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 Burfening. 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 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 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 Fidus Investment Corporation. Although management believes these statements are reasonable, based on estimates, assumptions and projections as of today, August 2nd, 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, 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 and 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 and adjusted NII over the base dividend from the prior quarter, which will be payable on September 26th, 2024, to stockholders of record as of September 19th, 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 31st, 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 31st, 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. Net investments 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, Pool & Electrical Products and Virginia Tile, resulting in net realized gains 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 30th, 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? Thank you, Ed, and good morning, everyone. I'll review our second 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, Q1 2024. Total investment income was $35.7 million for the three months ended June 30th, a $1 million increase from Q1, primarily due to $3.2 million increase in interest income, including PIK, partially offset by a $0.8 million decrease in fee income related to investment activity, and a $1.3 million decrease in interest income on excess cash, which was due to the new investments in Q1 being back-end loaded. Total expenses, including income tax provision, were $18.7 million for the second quarter, $1.7 million higher than Q1, driven primarily by a $0.9 million increase in the capital gains fee accrual, a $0.4 million increase in base management and income incentive fees, and a $0.2 million increase in the income tax provision related to state tax payments. Net investment income, or NII, for the three months ended June 30th, was $0.53 per share versus $0.57 per share in Q1. Adjusted NII, which excludes any capital gains, incentive fee accruals or reversals attributable to realized and unrealized gains and losses on investments, was $0.57 per share in Q2 versus $0.59 per share in Q1, which includes an increase in the weighted average shares outstanding in Q2. For the three months ended June 30th, we recognized approximately $9.2 million of net realized gains, primarily related to the sale of our equity investments in Pool & Electrical Products and Virginia Tile. We ended the quarter with $472.8 million of debt outstanding, comprised of $175 million of SBA debentures, $250 million of unsecured notes, $32.5 million outstanding on the line of credit, and $15.3 million of secured borrowings. Our debt-to-equity ratio as of June 30th was 0.7x, or 0.5x statutory leverage, excluding exempt SBA debentures. The weighted average interest rate on our outstanding debt was 4.6% as of June 30. Turning now to portfolio statistics. As of June 30th, our total investment portfolio had a fair value of $1.1 billion. Our average portfolio company on a cost basis was $11.9 million, which excludes investments in five portfolio companies that sold their operations or are in the process of winding down. We have equity investments in approximately 81.3% of our portfolio companies, with an average fully diluted equity ownership of 3.6%. Weighted average effective yield on debt investments was 14% as of June, in line with Q1. 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 nonaccrual, if any. Now, I'd like to briefly discuss our available liquidity. In Q2, we issued approximately 1.7 million shares at an average price of $19.80 per share, generating $33 million in net proceeds. As of June 30th, our liquidity and capital resources included cash of $48.3 million and $67 million of availability on our line of credit, resulting in total liquidity of approximately $115.8 million. Subsequent to quarter end, we increased our line of credit from $100 million to $140 million, giving us $40 million of incremental liquidity. Now I'll 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 Cindy for Q&A. Cindy? We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are 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. At this time, we will pause momentarily to assemble our roster. Our first question comes from Bryce Rowe of B. Riley. Go ahead, please. Thanks. Thanks a bunch. Good morning. Good morning, Bryce. Good morning. Ed and Shelby, maybe I'll just start on the capital structure and liquidity profile. You know, last quarter, we talked about the potential for a fresh SBIC license. So, you know, like to get an update there if there is one. And then also, nice to see, you know, the revolving credit facility get expanded and then, you know, getting the investment-grade rating subsequent to quarter end, too, was a good thing to see. So, you know, wanted to get your feel in terms of how you think about kind of managing the capital structure at this point, you know, especially in light of what seems to be maybe the lowest debt-to-equity coverage or debt-to-equity ratio in the industry. Great question, Bryce. And I'll let Shelby jump in here as well. I think, obviously, the increase in the revolver is a good thing. The investment-grade rating is a great point. Appreciate you bringing that up. I think that's been very helpful when we ultimately do issue, you know, unsecured notes in the market, which we will at some point in time. And then the SBIC is we have continued to go through that process. We still have a fair degree of confidence that we'll get through that by year-end. So we are making progress, but you know, when it's completed is still a little bit of an unknown, but we feel good about it. So from a equity capitalization perspective, we did raise some equity, you know, through our ATM program last quarter. You know, part of—you know, we're gonna keep that open, but generally speaking, we were very focused on liquidity