decrease in interest and fee income was offset by a $0.1 million increase in dividend income and a $0.7 million increase in interest income on excess cash, which was due to the new investments in Q1 being back-end loaded as approximately 72% of invested capital in Q1 closed in March. Total expenses including income tax provision were $17 million for the first quarter, $2.3 million lower than Q4 driven primarily by a $1.4 million decrease in the capital gains fee accrual and a $1 million decrease in income taxes related to the annual excise tax accrual in Q4. We ended the quarter with $463.1 million of debt outstanding comprised of $175 million of SBA debentures, $250 million of unsecured notes, $22.5 million outstanding on the line of credit, and $15.6 million of secured borrowings. Our debt-to-equity ratio as of March 31st was 0.8x or 0.5x statutory leverage excluding exempt SBA debentures. The weighted average interest rate on our outstanding debt was 4.6% as of March 31st, 2024. Net investment income or NII for the three months ended March 31st was $0.57 per share versus $0.58 per share in Q4. Adjusted NII, which excludes any capital gains incentive fee accruals or reversals attributable to realized and unrealized gains and losses on investment, was $0.59 per share in Q1 versus $0.65 in Q4, which includes an increase in the weighted average shares outstanding and a decrease in the capital gains fee accrual in Q1. For the three months ended March 31st, we recognized approximately $1.7 million of net realized gains primarily related to the sale of our equity investments in Applied Data Corporation. Turning now to portfolio statistics. As of March 31st, our total investment portfolio had a fair value over $1 billion. Our average portfolio company on a cost basis was $11.8 million, which excludes investments in four portfolio companies that sold their operations or in the process of winding down. We have equity investments in approximately 81.3% of our portfolio companies with average fully diluted equity ownership of 3.5%. Weighted average effective yield on debt investments was 14% as of March versus 14.2% at year-end 2023. The weighted average yield is computed using effective interest rates for debt investments at cost, including the accretion of original issue discount and loan origination fees, but excluding investments on non-accrual, if any. Now I'd like to briefly discuss our available liquidity. In Q1, we repaid the remaining $35 million of outstanding SBA debentures in our second SBIC fund, completing the wind-down of this fund. As of March 31st, our liquidity and capital resources included cash of $27.1 million and $77.5 million of availability on our line of credit, resulting in total liquidity of approximately $104.6 million. Now I will turn the call back to Ed for concluding comments. Thanks, Shelby. As always, I'd like to thank our team and the board of directors at Fidus for their dedication and hard work, and our shareholders for their continued support. I will now turn the call over to Chuck for Q&A. Chuck? Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Robert Dodd with Raymond James. Please go ahead. Hi, and congratulations on the quarter. Several questions. On the deployment outlook at, I mean, you flagged Q2 will be down versus Q1, which is a very large number. What are your expectations kind of for the year? And obviously, it's hard to predict the further you get out, but could 2024 be the first time you ever do $400 million in originations for a year given the start you had this year? Or is that perhaps would that be a reach too far? Are we still looking in the $300s for this year? Just kind of ballpark. Sure. Great question. And as you know, originations and timing of deals are very hard to predict. I mean. Yep. Understood. Yeah. And what I would say, when you talk about Q1, we had a reasonable level of deal flow. We also had some holdover transaction opportunities from Q4, which helped the activity levels, if you will. So we were fortunate, right, to have a very strong quarter, which was great. Q2, deal flow has been solid. I would say quality has been a bit spotty. We do have an expectation that deal flow will pick up here a little bit. M&A, there's just a lot of discussion around it. We think, actually, there is transaction activity that's starting to increase. For us, this quarter probably is going to be lighter than Q1 by a good bit. And that's okay. And what I would say is our portfolio continues to be acquisitive, so that's part of our investments. And then new transaction activity, we're working on a couple of deals very seriously right now. Don't know if they'll close or not, but that's our hope. So we definitely are very busy, but it's not like Q1. And so when I look out the rest of the year, I expect an increase in activity levels over Q2. Do we get to $400 million like you asked? There's a possibility of that. Over the last 12 months, I think we've been near that number. But that's a pretty aggressive number at the same time. So I would guess something shy of that, but it's also a distinct possibility. Really hard to. Understood. Yeah, yeah. No, it's really hard to say. On the repayment side, I mean, you have deployed a lot of capital over the last 12 months or longer. A lot of the portfolio is