FDUS - Earnings call transcript Q1 2018 | Fidus Investment Corporation

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Operator

Good day, ladies and gentlemen and welcome to Fidus Investment Corporation First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. John Heilshorn from LHA. begin. may you Sir,

John Heilshorn

on the quarterly Fidus would and Relations Officer. using Fidus the today's everyone. of XXXX provided Investment me press results. by that Sherard, afternoon, the Ed available call. Jimmy available Executive yesterday the and copy being joining and release release Company's of press Investment website like I Officer; A earnings you Corporation will is recorded. us the With Shelby ID Ross, are morning everyone for Corporation's Investor Chief in this details earnings of Corporation's of fdus.com. good press you, Chairman telephone Company's financial remind Thank Chief the Financial today's numbers page call morning, be our for conference conference Investment Fidus release. call Thank replay is A with first a quarter at to and issued

replay release. regarding goals, also potential, certain included information disclosure the conference be and cash regarding in customary results contain on Investment operating of Harbor today call call following In addition, website call. the strategies, will Fidus will fdus.com attention to available forward-looking your earnings Relations to Corporation. statements an forward-looking including future statements, The the beliefs, would the of flows I page the this at conclusion Safe Company's of like webcast the archived Investor

webcast of no materially results statements accurate Actual today, differ future are the as these of longer based believes not and of statements may telephonic may a of May update Time-sensitive Company's turn to including, factors morning. to any at over management Although Securities with the the these as undertakes estimates, be revise to information result the or Ed time forward-looking performance. statements. I'd Exchange are XXXX, risks, replay. reasonable upon filings and the assumptions good like X, any now Ross. projections uncertainties that in With no these but Commission. not obligation Fidus or Ed, of set and to forth factors limited other guarantees call

Ed Ross

our good will good our After realized liquidity to highlighting quarter, to Good morning, and and XXXX by for and to about activity Shelby gains call. our thank income Welcome $X.XX our the call to offer I John, of quarter attributable or by then $X.X we earnings with adjusted start any losses and first results capital results as net views unrealized will year-over-year you, comments our activity. our about share. our our first investment which quarter first portfolio net for income XXXX performance go start position. will followed the morning, first the investment financial detail deal X.X% into about excluding investment had and investment everyone. to X.X% million increasing more incentive per call fee We open define quarter a that, gains questions. we and

capital first equity first related In preservation debt with to portfolio realized long-term in diversified Our on quantity, equity include $X.X investments. net to quarter, of quarter our approach prioritizing the affirming over and well view. investments and perform continued million to we gains the focusing quality our investing a

in XX, license. per or distributions a or for $X.XX week income third XX, estimated $X.XX million from share; was SBA share announce pleased Fidus grew per a excess and March asset per $XXX.X our I'm respect level. to XXXX of or per have value with we green application a submitted income letter received from earlier taxable SBIC our asset paid XXXX of March March regular was quarterly net value our the share. As XXXX NAV that share. X.X% or On this XX, of dividend And year-end spillover million light $XX.X $XX.XX to at

For the we million dividend was invested channeled to of payable Directors in five $XX.X excess investments. have for and each of XXXX, industries June debt and per $XX.X debt including $X.XX company growth. strong criteria which our million businesses portfolio XXXX, In meet record know first and is these amount, stakeholders generate quarter a market Of equity XX, quarterly companies second positions, this to on of service flow has operating cash declared free securities. new we that In of quarter share long-term XXXX outlooks, on regular Board of XXXX. the positive investment well defensible case, yet June