here in Q2 and wanted to make sure we had a good liquidity position as we were making decisions to make new investments or not. And so we feel good about our capitalization right now and our liquidity position, and we also feel good about the fact that we've got some additional places we can go, meaning equity, meaning the SBIC license, hopefully soon, as well as using the revolver. So Shelby, do you have any additional thoughts there? No, I would just echo that we are currently under-levered, but in terms of, you know, increasing leverage on the balance sheet, it's first line of credit, and then SBIC debt, once that becomes available to us, and we're obviously well positioned in the unsecured market, but that's probably a more opportunistic as opposed to a near-term need. Okay. Okay, that's great, great context. Maybe one more from me. Ed, we talked last quarter also about second quarter being a little bit slower in terms of, you know, newer originations, and certainly that came to be. I think your other commentary last quarter was around the second half of the year picking up and the press release, you noted that. Can you talk a little bit about, you know, what the second half, you know, might look like and help size it up for us? Sure, sure. No, it's second quarter, you know, as you mentioned, and as we mentioned, it was slower than normal from a new investment perspective. We had a feeling it would go that way, and some of that's just timing. Some of that, we did lose a deal or two from a pricing perspective. But we're sticking to our, you know, our knitting on how we go about things and our risk-adjusted returns are focused. And so as we look forward, we do feel like, you know, look, M&A activity is below normal levels, so not robust. But it's, you know, the good thing about the lower middle market is that there is always activity going on, including add-on activity in our existing portfolio... So we are working on several opportunities that would be new platform investments and, you know, have high hopes that some of those will take place here in Q3. We also expect just overall M&A activity levels to pick up a little bit here from the summer and so to be decent. And so our hope and expectation is to participate with some of those as we move forward. So it's, you know, it's not a terrible market, it's just not a robust market. And our portfolio will continue to be acquisitive, would be our guess, and so that'll also drive some new originations for us. Hopefully, that gives you a good feel. I guess one other point I would make is with that comes repayments, right? And we do have numerous companies that are evaluating strategic alternatives. Several are equity-only deals, you know, more smallish in nature. But there is, you know, a fair number of companies that are evaluating strategic alternatives. So we do expect repayments to pick up a little bit here in Q3 and Q4, but in line, that's in line with our expectation for a bit of a pickup on the front end, meaning new investment side of things as well. Got it. Okay, I'll jump back in queue. Appreciate the time. Okay. Thank you. Good talking to you, Bryce. You too, Ed. Thanks. The next question comes from Robert Dodd of Raymond James. Go ahead, please. Hi, guys. Congratulations on the quarter. Just to kind of follow up on that theme on repayments, Ed, and you talking about, you know, strategic alternatives, et cetera. I mean, can you give us any color on how does it look within the portfolio for like, you know, repricing requests or refinancing activity versus, to your point, a strategic alternative sounds like, you know, moving into a different area of the market or getting acquired or whatever, right? So, you know, because obviously repayments can be triggered by different things. So what are you seeing on the different dynamics between, you know, a portfolio company having outgrown and now look in a different segment of the market versus, again, they're looking to refinance versus... I mean, can you give us any color on the different breakdown within the expectation for repayments to increase? Great question, Robert, and it's a little nuanced, but I will, what I would suggest is the strategic alternatives comment that I'm making, and again, some of those are now equity-only, pretty mature investments that we have. But we have numerous, and when I mean numerous, over five, that are evaluating strategic alternatives at the moment, and that's to be sold. And so that, you know, that's a that piece of the puzzle, if you will. Repricing, you know, early in the year, we did have one or two, I actually think it was only one, but one or two, I think it was one repricing of a loan. You know, and it was an asset that we obviously wanted to keep, and it made good sense. The company is delevered, and so we executed that transaction. That's not overly common. And then refinancing, refinancings of companies that have performed well, gotten bigger, you know, maybe another lender will do things cheaper than us. That has happened. We had one company in Q2 that actually went to the broadly syndicated loan market. Now, we don't have many companies in our portfolio that are big enough for that to happen often, but they did do that and achieved a better level of pricing. And then we had, you know, the event in July, that's a subsequent event, that we announced. That was a full repayment of a first lien loan that we were leading, another lender came in and took at a lower price. So that is part of the market as we've talked about. I don't expect it to be a huge trend, but it will be part of the market as we move forward. This is kind of how we think about it. Got it. I appreciate that. Then on credit quality, Ed, I mean, it's obviously, it's really good. You haven't had the first-lien new non-accrual since, like, 2019 and haven't had anything in a year at this point. So can you give us any more? I mean, the portfolio is really holding in really well. Rates are up. The economy does seem to be slowing. I mean, the liquidity for portfolio companies up here, you know, has got to be getting more squeezed. I mean, what's