Q2 2026 Fidus Investment Corp Earnings Call

August 7, 2026

Operator 3: Good day, welcome to the Fidus Q2 2026 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 Jody Burfening. Please go ahead.

Operator: Good day, welcome to the Fidus Q2 2026 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 Jody Burfening. Please go ahead.

Speaker #1: Good day and welcome to the FIDOS second quarter 2026 earnings conference call. I'll 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.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone.

Speaker #1: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jody Burfening.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Danielle, and good morning, everyone. And thank you for joining us for FIDOS Investment Corporation's second quarter 2026 earnings conference call. With me this morning are Ed Ross, FIDOS Investment Corporation's Chairman, and Chief Executive Officer in Shelby Sherard, Chief Financial Officer.

Jody Burfening: Thank you, Danielle. Good morning, everyone, and thank you for joining us for Fidus Investment Corporation's Q2 2026 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.

Speaker #2: FIDOS Investment Corporation issued a press release yesterday afternoon with a 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.

Speaker #2: 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.

Speaker #2: Although management believes these statements are reasonable based on estimates assumptions and projections as of today, August 7th, , 2026, these statements are not guarantees of future performance.

Jody Burfening: Although management believes these statements are reasonable, based on estimates, assumptions, and projections as of today, 7 August 2026, 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.

Speaker #2: 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 of the securities and exchange commission.

Speaker #2: FIDOS 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.

Speaker #2: Good morning, Ed.

Speaker #3: Good morning, Jody. And good morning, everyone. Welcome to our second quarter 2026 earnings conference call. On today's call, start with a review of our second quarter performance and our portfolio at quarter end.

Edward H. Ross: Good morning, Jody, good morning, everyone. Welcome to our Q2 2026 earnings conference call. On today's call, I'll start with a review of our Q2 performance and our portfolio at quarter end. Then share with you our outlook for H2 2026. Shelby will cover the Q2 financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. Although ongoing geopolitical uncertainties and market volatility weighed on deal activity levels in the fragmented lower middle market, we continued to build our diversified portfolio of debt and equity investments in the Q2. Our long-standing relationships with high-quality sponsors, our proven investment strategy, and industry knowledge continue to differentiate Fidus.

Ed Ross: Good morning, Jody, good morning, everyone. Welcome to our Q2 2026 earnings conference call. On today's call, I'll start with a review of our Q2 performance and our portfolio at quarter end. Then share with you our outlook for H2 2026. Shelby will cover the Q2 financial results and our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions. Although ongoing geopolitical uncertainties and market volatility weighed on deal activity levels in the fragmented lower middle market, we continued to build our diversified portfolio of debt and equity investments in the Q2. Our long-standing relationships with high-quality sponsors, our proven investment strategy, and industry knowledge continue to differentiate Fidus.

Speaker #3: And then share with you our outlook for the second half of 2026. Shelby will cover the second quarter financial results and our liquidity position.

Speaker #3: After we have completed our prepared remarks, we'll be happy to take your questions. Although ongoing geopolitical uncertainties and market volatility weighed on deal activity levels and the fragmented lower middle market, we continue to build our diversified portfolio of debt and equity investments in the second quarter.

Speaker #3: Our long-standing relationships with high-quality sponsors, our proven investment strategy, and industry knowledge continue to differentiate FIDOS. These attributes create opportunities for us to add through disciplined selection, niche market leaders with defensible moats and resilient business models, that generate cash flows to service debt and support realistic growth strategies.

Edward H. Ross: These attributes create opportunities for us to add, through disciplined selection, niche market leaders with defensible moats and resilient business models that generate cash flows to service debt and support realistic growth strategies. As a result, our portfolio remains healthy and structured to produce both high levels of current and recurring income, and the potential for capital gains from monetizing equity investments. Adjusted NII of $0.50 per share extended our track record of covering our base dividend. In addition, we realized net gains of $6.4 million, or $0.17 per share, from the monetization of three equity investments. Net asset value is $738.5 million at quarter end, or $19.46 per share.

Ed Ross: These attributes create opportunities for us to add, through disciplined selection, niche market leaders with defensible moats and resilient business models that generate cash flows to service debt and support realistic growth strategies. As a result, our portfolio remains healthy and structured to produce both high levels of current and recurring income, and the potential for capital gains from monetizing equity investments. Adjusted NII of $0.50 per share extended our track record of covering our base dividend. In addition, we realized net gains of $6.4 million, or $0.17 per share, from the monetization of three equity investments. Net asset value is $738.5 million at quarter end, or $19.46 per share.

Speaker #3: As a result, our portfolio remains healthy and structured to produce both high levels of current and recurring income and the potential for capital gains from monetizing equity investments.

Speaker #3: Adjusted NII of 50 cents per share extended our track record of covering our base dividend. In addition, we realize net gains of 6.4 million dollars, or 17 cents per share, from the monetization of three equity investments.

Speaker #3: That asset value is 738.5 million dollars at quarter end, or 19 dollars and 46 cents per share. For the third quarter of 2026, the board of directors declared a total dividend of 50 cents per share, which consists of a base dividend of 43 cents per share, and a supplemental dividend of 7 cents 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 29th, 2026, to stockholders of record as of September 15th, 2026.

Edward H. Ross: For the Q3 2026, the board of directors declared a total dividend of $0.50 per share, which consists of a base dividend of $0.43 per share and a supplemental dividend of $0.07 per share, equal to 100% of the surplus and adjusted NII over the base dividend from the prior quarter, which will be payable on 29 September 2026, to stockholders of record as of 15 September 2026. Originations in the Q2 amounted to $98 million, the vast majority of which were M&A-driven first lien investments. We invested a total of $48.1 million in four new portfolio companies. In terms of existing portfolio company investments, we continue to support many of them with acquisition capital in the form of debt and equity investments.