relatively young as a result. I mean, you said Q1 repayments were light, and they were. But at the same time, should we expect that to continue for a while given how much the portfolio is relatively fresh? Or do you think there's a different dynamic that's going to play out in repayment levels? Sure. Another great question. I wish I had a crystal ball. But what I would say is we do have several companies, probably more than several, that are evaluating strategic alternatives at the moment. It's unclear if any of those are Q2 or they kind of push into Q3 and which ones actually transact. The other piece of the puzzle is some of those portfolio companies are equity-only investments and not the real large ones, for instance. And so I'm not, at the moment, expecting a real high level of repayments here in Q2. The current expectation, based on what we know today, is it's less than Q1. Having said that, we do have an expectation that repayments will pick up in Q3 and Q4. As you know, the market is more aggressive. Also, we do see transactions from a realization perspective, company sale, M&A type stuff, taking place in Q3, Q4 for us. Hopefully, that's. Understood. That is very helpful. Oh, one comment, if I can. Shelby, your color on 72% of capital was deployed in March. Very helpful for figuring out directional spreads, etc., etc. Be really helpful if color like that was in the press release. That's all. Thank you. And that's it from me. Thanks. Thank you. Appreciate it. Good talking to you, Robert. The next question will come from Mickey Schleien with Ladenburg Thalmann. Please go ahead. Yes. Good morning, everyone. Ed, LSEG is reporting that middle market spreads have declined about 50 basis points over the last year, but they're still above pre-COVID levels. So when we think about how resilient the economy has remained and the fact that there's plenty of debt capital available out there, what's your outlook on spreads in sort of the in your bread and butter business? Sure. It's a great question. Spread, if you think about from a year ago, it's a bit of night and day, right? Banks were struggling. There was a banking crisis just 12 months ago. Today, banks are active. Direct lenders are active. SBIC funds, BDCs, you name it. Everyone's pretty active today. And that's very different than it was 12 months ago. And with that comes a decline in spreads. Also, as you mentioned, the economy is showing a fair bit of resilience, and people are getting pretty comfortable with where we are. So spreads have declined. We, just given the uncertainty levels, have focused very much, as we always do, on quality. With that, there's been some first-lien investments, dollar-one. If you do dollar-one investments, your yields are a little bit lower. So that's been a bit of the puzzle for us. But we're focused on quality and attractive risk-adjusted returns and not pushing the envelope, obviously. I would expect yields today are, depending on the deal, 50-100 basis points lower than they were a year ago. And in the larger markets, say the middle market and above, we're seeing spreads that are even narrower than that. I'd say even 150 basis points. And so it's much more aggressive in the upper market than it is where we are. But spreads have come in, and you're seeing that in the originations of our investments. And if you think about last quarter - and again, it was weighted towards first lien - our originations were at yields that were equal to 12.9%. And our repayments averaged more like 13.7%. So that gives you a little color on why our yields declined. But so I would expect, going forward, our yields to be stable to slightly declining, just given what's going on in the marketplace today. That's really, really helpful, Ed. And if I could follow that up, you mentioned the, I don't know, what you want to call it, frothiness in the upper-middle market, but let's just say a very active upper-middle market. I mean, part of your playbook is to invest in companies that will grow and succeed. And I imagine some of your portfolio companies have done that pretty well and could look to potentially refinance into the upper-middle market. How concerned are you about that refinancing risk in your portfolio? Not terribly. I mean, those are investments. I think you're exactly right. We have some companies, and we continue to support those companies that are performing extremely well. And could they get refinanced at lower rates at some point in time in the future, in the next 12 months or what have you? The answer to that is yes. I think, at the same time, we add a lot of value to portfolio companies. We've got strong relationships, but they're built on trust and adding value. But your point's a good one. That is a part of the market today. And so it is our expectation that there'll be some of that activity, whether it's Q3 or Q4 or into next year. That's a piece of the puzzle, for sure. It's not alarming to us. It's just a part of the equation, I think. It's not. I understand. My last question regarding balance sheet leverage. You're still below your target, which I believe is debt-to-equity of 0.8-1.1. I understand that that takes into account a lot of different moving parts. With the discussion you just had about pressure on portfolio yields, are you open to increasing