markets. and million doing portfolio security industrial additional business solutions. second equity million AVC in lien million up perimeter fasteners $XX.X $X.X in debt a the LLC, Holdings, of the Let new a company recovery control to as personal second of end supplier as and equity subordinated second market. general of to value-added and common and of Tranzonic investments. Solutions, B&B leading made recap industry. Roadway hospitality of in me debt, services debt We common products point-of-sale in Security $X.X to maintenance, common CRS provider our lien the and equity audit commitment common and the and debt the debt away-from-home for in million CRS care equity healthcare LLC provider of Texas, second solutions of a hardware automotive business in marketplace. Auveco, traffic And lien autobody to each Companies, comprehensive leading manufacturer a spend safety a and preferred lien and doing equity invested of common disposable Solutions of equity aftermarket a equity $XX.X technology-enabled briefly of $XX provider of visibility LLC Investors, million and and common $X.X LLC, of to SpendMend million cleaning,

second an million Vanguard million LLC in received support had also second $X.X an repayments of in of debt first realizations perspective, a payment acquisition. of invested subordinated $X.X $XX.X we addition, prepayment including a quarter. on Biologics. in United exited debt active an gain in debt penalty in in Group million. equity Technology $X.X Services equity Proceeds In $X.X and of support realized our Thermoforming totaled we We packaging lien acquisition approximately in LLC including we our investment approximately Logistics million in of of a Comprehensive of net debt our investment Dealer full and million. investment common worldwide we estimated From full And received and payment lien in taxes exited and on

on operations. second levels we active subordinated and April XXXX The of full and of XXXX to debt. XX, provider equity million, our their in have capital and common plus million As end reported April equity subsequent underline products of Power March in fairly payment quality, in breakdown investment of Inc., was used debt stable with Components, investments UBEO, equity and million XXXX, a equal services. exited our the cost. companies common and $XXX.X electric [ph] XX XX% from from a remained realize preferred X, of between printer, that equity XXX North received investments. in office Inc. and investments XXXX, $XX The supplier release, and $XX of equity million and three the Grid sales power to portfolio related April on lien portfolio in high On LLC, the approximately debt in quarter a and Allied the we first related value dent equity On invested fair quarter copier, companies debt XX, approximately income to in debt, quarter portfolio press American equipment investments We we in $X.X and current equity XX% of We grid. on in subordinated debt opportunity sold mission invested premier with ended XXX% continued critical with basis XX, providing recurring debt gains high us our Group,

the track remain our basis portfolio first with in and to we performance, on us several terms periods. performance help measures the portfolio. quarterly and overall quarter, of these metrics investment line of stability quality strong prior In monitor quality a In

First, an our X a we a on based average outperformed, rating is portfolios, methodology, of rating is the X internal of expected track loss. Under rating weighted and system. our investment

investment average the was As prior for rating basis with X portfolio line of on the in periods. fair a March XX, value weighted

performance of companies our EBITDA. measured Another total investments of to debt Fidus's metric the by to track portfolio ratio debt portfolio is the net credit we combined total which is

X.Xx quarter For X.Xx same ratio first this was to the quarter for last compared the year.

Two as companies goals. was cushions preservation and [ph] their non-accrual first support The meet portfolio reflects our this Smiles to X.Xx compared Month us. In Restaurant to quarter, remain year. third level Six same increased portfolio of measure cash our for expense of and our a interest it's metric total cushion of Co, we to investments, Inc. fluid to capital income these metrics The value soundness is LLC X.Xx both Finance the of company Month status which With and our an quarter obligations ratio combined performance, substantially. EBITDA of our maintaining in track Holdings on situation and risk enterprise significant of March our last and the debt philosophy of borrower's service is aggregate to the XX, as a Smiles, events total of result companies has indicative Six to XXXX. respect extremely have the

of active zero As to down both of Smiles discussions quarter. a in result, Six we with We value Month remain companies. the wrote investment this Holdings these

stable, a our radic in level activity reasonably Joining at month. deal pipeline and we more target seeing deals remains conditions over past M&A quality the are of the the in business while been has market; the that flow healthy continues

course don't economy expansion but steady relatively our rates or The at our and and rate, for proceeds. Notwithstanding and an today, redeploying XXXX currently have flow. but a issues energy the been we are we contraction any first successful repayments in slow grow cause quarter interest was always in would overall uptick to in as business, that us in dramatic from realizations unchanged deal a a of see continues our of prices, exit wildcard

and leveraging long-term. we investing capital approach of attractive proven we well will adjusted businesses to as knowledge hearing highly By investment well believe our remained our strategy on grow relative focus our returns. over selective our the preserving well, deliberate relationships positioned always goals and risk diversify cautious know industries that portfolio, to generating our further be and to and will, do, investment we to with and in perform We we