Ed Ross: For the Q3 2026, the board of directors declared a total dividend of $0.50 per share, which consists of a base dividend of $0.43 per share and a supplemental dividend of $0.07 per share, equal to 100% of the surplus and adjusted NII over the base dividend from the prior quarter, which will be payable on 29 September 2026, to stockholders of record as of 15 September 2026. Originations in the Q2 amounted to $98 million, the vast majority of which were M&A-driven first lien investments. We invested a total of $48.1 million in four new portfolio companies. In terms of existing portfolio company investments, we continue to support many of them with acquisition capital in the form of debt and equity investments.

Speaker #3: Originations in the second quarter amounted to 98 million dollars. The vast majority of which were M&A-driven first lien investments. We invested a total of 48.1 million dollars in four new portfolio companies.

Speaker #3: In terms of existing portfolio company investments, we continue to support many of them with acquisition capital in the form of debt and equity investments.

Speaker #3: As we continue to build our portfolio, we remain focused on maintaining a high level of diversity, while investing in growing companies that provide essential products and services, with an emphasis on manufacturing, distribution, and service enterprises.

Edward H. Ross: As we continue to build our portfolio, we remain focused on maintaining a high level of diversity while investing in growing companies that provide essential products and services, with an emphasis on manufacturing, distribution, and service enterprises. Proceeds from repayments and realizations totaled $39.2 million for Q2. At quarter end, our portfolio, on a fair value basis, stood at $1.4 billion, or 102% of cost, and consisted of $1.3 billion in debt investments and $147.2 million in equity investments. Our portfolio remains well-structured to produce both high levels of recurring income and capital gains from monetizing equity investments, coupled with attractive loan-to-value characteristics. Our debt portfolio continues to perform well and is sound from a credit quality perspective, given the solid fundamentals of our underlying portfolio companies.

Ed Ross: As we continue to build our portfolio, we remain focused on maintaining a high level of diversity while investing in growing companies that provide essential products and services, with an emphasis on manufacturing, distribution, and service enterprises. Proceeds from repayments and realizations totaled $39.2 million for Q2. At quarter end, our portfolio, on a fair value basis, stood at $1.4 billion, or 102% of cost, and consisted of $1.3 billion in debt investments and $147.2 million in equity investments. Our portfolio remains well-structured to produce both high levels of recurring income and capital gains from monetizing equity investments, coupled with attractive loan-to-value characteristics. Our debt portfolio continues to perform well and is sound from a credit quality perspective, given the solid fundamentals of our underlying portfolio companies.

Speaker #3: Proceeds from repayments and realizations totaled 39.2 million dollars for the second quarter. At quarter end, our portfolio on a fair value basis stood at 1.4 billion dollars, or 102% of cost, and consisted of 1.3 billion dollars in debt investments, and 147.2 million dollars in equity investments.

Speaker #3: Our portfolio remains well-structured to produce both high levels of recurring income and capital gains from monetizing equity investments. Coupled with the attractive loan-to-value characteristics.

Speaker #3: Our debt portfolio continues to perform well and is sound from a credit quality perspective, given the solid fundamentals of our underlying portfolio companies. At quarter end, one portfolio company, Vertex, remained on non-accrual accounting for less than 1% of the total portfolio on both a fair value and cost basis.

Edward H. Ross: As of 30 June 2026, one portfolio company, Virtex, remained on non-accrual, accounting for less than 1% of the total portfolio on both a fair value and cost basis. Subsequent to quarter end, we exited our second lien and subordinated debt investments in Virtex Enterprises, LP, which had previously been written down. We received payment of $20.2 million, resulting in an aggregate realized loss of $11 million. As a result, as of today, we do not have any investments on non-accrual status. Looking ahead to H2 2026, given the pent-up demand in the M&A market, we expect deal flow and investment activity to pick up as geopolitical uncertainties abate, though such timing is not entirely clear. Yet deal flow appears to be picking up as we sit here today. In addition, even in this more muted environment, our portfolio continues to be active and a meaningful source of new investments.

Ed Ross: As of 30 June 2026, one portfolio company, Virtex, remained on non-accrual, accounting for less than 1% of the total portfolio on both a fair value and cost basis. Subsequent to quarter end, we exited our second lien and subordinated debt investments in Virtex Enterprises, LP, which had previously been written down. We received payment of $20.2 million, resulting in an aggregate realized loss of $11 million. As a result, as of today, we do not have any investments on non-accrual status. Looking ahead to H2 2026, given the pent-up demand in the M&A market, we expect deal flow and investment activity to pick up as geopolitical uncertainties abate, though such timing is not entirely clear. Yet deal flow appears to be picking up as we sit here today. In addition, even in this more muted environment, our portfolio continues to be active and a meaningful source of new investments.

Speaker #3: Subsequent to quarter end, we exited our second lien and subordinated debt investments in Vertex Enterprises LP, which had previously been written down. We received payment of $0.2 million, resulting in an aggregate realized loss of $11 million.

Speaker #3: As a result, as of today, we do not have any investments on non-accrual status. Looking ahead to the second half of 2026, given the pent-up demand and the M&A market, we expect deal flow and investment activity to pick up as geopolitical uncertainties abate.

Speaker #3: Though such timing is not entirely clear. Yet deal flow appears to be picking up as we sit here today. In addition, even in this more muted environment, our portfolio continues to be active in a meaningful source of new investments.

Speaker #3: As we have in the past, through periods of both robust and sluggish deal activity and during the heightened risk associated with the pandemic, we will adhere to our strict underwriting standards to maintain a well-diversified portfolio that produces both high levels of current and recurring income and offers the potential for enhanced returns from monetizing equity investments.

Edward H. Ross: As we have in the past, through periods of both robust and sluggish deal activity and during the heightened risk associated with the pandemic, we will adhere to our strict underwriting standards to maintain a well-diversified portfolio that produces both high levels of current and recurring income and offers the potential for enhanced returns from monetizing equity investments. Our portfolio is well positioned to continue to generate adjusted NII that covers our base dividend. We remain focused on managing the business for the long term and committed to our goals of capital preservation and generating attractive risk-adjusted returns. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?