at margin, what's yeah? Do you have any significant concerns, or how are they holding up so well in this situation, with the economy and rates, you know, which has been going on a while, and you just haven't had any issues. So can you tell us why? Sure. I'll try. I mean, I will, you know, we're very pleased with the overall performance of our portfolio. You know, it comes with a lot of work. We focus on very high caliber, you know, quite frankly, high free cash flow, defensive growth companies. Those are general characteristics that we're looking for, and I think that strategy has worked well for us. You know, we do have two non-accruals, as you noted and well know, and we're working through those... What I would say is, you know, the rest of the portfolio is generally performing quite well. This quarter, 65% of the companies grew their cash flow or EBITDA. So we feel good about the portfolio. Having said that, you always have some companies that are greatly exceeding expectations, and you have some companies that are not meeting expectations, and in some cases, in a more meaningful fashion than you would like. And, you know, we're not immune to either one of those. That's the good news. On the positive, we've got more than a few that are doing great, and we've got a few that also are underperforming relative to expectations. But, you know, that's all part of it. I think our leverage levels are 4.3x in the core lower middle market, so much more modest than the broader and the bigger market or, you know, the larger EBITDA market. I think that's one of the things that helps us and helps us from a cash interest coverage perspective. And then, you know, when, you know, our portfolio is gravitated towards more of a first lien portfolio, as you well know, and when things aren't going exactly, you know, how the sponsor wants it to, or the ownership group, or we do, you know, that's a discussion. And in those cases where there is tighter liquidity, for instance, because of underperformance, we typically ask the owners to put money in. Doesn't mean there's not a discussion and a two-way street, because there typically is. But we very much ask for support to make sure that, you know, we're protected on our side of things, and the company has room to operate. So that's the general strategy, but I think the strategy of moving to a first lien strategy has helped us, you know, when things don't go as well as expected. And, also, I think the overall strategy of where we focus, you know, and the types of deals and types of companies we're looking for, I think has helped us as well. Got it. Thank you for the color on that. Then one last one, if I can, kind of following up on Bryce's first question. You know, activity is expected to pick up in repayments. I mean, in the first half of the year, you grew the portfolio net just a little over $100 million. Much of that was in Q1, which was really, really active, obviously. I mean, so if we're looking at, like, you know, $100 million as a six-month growth number, I mean, do you think in the second half, what's the over-under on that? You know, as I sit here today, I would, I would guess that it's gonna be less than that, because of repayments, because repayments will become a bigger part of the equation. I think it's probably that simple. I think my, my belief system is, originations, you know, will most likely outpace repayments. But they're, you know, so hopefully that gives you the context. That's okay. It's very hard to look out to Q4 at this point and know what's gonna happen, but we expect, you know, decent activity levels on both, you know, ends of the coin, if you will, meaning originations and repayments. Got it. Thank you. Thank you. Good talking to you, Robert. Our next question comes from Mickey Schleien of Ladenburg. Go ahead, please. Yes, good morning, everyone. Ed, spreads in the sponsored middle market are under enormous pressure with so much capital available. So I'm curious whether that's driving you toward looking at more non-sponsored deals. And if you are, how do you look at the underwriting and structuring of non-sponsored deals versus sponsored deals? It's a great question, Mickey, and, I think, you know, we, we've always looked at non-sponsored deals. There was a time, actually, when it was, you know, 30%-40% of our portfolio. That is not the case today. I'd say our portfolio is over 90%. 90% of our companies are controlled by private equity groups. Having said that, when companies, that are domiciled in industries that we know well, and we really like the, you know, the characteristics of the business and the outlook, we do look to participate in those situations. You know, the bar is very high, as you might imagine, and they need to be companies that aren't dependent on people as much, and the relationships with the customers is really so there's an underwriting there that you got to be very, very careful about. But we do always have looked at that as a source of deal flow and of good opportunities, and so we do continue to look, but the bar remains very, very high. So if I could follow up on that. In terms of your actionable pipeline, are non-sponsored deals a meaningful portion of that at this time? Actually, no. The deals that are most likely, and that's more than a couple, are all sponsored deals and part of a fund complex, if you will, with committed funds. Having said that, we had some discussions this week about a couple of non-sponsored deals. And we also have one in a longer-term pipeline that's more of a search fund deal, which is quasi-sponsored, definitely. So, you're right, it's part of the equation for us, but we're, you know, sponsored-driven deals is still going to be the, you know, the majority of our flow and our activity. But we do, we, for the right opportunities, we are interested in those types of situations. Okay, I understand. I want to follow up on the balance sheet question, and I do recall that in the last earnings call, you guided for lower originations in the second quarter, which is indeed what happened, but you also kept issuing a lot of equity. So now you're