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

Shelby Sherard

Interest comparative decreased March QX, morning assets from and quarter in months pick million new QX logistics. our Thank was Interest $XX.X for investment $X.X XXXX, Total you, accrued as Dividend income February, $X.X capital were the due SBA prior XX, in was $X.X million. SBA QX. the an I gains $X.X XXXX. QX and repaid includes $X.X will quarter fees financing commitment Fidus' public notes incremental $X.X as by XXXX. $X.X income review related expense expense a and on and the increased by rate accrued amortization debt debentures amortization well late $X.X in debt that the deferred and capital $X.X credit, in interest providing in note, position. debt investments of under results of fees majority well higher and income the cost. increased $XX.X our versus as quarter, gains million the Fee million increase ended increase Base on SBA million. be and total income to higher income expense three Please offering, repayment a debt took increase of incentive more paid interest approximately first comprehensive due I approximately interest Total million place a our for interest related million to quarter. primarily was expense our unused will to QX debentures, increase as from by the by the G&A million in average of increased everyone. in liquidity $X.X close increased non-cash million modest with million late investment by detail $X.X incentive on comments the increase million expenses good prior management management versus fees and acceleration our fees. increased to and timing quarter in commentary prepayment an related QX. any first Ed tax roughly were of $X.X to by public in on and incentive investment of million, and as line million provision warranties related expenses, the a weighted outstanding, Interest the income of than including to a the repaid million

As year-end. weighted XX, of the on average X.X% X.X% at debt versus rate March our XXXX, interest outstanding was

million NII in $XX share Adjusted had completed QX. income Net debt investment versus notes capital that public income is issued million we NII or ended also earnings gains NII including gains investment $X.XX to was March and is to on can QX outstanding in XX, share attributable any the debt three first share per A March per of the of be Relations or As was reversal page afternoon, realized in press per XXXX. losses or adjusted excluding website. of incentive in defined to our versus $XXX.X $X.XX offering was and our release the as of XXXX quarter. reconciliation $X.X Adjusted posted fee million in per for of share QX net $X.XX XX, yesterday unrealized investments. expense on Investor our found XXXX, NII months NII X.XX% $X.XX and

net XXXX, $X.X investment in of by equity estimated primarily expenses held taxable $X.X on ended March worldwide offset related in subsidiary. three million from realized of packaging realized to the equity For million gains, the gain million Fidus exit had investments to $X.X gains related realized our months tax XX, on

Our was dividend regular share $XX.XX in share, March. net value $X.XX reflects XXXX XX, payment the asset of which per per March at

had XX; XX% Turning X% on XX% now to oriented lien subordinated investment cost as equity of of consistent million approximately with fair first securities. was debt debt, statistics basis value second of portfolio our $XXX.X comprised XX% debt, portfolio our our lien a portfolio and total debt, strategy, investment March

investments the in $X.X company sold first end companies of cost are portfolio in down. which portfolio winding operations three their investment million a and quarter, that average includes basis Our the process the of on at was

We program debt fees, original XX,XXX weighted is effective discounts effective loan investments of purchase the approximately debt investments for using at average share of average an at Under of The shares Fidus of portfolio ownership and an of accretion investments costs, yield in XX.X% XX.X% we excluding equity March X.X%. yield $XXX,XXX any. including $XX.XX average have our issue was total our on approximately equity repurchase approximately rate if the in diluted investments companies origination but QX. XX. with interest non-accrual, price average Weighted purchased as fully on computed of or

to briefly like would available I our Now, discuss liquidity.