Ed Ross: As we have in the past, through periods of both robust and sluggish deal activity and during the heightened risk associated with the pandemic, we will adhere to our strict underwriting standards to maintain a well-diversified portfolio that produces both high levels of current and recurring income and offers the potential for enhanced returns from monetizing equity investments. Our portfolio is well positioned to continue to generate adjusted NII that covers our base dividend. We remain focused on managing the business for the long term and committed to our goals of capital preservation and generating attractive risk-adjusted returns. Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?

Speaker #3: Our portfolio is well positioned to continue to generate adjusted NII that covers our base dividend. We remain focused on managing the business for the long term and committed to our goals of capital preservation and generating attractive risk-adjusted returns.

Speaker #3: Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?

Speaker #2: Thank you, Ed, and good morning, everyone. I'll review our second quarter results in more detail, enclosed with comments on our liquidity position. Please note I will be providing comparative commentary versus the prior quarter Q1, 2026.

Shelby Sherard: Thank you, Ed, and good morning, everyone. I'll review our Q2 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 2026. Total investment income was $43.5 million for the three months ended 30 June, a $4 million decrease from Q1, primarily driven by a $2.6 million increase in interest income, driven by increased average debt investments outstanding, a $0.6 million increase in dividend income from equity investments, offset by a $6.8 million decrease in fee income, primarily related to the fees from the American AllWaste debt refinancing recognized in Q1.

Speaker #2: Total investment income was 43.5 million for the three months ended June 30th. A 4 million decrease from Q1 primarily driven by a 2.6 million increase in interest income driven by increased average debt investments outstanding, a 0.6 million increase in dividend income from equity investments, offset by a 6.8 million decrease in fee income primarily related to the fees from the American Always Debt Refinancing recognized in Q1.

Speaker #2: Total expenses, including income tax provision, were 24.8 million for the second quarter. A 1.9 million higher than Q1, driven primarily by a 1.2 million increase in interest expense related to higher average debt balances outstanding and the refinancing of our unsecured notes due November 2026, completed in the second quarter.

Shelby Sherard: Total expenses, including income tax provision, were $24.8 million for Q2, a $1.9 million higher than Q1, driven primarily by a $1.2 million increase in interest expense related to higher average debt balances outstanding and the refinancing of our unsecured notes due November 2026, completed in Q2, which included approximately $0.4 million of duplicative interest given the timing of the redemption of the unsecured notes. A $0.3 million increase in base management fees gave an increase in assets under management, offset by a $1.2 million decrease in income incentive fees given lower fee income in Q2. A $0.4 million increase in G&A expenses, primarily related to proxy solicitation costs related to the annual shareholder meeting held in Q2, and a $1.2 million increase in capital gains fee accrual.

Speaker #2: Which included approximately 0.4 million of duplicative interest given the timing of the redemption of the unsecured notes. A 0.3 million increase in base management fees given increase in assets under management, offset by a 1.2 million decrease in income incentive fees given lower fee income in Q2.

Speaker #2: A 0.4 million increase in G&A expenses primarily related to proxy solicitation costs related to the annual shareholder meeting held in Q2, and a 1.2 million increase in capital gains fee accrual.

Speaker #2: Net investment income, or NII, for the three months ended June 30th was $0.49 per share versus $0.65 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 $0.50 per share in Q2 versus $0.62 in Q1.

Shelby Sherard: Net investment income, or NII, for the three months ended 30 June was $0.49 per share versus $0.65 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 $0.50 per share in Q2 versus $0.62 in Q1. For the three months ended 30 June, we recognized approximately $6.4 million of net realized gains on our equity investments in Medsurant Holdings, USGAS Holdings, and Worldwide Express Operations. We ended Q2 with $73.8 million of debt outstanding, comprised of $296 million of SBA debentures, $320 million of unsecured notes, $112.7 million outstanding on the line of credit, and $11.1 million of secured borrowings. Our net debt-to-equity ratio as of 30 June was 1x. Our statutory leverage, excluding exempt SBA debentures, was 0.6x.

Speaker #2: For the three months ended June 30th, we recognized approximately $6.4 million of net realized gains on our equity investments and maturant holdings, USGAS holdings, and Worldwide Express operations.

Speaker #2: We ended the quarter with 73.8 million of debt outstanding, comprised of 296 million of SBA debentures, 320 million of unsecured notes, 112.7 million outstanding on the line of credit, and 11.1 million of secured borrowings.

Speaker #2: Our net debt to equity ratio as of June 30th was one times. Our statutory leverage excluding exempt SBA debentures was 0.6 times. The weighted average interest rate on our outstanding debt was 5.8% as of quarter end versus 5.2% in Q1.

Shelby Sherard: The weighted average interest rate on our outstanding debt was 5.8% as of quarter end versus 5.2% in Q1. The increase in the cost of debt is driven by the refinancing of the 3.5% unsecured notes that were due in November with new unsecured notes with a higher interest rate of 6.625% that are due in June 2029. As a result of the refinancing, our earliest debt maturity is now in June 2029. Turning now to portfolio statistics. As of 30 June, our total investment portfolio had a fair value of $1.4 billion. Our average portfolio investment on a cost basis was $14 million, which excludes investments in 8 portfolio companies that sold their operations or are in the process of winding down. We have equity investments in approximately 82.4% of our portfolio companies with average fully diluted equity ownership of 2.1%.

Speaker #2: The increase in the cost of debt is driven by the refinancing of the 3.5% unsecured notes that were due in November, with new unsecured notes at the higher interest rate of 6.625%, which are due in June 2029.

Speaker #2: As a result of the refinancing, our earliest debt maturity is now in June 2029. Turning now to portfolio statistics, as of June 30th, our total investment portfolio had a fair value of 1.4 billion.