balance sheet leverage to continue to deliver financial performance at the BDC? Great question, Mickey. The answer to that is yes. We're trying to do what makes sense for our shareholders on a long-term basis. As you know, there's been some turmoil in the debt markets here recently, in particular the unsecured and the treasury markets, which impact those markets. We do have other ways to access capital, right? We have our revolver, which has a strong liquidity position. And then we also have the ability to increase the size of the revolver. I'd say, if you look at our capital structure, the revolver is probably smallest in nature relative to most other BDCs. And then we have the SBIC application that we obviously applied for that in December. And we knew it was going to take a while. We were told that. And we continue to be in the queue there. That'll be part of the equation for us as well. The answer is yes, absolutely. We're trying to do it in a methodical manner and do what's right for our shareholders over the long term, if that makes sense. Yeah. I understand. Those are all my questions this morning. I appreciate your time. Thank you. Thank you, Mickey. Good talking to you. The next question will come from Bryce Rowe with B. Riley. Please go ahead. Morning, Ed and Shelby. Good morning, Bryce. Good morning. Hey, I wanted to maybe follow up just on those comments you made, Ed, about the SBA license and maybe expanding the credit facility. Maybe any color around where you'd like to see the credit facility go in terms of commitment? And then I think last quarter, you talked about the SBA license, the newer one, maybe being in place by the middle of this year. Is that still your expectation from a timing perspective? I think the SBA license is a tough one. I think the SBA, they told us it was going to take a while, and it's just hard to predict. I think June, if I sit here today where I don't have any real new information, I'd say, "Hey, that's a little aggressive." I do think things are moving along, but timing is very tough to predict. Probably June is a little aggressive. I would assume Q3 or Q4 at this point. From a credit facility perspective, I don't know that we have a specific target. But I will say that we're thinking about, as we sit here today, increasing the size of the facility. I think that makes sense. Going back to strategy from a capital structure perspective, I think diversity is important. So having a secured piece of the puzzle is important. Having unsecured being a large piece of it, and that includes SBIC to ventures. I mean, all of those are pieces to the puzzle that we like. And I think we've got an ability to increase leverage in all three areas. It's just a matter of kind of picking the time, if you will. Yeah. Okay. Okay. I wanted to maybe follow up on that adjective you used, spotty, in terms of kind of quality that you're seeing in the market today. What does that mean in particular? For us, we're looking for pretty high quality, high free cash flow, generally high multiple, meaning EBITDA multiple transactions, so high value-add businesses. In terms of the stars aligning where the sponsor wins and we're well-positioned, there's just less of those opportunities this quarter relative to last quarter. So it's just a little bit of it. It's just mix. I do think luck's not the right word. But sometimes it's just good fortune. Things kind of fall in place. Other times, they don't as much. We are being very, very careful. We're looking at the cream of the crop from an asset quality perspective. There are fewer of those companies out there. Then if we don't have the right equation, if you will, whether the sponsor doesn't win or we don't have the right financing facility, then maybe that transaction doesn't happen. And so the quality for us has been at a very important marker always. But we're sticking to our knitting of really focusing on those types of businesses. And hopefully, that's helpful. But that's really what I'm getting at. Yep. Yep. Maybe one here on credit quality. Any way to kind of quantify where leverage in the portfolio is, weighted average leverage, and what you're seeing from a kind of a weighted average loan-to-value perspective at this point too? Sure. So leverage for our core lower-middle market portfolio, absent a couple investments in the larger world, if you will, BSL world, our leverage is at 4.37x, I think, so debt to EBITDA. And then interest coverage was at 3.1x. And what was the last question? I think you've talked about kind of loan-to-value within the portfolio in the past. Yeah. Loan-to-value is pretty stable. It's just under 40% this quarter. Okay. All All right. Appreciate your time. Good talking. Likewise. Good talking to you, Bryce. Yep. The next question will come from Paul Johnson with KBW. Please go ahead. Yeah. Good morning. Thanks for taking my questions. Yeah. It's kind of within the marks on the equity portfolio. You mentioned the one gain this quarter. That was nice. But is there any other significant or notable movements or marks within the equity portfolio? I just want to make sure I heard you correctly. Were there notable market changes? Is that the question, Paul? Yes. Yeah. Yes. I mean, overall, the equity portfolio performed quite well. We did have a write-down in