in million. our liquidity and of liquidity total on As credit resources of capital million, of included XX, March and our availability million $XX $XX.X cash of $XX.X line of resulting

of of As prepaid X.X%. February. call, an year-end of earnings debentures debentures at scheduled the discussed of SBA date in maturity we had These end our average million $XX.X rate in advance interest

of ratio notes of as outstanding for million have million XXXX. In FMC X.XX FMCX. As a million approximately we SBIC result, maturity million $XXX under total million $XXX.X totaling to SBA XXXX of from in and our March second we In currently have $XX and FMCX QX, XXXX. of $XX.X SBA million under of dates debentures as X.XX remaining we versus XX borrowed March debentures fund $XXX.X debentures with of public at aggregate, September ranging debt of year-end $XX debt-to-equity outstanding a of

portfolio account and have and mentioned, end, Taking received of our earlier effective per Ed currently has we with liquidity was call of includes subsequent registration final incremental will roughly registration credit. related $XX which our expenses, incur back expense prior availability share QX subsequent million to new the line exploration $XXX,XXX existing we events, non-cash of on filed we turn the expired, million of registration we new this expense. to declared I $XX a One repayments. our Ed; statement conjunction In statement unamortized in approximately into that as $XX $X.XX of to statement, week. before two of comment companies quarter QX million regarding in invested As cash of total

to Now concluding turn for call comments. back I Ed? Ed the will

Ed Ross

Thanks, Shelby.

our I'd As continued will at team for always, of to their back hard and our Board call and for to like Directors work the dedication and thank support. Jimmy? Fidus turn the Jimmy their now for over Q&A. I shareholders

Operator

of Raymond comes question Robert Instructions] from Thank first Our you. Dodd [Operator James.

line Your open. now is

Robert Dodd

I'll allowed vehicle. never guys even ask SBIC one-to-one, you when about, have to been obviously double been over all-in First for the leverage, question you've prospect

change or either approval asset board So any coverage you I guys? to shareholder ask is cap ratio for to there intent mean, the

Ed Ross

in so just the -- reform opportunity positive we at for this well is Again, -- a it's taken this to to a think think so need we and think well think I think there approach watch investment if kind but don't as think thus utilize whether to good time. much our is about double-edged sword sit we is of guess, point perform see at a wait, for I talking be offering a [indiscernible]. it's here increase positive. the for I need us a the strategy; do shareholders industry I margin we we But us and today, positive, our very as leverage the know anything, for leverage point a given don't in we're we and can

Robert Dodd

Another -- and out the if you I for little just a how that quarter expected? cap, bit you was than I cautious, that, one there sounded on just SBICX you moving license $XXX can a point you've light tied million to except led heard think as ticked things bit is so why? one anything to in already. a your And -- potential gone are SBIC green more I more correct wrong, the long can while license the got now tap -- last third mean, I'm previous up that that upto it process I to then takes but faster limit obviously, per think the changed; which me that has $XXX million little you just right

Ed Ross

good the perspective, a license SBIC thing. very our from think I obviously is

a would have the of $X here be to if my can that just debentures. $XXX clear doesn't the moving then are point, think that this think of application, expect think but don't at timing utilizing standpoint, we with debentures hopefully XXXX sometime. perspective, get bit mean that's that put on the I been From things million license. really is up test I the XXXX. million, million week slowly; That we in little we do I regard planning utilize license moment that clearly and go in think consider SBA expectation we a picked the at I I to we think $XXX will to million this -- I to at And things in but have that $XXX think

So -- hear and can is our we it's take to the accomplish year by hope so license, and hopefully time. end receipt something full going of some

Robert Dodd

is dividend Another question color in just terms the in row. a was any $XXX,XXX quarter, one Obviously, I should anything about capital the of -- this quality mean, another mean, getting into on reversal you're like the effects. it read quarter of on looks companies as is the from that non-control in that there debt; of two I mean, well; I dividend repayments? there what character versus we portfolio information last