Speaker #2: Our average portfolio investment on a cost basis was 14 million, which excludes investments in a portfolio companies that sold their operations during the process of winding down.

Speaker #2: We have equity investments in approximately 82.4% of our portfolio companies with average fully diluted equity ownership of 2.1%. Weighted average effective yield on debt investments was 12.5% as of June 30th, in line with Q1.

Shelby Sherard: Weighted average effective yield on debt investments was 12.5% as of 30 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 non-accrual, if any. Now I'd like to briefly discuss our available liquidity. As of 30 June, our liquidity and capital resources included cash of $39.3 million, $112.3 million of availability on our line of credit, and $18.5 million of available SBA debentures, resulting in total liquidity of approximately $170.1 million. Now I'll turn the call back to Ed for concluding comments.

Speaker #2: 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.

Speaker #2: Now I'd like to briefly discuss our available liquidity. As of June 30th, our liquidity and capital resources, included cash of 39.3 million, 112.3 million of availability on our line of credit, and 18.5 million of available SBA debentures, resulting in total liquidity of approximately 170.1 million.

Speaker #2: Now I'll turn the call back to Ed for concluding comments.

Speaker #3: Thanks, Shelby. As always, I'd like to take thank our team and our board of directors at FIDUS for their dedication and hard work in our shareholders for their continued support.

Edward H. Ross: Thanks, Shelby. As always, I'd like to thank our team and our 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 Danielle for Q&A. Danielle?

Ed Ross: Thanks, Shelby. As always, I'd like to thank our team and our 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 Danielle for Q&A. Danielle?

Speaker #3: I will now turn the call over to Dan to Danielle for Q&A. Danielle?

Speaker #4: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchdown phone.

Operator 3: 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 two. The first question comes from Robert Doud from Raymond James. Please go ahead.

Speaker #4: If you are using a speakerphone, please pick up your hands up before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star two.

Speaker #4: The first question comes from Robert Dowd from Raymond James. Please go ahead.

Operator: The first question comes from Robert Doud from Raymond James. Please go ahead.

Speaker #5: good morning, Ed, Shelby. and congratulations on, on the quarter. If I can ask on, on the, the, the market outlook at I mean, as you say, you know, there's uncertainty.

Robert Dowd: Good morning, Ed, Shelby. Congratulations on the quarter. If I can ask on the market outlook, Ed, as you say, there's uncertainty. There's a lot going on globally. Your color indicated that you do think deal activity is going to pick up, is picking up right now, but overall timing, is it going to be strong in H2? Is it going to be stronger in 2027? Can you give us any more feel for. Again, you already hedged a little bit on the timing, so I'm not trying to totally pin you down, but what does it feel like for H2 of this year versus is it just going to be more 2027?

Robert Dodd: Good morning, Ed, Shelby. Congratulations on the quarter. If I can ask on the market outlook, Ed, as you say, there's uncertainty. There's a lot going on globally. Your color indicated that you do think deal activity is going to pick up, is picking up right now, but overall timing, is it going to be strong in H2? Is it going to be stronger in 2027? Can you give us any more feel for. Again, you already hedged a little bit on the timing, so I'm not trying to totally pin you down, but what does it feel like for H2 of this year versus is it just going to be more 2027?

Speaker #5: There's a lot going on globally. your, your color kind of indicated that you do think deal activity is going to pick up. Is picking up right now.

Speaker #5: But overall timing, like, I mean, is it going to be strong in the second half? Is it going to be stronger in '27?

Speaker #5: I mean, can you give us any, any more feel for kind of like what the and again, you, you, you already hedged a little bit on the timing, so I'm not trying to totally pin you down, but like, kind of what does what does it kind of feel like for the second half of this year versus is it just going to be more 27?

Edward H. Ross: It's a great question, Robert. I wish I had a crystal ball.

Ed Ross: It's a great question, Robert. I wish I had a crystal ball.

Speaker #3: that's a great question, Robert, and I wish I had a crystal ball. you know, what I what I would say and I, I did allude to it, and you caught it, is that we, we are seeing you know, a higher level of deal flow today than we were 60 days ago, for sure.

Robert Dowd: Fair enough.

Robert Dodd: Fair enough.

Edward H. Ross: What I would say, I did allude to it and you caught it, is that we are seeing a higher level of deal flow today than we were 60 days ago, for sure. I think that bodes well for Q4 in particular. Maybe Q3 for some. I think it bodes well for Q4. There clearly are uncertainties in the world today that could get in the way of some of that. That's how we're thinking about it as we sit here today. Deal flow is picking up. If I go back to Q1 and Q2, deal flow was not robust. There was some deal flow. I would say quality was also lackluster. Our hope is quality does and continues to improve. With that, hopefully, activity levels across the board will pick up a little bit.

Ed Ross: What I would say, I did allude to it and you caught it, is that we are seeing a higher level of deal flow today than we were 60 days ago, for sure. I think that bodes well for Q4 in particular. Maybe Q3 for some. I think it bodes well for Q4. There clearly are uncertainties in the world today that could get in the way of some of that. That's how we're thinking about it as we sit here today. Deal flow is picking up. If I go back to Q1 and Q2, deal flow was not robust. There was some deal flow. I would say quality was also lackluster. Our hope is quality does and continues to improve. With that, hopefully, activity levels across the board will pick up a little bit.

Speaker #3: and I think that bodes well for, Q4 in particular. you know, maybe Q3 for some. but I, I think it I think it bodes well for Q4.

Speaker #3: But there clearly are uncertainties in the world today that could get in the way of some of that. But that's how we're thinking about it as we sit here today.

Speaker #3: deal flow is picking up. I mean, if I go back to, Q1 and Q2, deal flow was not robust. there was some deal flow.

Speaker #3: I would say quality was also lackluster. So our hope is that quality does, and continues to, improve. And, with that, you know, hopefully activity levels, you know, across the board, will pick up a little bit.