Fansteel, which is our largest position. That company continues to kind of weather the pharma destocking trend. We're kind of at the end of that, we believe. We expect performance to start to improve. That continues to be a very high-quality business with a very good outlook. It's going through this inventory destocking trend in the pharma space. It's kind of at the tail end of that. The rest of the portfolio really was quite stable and performed well. I mean, I think the equity portfolio, despite what I just mentioned with Fansteel, appreciated in the quarter, as did the debt portfolio. It was a good quarter, very stable, and very solid performance. Thanks for that. And then just in terms of the deal flow you're seeing in the market, I'm just wondering, trying to get your thoughts on kind of what you think of the relative value of the first-lien sort of structured opportunities that you've seen versus any kind of subordinated opportunities that are out there today. And if that's something that you're even seeing and if that makes sense. Sure. Sure. It's a great question. It's a tough one too. I think the market, as you well know, has moved very much to more of a first-lien solution. Having said that, mezzanine investments are still a part of the market, a core part of the market. It's just from a market share perspective, it's lower. And in today's world, mezzanine continues to show up for us. And so we made two mezzanine investments last quarter in very high-quality companies. And so we're going to continue to look for those types of situations where we like the debt and the equity of those prospective portfolio companies. But what I would suggest is the first-lien solution is a large majority of the market. And I would also expect that to continue to be a large majority of our investments as we move forward. But we are actively looking for attractive mezzanine opportunities. Thanks for that, Ed. That's very interesting. All for me. Okay. Thanks, Paul. Good talking to you. The next question will come from Erik Zwick with Hovde Group. Please go ahead. Good morning, Ed and Shelby. I wanted to first just start with a bit of a follow-up. You've mentioned the market is fairly active at this point, and competition is, I guess, somewhat intense. It's impacting spreads. Curious if you're seeing any deterioration in the market on the structure side, if you're finding that you're losing any deals where you're sticking to your gun, so to speak, in terms of your credit quality standards at underwriting and others are starting to bend at all? Sure. Great question. We haven't really seen structural changes. One of the things we like about the lower-middle market is we have real maintenance covenants. Many times, we have two covenants, both a leverage and a fixed charge. That's a large majority of our situations or our investments. And that's different than the upper market, if you will, the larger market, very different. And I would say the spreads to those maintenance covenants are also narrower. So we like the ability to have a seat at the table. And we have not seen any real changes from that perspective. Clearly, pricing and spreads narrowing is a part of the market and the business today. But structures have not started to change yet, which is a good thing. To be honest, in the lower-middle market, you don't really see a deviation away from pretty strong structures at the end of the day. Again, it's one of the things we really like about the lower-middle market and our ability to risk-manage our investments, if you will. Thanks, Ed. I agree with you. That's good to hear. And then the last one for me. I think you mentioned in your comments for the two existing non-accruals, the situations there are improving but remain at high risk. Wondering if you could just maybe provide a little bit more color to the term improving if it's kind of the underlying financial metrics and trends at the companies or just progressing towards some sort of resolution and what you were kind of referring to there with that comment. Sure. Great question. What I'm referring to there is really the EBITDA levels. So EBITDA levels in both cases are growing and improving on a current basis than on a last 12-month basis and in a meaningful way. But at the same time, these businesses had some idiosyncratic issues that were meaningful as well. And so the EBITDA performance is improving. We do not expect any quick resolutions or anything like that in either case. And so we're just managing through kind of the situation, trying to work through an improved outlook in both cases. And I would also say we've got supportive equity sponsors in both those cases as well, which is great. There's a lot of work being done to try to improve the overall position of both assets. But we've got a ways to go. I appreciate the update. Thanks for taking my questions today. Absolutely. Thank you. Again, if you have a question, please press star, then one. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Ed Ross for any closing remarks. Please go ahead. Thank you, Chuck. Thank you, everyone, for joining us this morning. We look forward to speaking with you on our second-quarter call in early August 2024. Have a great day and a great weekend. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.