Shelby Sherard

had until has didn't a do the of quarter and do XXXX dividend. have that the on but to one-time re-record to don't We XXXX. information income estimates character has that until of that to and subsequent we the based true-up to income period, No, related of do recognized with with that KXs so associated dividend we dividend KX the actually receive receive first kind in that with

Robert Dodd

a it never -- mean of place I minor had for the at the -- collection, kind I before that's guess, last reversals think couple don't it's I quarters. of dividend

you are changed question etcetera, has what I I the overtime, reliable information estimates depend character, that depends has quality less is, the the -- those getting the your guess but question. is mean point on the etcetera told to on company So if

Shelby Sherard

it think No, don't has. I

kind by you're versus income one seeing out focusing a affiliate bit now what opposed control to think out. in because would detailed it line I is is dividend versus of information netted non-controls, more item; as quarters prefer a prior so little probably things broken of

Robert Dodd

a income you today [indiscernible]. decent your and for already can spillover But us do realized obviously that on had of because me; is estimate some you've additional give had front? a stand one where Last you current you've what gains

Shelby Sherard

share. per $X.XX At

Operator

next And with comes Chris from question Oppenheimer. our Kotowski

now Your open. is line

Chris Kotowski

event the I can't know to companies energy normally $XX.X -- and [ph] let move just and investments mark million, million from I $XX.X you you big noticed see leave and what equity -- $X individual I on just much about triggering was million can is is it well, that that say. cost there say investment went like seems a I an or their me but wondering and there

Ed Ross

business perspective some on we cycle, is this of this retained restructuring, know, well. the in and our very holder through company a the went just meaningful frankly, obviously extremely is valuation equity Obviously, a was quite we from debt its are we performing and performance well. based. went both performing You performance, through The based that a business and now, is operationally financial very

So that's the driver.

Chris Kotowski

having to investment I have this quite do guess the it desire, you want equity curious remember And the an you don't -- willingness, I'm to ever over phrase longer exits? any I you what's however hold capacity; this term? control your for big,

Ed Ross

you've debt sure something substantial monetize about a $XXX over equity seen, same of or basis portfolio we we're is rotate we time value yielding I'm they with obviously will and are investments now them is million the investments is the which investments. or $XXX to As more would million fair if you outcome some like at it pleased these that well are. and But on and where our of into performing

XX give not I to to would more mature control and you over that's point to control to our some be do drive helpful them with that have the only over try months definitely will, company; and to can don't to the really some the are and -- our is that of opinions we can stake to so don't a goals best call Fidus, it it. we investments say Hopefully control hope will one good is if you But -- equity of what obviously getting to next one these but we do our exits. controlling thing we we so these you exits. monetize a of we these for influence but regard a we XX really, extent so have would is, and of have if So over have can

Chris Kotowski

the you is gains to offset obviously still realized there zero. be or Month and noticed I to Six Smiles, any And that that and Is to marked loss done? crystallized

Ed Ross

so other extremely loss our last events That our been some on -- big We're over plan provide point, performance, need that the and at you as do I clarity that be hope at negatives the been is here I crystallized and next keep to I with not risk hard call. has call this as this if point. company. It confidential in in to will. I gone reflected to investments obviously profile a as active working definition that discussions not but recently this It's right but commented much able to that is evaluation fluid, both, to situation regard on is and have this it's to write-down think last company XX months well according the