Speaker #3: But I think there's also, you know, good news from our perspective, which is our portfolio continues to be quite active. It was in Q1, it was in Q2.

Edward H. Ross: I think there's also good news from our perspective, which is our portfolio continues to be quite active. It was in Q1, it was in Q2. I think there has been activity here in Q3. We've had one funding of a commitment we made in Q2, and we've also made two sizable add-on investments in July that were acquisition related. I do think things continue to move along from a portfolio investment perspective, and that's healthy, and we like that. The whole idea of incumbency is a good thing. We also expect new deal activity, probably more in Q4, to pick up some.

Ed Ross: I think there's also good news from our perspective, which is our portfolio continues to be quite active. It was in Q1, it was in Q2. I think there has been activity here in Q3. We've had one funding of a commitment we made in Q2, and we've also made two sizable add-on investments in July that were acquisition related. I do think things continue to move along from a portfolio investment perspective, and that's healthy, and we like that. The whole idea of incumbency is a good thing. We also expect new deal activity, probably more in Q4, to pick up some.

Speaker #3: you know, I think there's there has been, activity here in, in Q3, a couple, you know, we've had one, funding, of a commitment we made in Q2, and we've also made, you know, two sizable add-on investments, in July, that were acquisition related.

Speaker #3: So, you know, I do think things continue to move along from a portfolio investment perspective, and that's healthy, and we like that. The whole idea of incumbency is a is a good thing.

Speaker #3: but we also expect new deal activity, probably more in Q4 to pick up some.

Speaker #5: Got it. Thank appreciate that comment. On, on, on credit quality, obviously, I mean, Vertex after the end of the quarter, was excellent. So you're back down to, to zero, non-accruals right now.

Robert Dowd: Got it. Thanks. I appreciate that color. On credit quality, obviously, Virtex, after the end of the quarter, was exited. You're back down to zero non-accruals right now. Are you seeing anything on the horizon or anything in any particular portfolio that comes? Anything that gives you any concern over the next six to 12 months about credit quality, either in your portfolio or even more broadly, for the economy?

Robert Dodd: Got it. Thanks. I appreciate that color. On credit quality, obviously, Virtex, after the end of the quarter, was exited. You're back down to zero non-accruals right now. Are you seeing anything on the horizon or anything in any particular portfolio that comes? Anything that gives you any concern over the next six to 12 months about credit quality, either in your portfolio or even more broadly, for the economy?

Speaker #5: I mean, are you seeing anything, on the horizon or anything in any particular portfolio comes? I mean, do, do I mean, anything that, that gives you any concern over the next, you know, 6 to 12 months about credit quality?

Speaker #5: either in your portfolio or even more broadly, I mean, for the for, for the, you know, economy.

Speaker #3: Sure. No, it's, it's a great question. And, and what I would say is, you know, the, the you know, the as you know, we have some companies performing really well, some that are performing as expected.

Edward H. Ross: Sure. No, it's a great question. What I would say is, as you know, we have some companies performing really well-

Ed Ross: Sure. No, it's a great question. What I would say is, as you know, we have some companies performing really well-

Robert Dowd: Yep

Robert Dodd: Yep

Edward H. Ross: some that aren't performing as expected, and a lot that are performing as expected, if you will. I think we aren't seeing anything systemic, if you will. We're all aware of the higher oil prices. We're all aware of the lower-end consumer struggling a little bit more than maybe others. Generally speaking, we are seeing healthy growth in our portfolio. EBITDA growth levels this quarter are about 6%. We feel good about the outlook and really the strength of the portfolio as we sit here today.

Ed Ross: some that aren't performing as expected, and a lot that are performing as expected, if you will. I think we aren't seeing anything systemic, if you will. We're all aware of the higher oil prices. We're all aware of the lower-end consumer struggling a little bit more than maybe others. Generally speaking, we are seeing healthy growth in our portfolio. EBITDA growth levels this quarter are about 6%. We feel good about the outlook and really the strength of the portfolio as we sit here today.

Speaker #3: and a lot that are performing kind of as expected, if you will. so, you know, I, I think, we aren't seeing anything you know, systemic, if you will.

Speaker #3: You know, we're all aware of the higher oil prices. we're all aware of, you know, the lower end consumer struggling a little bit more than maybe others.

Speaker #3: But, generally speaking, we are seeing healthy growth in our portfolio. You know, EBITDA growth levels this quarter are about 6%, and so we feel good about, you know, the outlook and really the strength of the portfolio as we sit here today.

Speaker #5: Got it. Thank you. If I can one, one more. You've talked about it. I mean, it's still topical software, and you, you do have, a, a good chunk of software, though.

Robert Dowd: Got it. Thank you. If I can have one more, and you've talked about it. It's still topical, software, and you do have a good chunk of software, though it tends to be specialized software. Have you seen any impacts on any of your software book from the AI discussions or pressures or anything like that, or is it just business as usual?

Robert Dodd: Got it. Thank you. If I can have one more, and you've talked about it. It's still topical, software, and you do have a good chunk of software, though it tends to be specialized software. Have you seen any impacts on any of your software book from the AI discussions or pressures or anything like that, or is it just business as usual?

Speaker #5: i-i-it tends to be specialized software. anything you're, you're have you seen any impacts on any of your software book from, you know, the, the, the AI discussions or, or pressures or, or anything like that?

Speaker #5: Or is it just business as usual?

Speaker #3: I think it's more business as usual. I think our, you know, software and tech-enabled services portfolio continues to perform well. You know, our, debt portfolio with regard to our software and tech-enabled services is marked at 99% of cost as we sit here today.

Edward H. Ross: I think it's more business as usual. I think our software and tech-enabled services portfolio continues to perform well. Our debt portfolio with regard to our software and tech-enabled services is marked at 99% of cost as we sit here today. We think we've invested in a very resilient group of companies. As is typical of any 100 company portfolio or with regard to software, a meaningful portfolio. From time to time, we have a few businesses dealing with company specific issues. Really as it pertains to AI risk, we are not seeing any widespread performance issues showing up in the portfolio. What I would say is that most borrowers are investing in and adopting AI capabilities to reduce costs and also just improve their products. We also believe many of them are well-positioned to capitalized on their advancing AI capabilities and software capabilities.