holding a lot of cash and you're under levered, which is causing your adjusted NII yield to run below last year. So what's the rationale for that process, and why not pay off at least the balance on the credit facility? Shelby, you want to take that on the- Yeah, I'll jump in there. Some of that, Mickey, is at 6.30 and seeing that excess cash is timing. Subsequent to quarter end, we did in fact pay off the line of credit. I would expect us to start borrowing on the line of credit again before the end of the second quarter. But there's just some timing nuances about where the pipeline is and what might be coming up- coming down the road and where cash sits. And, Shelby, you know, just from a working capital perspective, what's sort of the minimum amount of cash you typically want to hold on your balance sheet? I mean, if it's less than $10 million. I mean, you know, our line of credit is fairly facile, so it's easy to go up and down, and we don't have any concerns from a covenant or borrowing base perspective. So there's really, you know, no need to sit on excess cash out of, I'll clarify from the RIC. As you know, we do have some SBIC funds, and so from time to time, there can be reasons why we might need to sit on some excess cash at an SBIC fund. But generally speaking, there's not a need. But, you know, I'm not going to pay down the line and then turn around and borrow shortly thereafter. And timing of closings is very fluid, so it's kind of hard to predict. Right. So just in terms of a trajectory, if Ed's plan or hope for net portfolio growth pans out in the second half, your first source of funds is cash and then the credit facility, and then down the road, perhaps more SBIC debt. Is that correct? Correct. Okay. Those are all my questions this morning. Thanks for your time. Thanks, Mickey. Good talking to you. The next question comes from Paul Johnson of KBW. Go ahead, please. Yeah, good morning. Thanks for taking my questions. Congrats on a good quarter and a couple more successful exits. Kind of on that and kind of following on some of the questions for M&A. You know, obviously, it's been slower across the market, but your portfolio obviously continues to have these, you know, realizations along the way. I'm just curious, I mean, just, is there any effect where that's just due to these are, you know, inherently smaller companies, and there's maybe just more potential buyers out there for these businesses? And the private equity, you know, community is obviously under pressure to, you know, return more capital. So maybe these are, you know, potentially outperforming companies and, you know, easier places to potentially prune, you know, within their portfolios. Just wondering if, you know, there's just anything out there, I guess, you know, that would be, you know, kind of, I guess, supporting, you know, these, these realizations that, you know, you continue to have in your portfolio despite the slower M&A market? Sure. I mean, I think what it speaks to is the lower middle market is, as you know, large, right? It's 90% of the transactions that take place in M&A. They're just not talked about as much in the newspapers. And then, you know, one of our strategies is to invest in the lower end of the lower middle market. And if you grow those businesses, there's typically a pretty good opportunity to do one of two things, sell to another private equity group or sell to a strategic. And so one of the strategies, and what I would say is the names that I'm mentioning are all pretty mature investments for us, meaning they weren't made two or three years ago. And so, you know, we have, as you may know, probably 17 to 20, I don't know the exact number, of equity investments that are, we no longer have debt investments associated with those equity investments. And so some of those names, the ones I'm talking about, so it's just, you know, at some point, they do need to realize they're mostly private equity-driven deals, and they've just taken a little bit longer. So I think it really just speaks to the portfolio size of 86 companies and the fact that the lower middle market is always somewhat active, and that's where, you know, in terms of numbers, that's the majority of the deals taking place. M&A is not, you know, dead, it's just not robust right now. That's one of the things we like about the lower middle market. Thanks for that, Ed. That's helpful. And then just kind of, you know, when you mention, you know, new platform deals that you've done, I'm just curious, you know, when you're evaluating a new platform deal, does that mean that's a deal that's in a specific industry or vertical that's potentially new for that buyer, and that's an industry that you've already, you know, identified as attractive and, you know, have experience and investment expertise built up around that? Or is that a new platform and potentially industry for you as well? No, typically, not a new, new industry for us. We really try to focus on, you know, where we have experience and expertise. And, you know, I think about the one new platform company last quarter, it's a tech-enabled services business, which is a, you know, 30%-40% of our portfolio today. Within that segment, we have a lot of different end markets and whatnot, but it's tech-enabled type services, software, what have you. So we really try to stick to what we understand. So when I say new platform, it's a change. Those are change-of-control transactions, typically private equity driven. So a new ownership group is the private equity group, and we're financing that buyout and then also co-investing in the equity of the securities alongside the private equity group. Got it. That makes sense. All right. Well, that's it all for me. Congrats on a good quarter. Thank you, Paul. Good talking to you. This concludes our question-and-answer session. I would like to turn the conference back over to Ed Ross, CEO, for any closing remarks. Thank you, Cindy, and thank you everyone for joining us this morning. We look forward to speaking with you on our third quarter call in early November. Have a great day and a great weekend.