Ed Ross: I think it's more business as usual. I think our software and tech-enabled services portfolio continues to perform well. Our debt portfolio with regard to our software and tech-enabled services is marked at 99% of cost as we sit here today. We think we've invested in a very resilient group of companies. As is typical of any 100 company portfolio or with regard to software, a meaningful portfolio. From time to time, we have a few businesses dealing with company specific issues. Really as it pertains to AI risk, we are not seeing any widespread performance issues showing up in the portfolio. What I would say is that most borrowers are investing in and adopting AI capabilities to reduce costs and also just improve their products. We also believe many of them are well-positioned to capitalized on their advancing AI capabilities and software capabilities.

Speaker #3: you know, we think we've invested in a, a very, you know, resilient group of companies. But as is typical of, any, you know, 100 company portfolio or with regard to software, a meaningful portfolio, you know, from time to time, we have a few businesses dealing with company-specific issues.

Speaker #3: But really, as it pertains to AI risk, you know, we are not seeing any widespread performance issues showing up in the portfolio. What I would say is that most borrowers are investing in and adopting AI capabilities to reduce costs and also just improve their products.

Speaker #3: and, you know, we also believe many of them are well positioned to capitalize on their, you know, advancing AI capabilities and software capabilities. So, you know, we've, we are pleased with where the, the portfolio is and, and, you know, expect it to continue to perform well as we sit here today.

Edward H. Ross: We are pleased with where the portfolio is and expect it to continue to perform well as we sit here today.

Ed Ross: We are pleased with where the portfolio is and expect it to continue to perform well as we sit here today.

Speaker #5: Got it. Thank you.

Robert Dowd: Got it. Thank you.

Robert Dodd: Got it. Thank you.

Speaker #3: Thank you. Good talking to you, Robert.

Edward H. Ross: Thank you. Good talking to you, Robert.

Ed Ross: Thank you. Good talking to you, Robert.

Speaker #1: As a reminder, if you have a question, please press star one. The next question comes from Christopher Nolan from Lattenberg Thollen. Please go ahead.

Operator 3: As a reminder, if you have a question, please press star one. The next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.

Operator: The next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead.

Speaker #5: Hi. Thanks for taking my questions. Follow-up on Robert's question in terms of, the pickup and deal flow. Ed, what does this all mean for terms and conditions?

Christopher Nolan: Hi. Thanks for taking my questions. Follow up on Robert's question in terms of the pickup in deal flow. Ed, what does this all mean for terms and conditions? I guess in terms of the deals that you're seeing, also is the pickup in deal flow private equity sponsors just trying to find an exit after such a lull?

Speaker #5: I mean, and I guess there's a fo you know, in terms of the deals that you're seeing, and also, is the pickup and deal flow private equity sponsors just trying to find an exit after such a lull?

Edward H. Ross: No. I think there's pent-up demand for exits that will help drive. I think that's clearly in the private equity world, but also independent companies that maybe were thinking about it's time for a transaction to take place. There's just a fair bit of pent-up demand out there, and I think as uncertainties abate, we do expect more activity. I think from a terms and conditions perspective, one of the things we like about the lower middle market is we have maintenance covenants. Our leverage levels are lower. If you were to look at our weighted average leverage of our cash flow portfolio, it's 4.1 times. It's materially lower than the broader market. Pricing's better. You can see that reflected in our spreads. We like the market that we're in, and we expect those general terms to remain stable.

Ed Ross: No. I think there's pent-up demand for exits that will help drive. I think that's clearly in the private equity world, but also independent companies that maybe were thinking about it's time for a transaction to take place. There's just a fair bit of pent-up demand out there, and I think as uncertainties abate, we do expect more activity. I think from a terms and conditions perspective, one of the things we like about the lower middle market is we have maintenance covenants. Our leverage levels are lower. If you were to look at our weighted average leverage of our cash flow portfolio, it's 4.1 times. It's materially lower than the broader market. Pricing's better. You can see that reflected in our spreads. We like the market that we're in, and we expect those general terms to remain stable.

Speaker #3: no. I mean, I yeah, I think there's been up demand for exits, and then that will help drive, but I think that's, you know, clearly in the private equity world, but also independent companies that maybe were thinking about it's time you know, for a, a you know, a transaction to take place and so.

Speaker #3: we just there's just a fair bit of pent-up demand out there, and, you know, I think as uncertainty's abate, we do, we do expect more, more activity.

Speaker #3: I think from a terms and conditions perspective, you know, one of the things we like about the lower middle market is our, you know, we have maintenance covenants.

Speaker #3: Our leverage levels are lower. If you were to look at our weighted average leverage of our cash flow portfolio, it's 4.1x, so it's materially lower than the broader market.

Speaker #3: Pricing's better. You can see that reflected in our spreads. And so, we like the market that we're in, and we expect those general terms to remain stable.

Speaker #3: and, you know, in terms of covenants and pricing and, and whatnot, and structures. The other one I would mention is just loan-to-value. Our, our portfolio today has a loan-to-value or weighted average loan-to-value of 41%.

Edward H. Ross: In terms of covenants and pricing and whatnot, and structures. The other one I would mention is just loan to value. Our portfolio today has a loan to value, a weighted average loan to value of 41%. We target almost every deal having 50% loan to value or less. That is, I think, been helpful to us, but also gives us a fair bit of cushion when things don't go exactly right to weather storms. We expect those opportunities to continue as well.

Ed Ross: In terms of covenants and pricing and whatnot, and structures. The other one I would mention is just loan to value. Our portfolio today has a loan to value, a weighted average loan to value of 41%. We target almost every deal having 50% loan to value or less. That is, I think, been helpful to us, but also gives us a fair bit of cushion when things don't go exactly right to weather storms. We expect those opportunities to continue as well.

Speaker #3: We target almost every deal having 50% loan-to-value or less, and that has been helpful to us. But it also gives us a fair bit of cushion when things don't go exactly right, to weather storms.

Speaker #3: And so, you know, we expect those opportunities to continue as well.

Speaker #5: Gotcha. And I guess for Shelby, as a follow-up, on Vertex Enterprises—where the exit in the third quarter—it appears that you exited pretty close to the mark.

Operator 2: Got you. I guess for Shelby as a follow-up. On Virtex Enterprises with the exit in Q3, it appears that you exit pretty close to the mark. Am I missing something or is that accurate?

Christopher Nolan: Got you. I guess for Shelby as a follow-up. On Virtex Enterprises with the exit in Q3, it appears that you exit pretty close to the mark. Am I missing something or is that accurate?

Speaker #5: Am I missing something, or is that accurate?

Shelby Sherard: That's correct. No, that's correct.

Speaker #2: That's correct. No, that's correct.

Christopher Nolan: Okay. It should be pretty neutral on that. Okay, great. Thank you very much. That's all my questions.

Speaker #5: Okay. So it should be pretty neutral on that. Okay. Great. Thank you very much for taking my questions.

Speaker #2: Great.

Speaker #3: Thank you, Chris. Good talking to you.

Shelby Sherard: Correct.

Edward H. Ross: Thank you, Chris. Good talking to you.

Ed Ross: Thank you, Chris. Good talking to you.

Speaker #5: Likewise.

Christopher Nolan: Likewise.

Speaker #1: The next question comes from Paul Johnson from KBW. Please go ahead.

Operator 3: The next question comes from Paul Johnson from KBW. Please go ahead.

Operator: The next question comes from Paul Johnson from KBW. Please go ahead.

Speaker #6: Yeah, good morning. Thanks for taking my questions. And congrats on a stable quarter. I'm just wondering, maybe more broadly, in terms of how you're looking at credit.

Paul Johnson: Yeah, good morning. Thanks for taking my questions, and congrats on a stable quarter. I'm just wondering maybe more broadly, in terms of how you're looking at credit. I think it seems fairly obvious things are performing quite well, and you have a non-accrual coming off here next quarter. In terms of the internal watch list, if I can call it that, maybe how has that changed here this quarter? If that's gotten any bigger or going the other way, if that continues to get smaller?

Speaker #6: I think it seems fairly obvious things are performing quite well, and you have a non-accrual coming, coming off your next quarter. but like in terms of, you know, the internal, watch list, if I can call it that, you know, maybe how has that changed here this quarter, if that's gotten any bigger or, going the other way if, if that continues to, to get smaller?

Speaker #3: Yeah, it's a great question, Paul. We actually did see an increase this quarter. We had one addition to that list, and that would be in what I call the grade three-plus names.

Edward H. Ross: Yeah, it's a great question, Paul. It actually did increase this quarter. We had one addition to that list, and that would be in what I call the grade 3 plus names. It's idiosyncratic type issue for sure. I think the good news from our perspective is generally speaking, we're seeing growth, and we're seeing a pretty healthy portfolio. We always have some grade 3s, for lack of a better word, and we're working through those. We do see several names that we think will actually exit, be sold, and we'll get our money back in the next six to nine months. Hopefully, that does happen, that's what is being worked on right now. With a little luck, actually that grade 3 portfolio could improve. Overall, we're seeing generally growth and a healthy portfolio.

Ed Ross: Yeah, it's a great question, Paul. It actually did increase this quarter. We had one addition to that list, and that would be in what I call the grade 3 plus names. It's idiosyncratic type issue for sure. I think the good news from our perspective is generally speaking, we're seeing growth, and we're seeing a pretty healthy portfolio. We always have some grade 3s, for lack of a better word, and we're working through those. We do see several names that we think will actually exit, be sold, and we'll get our money back in the next six to nine months. Hopefully, that does happen, that's what is being worked on right now. With a little luck, actually that grade 3 portfolio could improve. Overall, we're seeing generally growth and a healthy portfolio.

Speaker #3: but, you know, it's, it's, you know, idiosyncratic type issue. for sure. And, but th-th I think the, the good news from our perspective is, is generally speaking, we're seeing growth.

Speaker #3: and we're seeing a pretty healthy portfolio. We always have some grade threes, for lack of a better word. and, and we're working through those.

Speaker #3: We do see, you know, several names that we think will actually exit, you know, be sold and, will get our money back in the next, six to nine months.

Speaker #3: Hopefully, that does happen, but that's what is being worked on right now. And so, you know, with a little luck, those, actually, that grade three portfolio could, improve, but, overall, we're, we're seeing, you know, generally, growth and, and a and a healthy portfolio.

Paul Johnson: Got it. Appreciate that. It's been a while, I think, since we've talked about, I guess, junior capital opportunities, and you guys have made more of the shift into the unitranche structure. What is, I guess, the relative value if those deal opportunities exist today? If there are any in terms of second lien subordinated type of deals that you could potentially be reviewing right now, or if you're still sticking to the knitting in terms of more of the senior tranche deals.

Speaker #6: I appreciate that. and then, you know, it's been a while. I think since we've, you know, talked about, I guess, junior capital opportunities, and you guys have made more of the shift into the unit tranche.

Speaker #6: structure, but, you know, what is, I guess, like the relative value if it you know, if, if those deal opportunities exist today, you know, if they're if there are any, in terms of, you know, second liens, subordinated type of, of deals that you could potentially be reviewing right now or if you're still kind of sticking to the, to the knitting in terms of more of the, the senior, unit tranch deals?

Speaker #3: Yeah, it's a it's a great question. you know, the se what you know, what is transpired for us and really the industry over the last 5 to 10 years is really moved towards more of a for-first lien solution.

Edward H. Ross: Yeah, it's a great question. What has transpired for us and really the industry over the last five to 10 years is really moved towards more of a first lien solution. There are obviously junior capital opportunities that come up, and we do look at them. What we're looking for regard to junior capital opportunities are really superlative businesses, attractive loan to values, obviously attractive pricing. The real piece of the puzzle is where I started, which is, the market is very first lien oriented. That's driving a large majority of the originations for us. We do see second lien junior capital opportunities. We will continue to look at those. Obviously the bar is extremely high from our perspective there, always has been.

Ed Ross: Yeah, it's a great question. What has transpired for us and really the industry over the last five to 10 years is really moved towards more of a first lien solution. There are obviously junior capital opportunities that come up, and we do look at them. What we're looking for regard to junior capital opportunities are really superlative businesses, attractive loan to values, obviously attractive pricing. The real piece of the puzzle is where I started, which is, the market is very first lien oriented. That's driving a large majority of the originations for us. We do see second lien junior capital opportunities. We will continue to look at those. Obviously the bar is extremely high from our perspective there, always has been.

Speaker #3: There are, obviously, junior capital opportunities that come up, and we do look at them. but th it's kind what we're looking for regard to junior capital opportunities are really superlative businesses.

Speaker #3: you know, attractive loan-to-values. Obviously, attractive pricing. and but the, the, the real piece of the puzzle is where I started, which is, you know, there's just the market is very first lien oriented.

Speaker #3: And so, that's driving a large majority of the originations for us. But we do see second lien, junior capital opportunities. We will continue to look at those and, obviously, the bar is extremely high from our perspective there.

Speaker #3: always has been, but it, you know, we expect you know, our first lien portfolio or our debt portfolio is now 88% first lien. And, you know, we, we think that's probably where it stays or if not, you know, actually increases from there a little bit over time.

Edward H. Ross: Our first lien portfolio, our debt portfolio is now 88% first lien. We think that's probably where it stays or if not, actually increases from there a little bit over time.

Ed Ross: Our first lien portfolio, our debt portfolio is now 88% first lien. We think that's probably where it stays or if not, actually increases from there a little bit over time.

Speaker #6: Appreciate it. thank you very much for that. And I guess the last question would be, given you are, one of the few BDCs in the space trading above NAV at this point, gross leverage is as high as it's probably been in a little while on a statutory-based.

Paul Johnson: Appreciate it. Thank you very much for that. I guess the last question would be, given you are one of the few BDCs in the space trading above NAV at this point, gross leverage is the highest it's probably been in a little while. On a statutory base, it's obviously much lower. How are you balancing the idea of potential equity capital raises here, with a potentially improving pipeline, if we should expect you to potentially be a little bit more active with ATM issuance here in the H2?

Speaker #6: It's obviously much lower, but, how are you kind of balancing the, the idea of potential equity capital raises here, with a potentially improving pipeline if we should expect you to potentially be a little bit more active with, ATM issuance here in the second half?

Speaker #3: Sure. As, you know, as we, it's a great question. As we move forward and we see, the opportunity for growth, we are we also see repayments, you know, which have been relatively light this quarter.

Edward H. Ross: Sure. It's a great question. As we move forward and we see the opportunity for growth, we also see repayments, which have been relatively light this quarter or this year so far. We expect repayments to pick up a little bit here in the H2 of the year as well. Having said that, if we are growing like we anticipate we're going to, then we would utilize the ATM program as appropriate, for sure, as it makes sense. Our target leverage is more, range is 0.9 to 1.1, but really the target being in the middle there at 1 to 1. It would make sense to raise capital if it looks appropriate.

Ed Ross: Sure. It's a great question. As we move forward and we see the opportunity for growth, we also see repayments, which have been relatively light this quarter or this year so far. We expect repayments to pick up a little bit here in the H2 of the year as well. Having said that, if we are growing like we anticipate we're going to, then we would utilize the ATM program as appropriate, for sure, as it makes sense. Our target leverage is more, range is 0.9 to 1.1, but really the target being in the middle there at 1 to 1. It would make sense to raise capital if it looks appropriate.

Speaker #3: Or this, this year so far. we expect, repayments to pick up a little bit here in the second half of the year as well.

Speaker #3: But having said that, if we are, you know, growing like we anticipate we're going to, then, you know, we would utilize the ATM program as appropriate.

Speaker #3: for sure. Is it you know, it makes sense. Our target leverage is more, you know, a range is 0.9 to 1.1, but really, you know, the, the target being in the middle there at 1 to 1.

Speaker #3: And so, it, it would make sense to raise capital if, if it if it if it looks a-appropriate.

Speaker #6: I appreciate it. That's all from me. Thank you very much.

Paul Johnson: I appreciate it. That's all for me. Thank you very much.

Speaker #3: Yeah. Thank you, Paul. Good talking to you.

Edward H. Ross: Yeah. Thank you, Paul. Good talking to you.

Ed Ross: Yeah. Thank you, Paul. Good talking to you.

Speaker #1: Again, if you have a question, please press star one. This concludes our question and answer session. I would like to turn the conference back over to Ed Ross for closing remarks.

Operator 3: If you have a question, please press star one. This concludes our question and answer session. I would like to turn the conference back over to Ed Ross for closing remarks.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Ed Ross for closing remarks.

Speaker #3: Thank you, Danielle. And thank you, everyone, for joining us this morning. We look forward to speaking with you on our third-quarter call in early November.

Edward H. Ross: Thank you, Danielle. Thank you everyone for joining us this morning. We look forward to speaking with you on our Q3 call in early November. Have a great day and a great weekend.

Ed Ross: Thank you, Danielle. Thank you everyone for joining us this morning. We look forward to speaking with you on our Q3 call in early November. Have a great day and a great weekend.

Speaker #3: Have a great day and a great weekend.

Operator 3: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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