Operator

And our Lynch next KBW. Ryan comes question with from

open. now is line Your

Ryan Lynch

leverage I your to debt the from guys just always are this yes, of I facility. on guys -- on think you up, facility with debt increment guys growth kind much to looking investments we balance you sheet floating cash SBA. reason or on wondering and just there balance the know, you it's your down, that probably would that's one full anymore would your predominantly look on at of the investment guys your draw rate, the want was The to assuming SBIC the I about or are obviously foresee [indiscernible] to I SBICX credit but mismatch. too to guys be or is I $XX kind continues structure know winding next fixed current uncertain you draw fixed continue investments would Having go? your the get us if issuing grow and million so nicely way have so one; have believe growth but portfolio rate do capital investment -- look looks facility because you sheet, down floating the you on is the asked versus set credit like with structure and of interest quarter; I you come When as rate did more you at it data unsecured I SBICX

debt SBICX? So about of the structure uncertainty capital forward given what are the going your thoughts

Ed Ross

and I think of did mentioned them. sources I debt. foremost, having I -- if will mean, we of you first like most think you diverse

like obviously So we that's that an last that and one. little bonds a quarter fact the those bit, increase option so some public is to issued

line it Secondly, here we of obviously have as credit, a unfunded is we sit today.

that's So our a but we've do capital. for quite we I us a it's have but there for to is think don't going debt option that majority we I good And of an ability in be option also something the think availability think that. to an got increase that are growth considering frankly. I

utilize and that And get the utilize we those that So SBIC debentures I well. think should we're approval hopeful that. you to as have then proceeds

three debt no we overtime sense access moment diversity is a but to there all but need it we timing; like I all perspective, to the plan we'll from probably and act the So think are three the as makes at grow. those --

Shelby Sherard

And liquidity prepayment the here fund process SBIC the we're only and other sizeable debt in thing a would add noted, first first you perspective, I our quarter. as made we winding down from the of a just on

create we as holding So additional the receive company to the on the cash ability liquidity that at fund. prepayment, debt debt we repayments with to upstream have

later do distributions we capital So can cash that of this return provide liquidity year. additional of source

Operator

Mickey comes today with Schleien Ladenburg. for question last our from And

line open. is Your now

Mickey Schleien

better trying looking a bit; was terms little a way have have you've portfolio reviewed; way Or the prepayment at do much I to the the there Well, in all exits? existing how a Ed, the more little that shed in been of risk of the yield light I still will the bit declined on on I the what is the another investments was your good understand see did portfolio? versus quarter questions I think fourth that couple from hopefully quarter. little new made

Ed Ross

very to particular, I about that question the was perspective, yields the answer was the in guess repayment average to was QX. XX.X% logistics directly, on a just yields XX% then in from And XX% comprehensive your debt under repaid. was it, that -- driving

particular, drivers those $X think characteristics move And made businesses would yields two more where we $XX are is over couple we're drop want so have could with on we or million $XX and that well overall a of the things of continue over three move material I and last defensive What it strategically past few what companies don't this so to continues. we've -- little a over little and the a years at primary market; today, the say That but I strategic of a our enduring believe been that a to -- drop companies focus has that say in million were of between as few of million million we've $XX point. from million, in a $X moves to qualities. continuing we as I invest very bit And couple change. to core so in been would larger as with focus, would even works EBITDA. And forward; within we've quite -- and EBITDA our that kind years

Mickey Schleien

just think information? could amortization of And I the you for Shelby expenses non-recurring about something SBA that question; prepayment; my repeat last said

Shelby Sherard

new has registration of about talking one, that my it's to the non-cash a -- that's in expense, I thoughts towards we've an was have on incremental is in so we'll QX, and there. one. cost in -- -- of $X.XX statement put since additional about whether amortization now two that There related Yes, expired our commentary end

So we had so SBA first with those I $XX.X repayment and that QX. non-cash repaid financing debentures accelerate and as we in was deferred accelerated expenses with the mentioned, million quarter, in of that of fees to $XXX,XXX the debentures about associated

Mickey Schleien

tell Shelby cash SBIC lastly, us of much subsidiaries? the your is in how And can you

Shelby Sherard

remaining about half say SBIC this the half it's half of the and -- as million point of the the subsidiary. At then Sure. company terms being being in and half holding half the $XX I'd in

Mickey Schleien

right if license, mistaken, because be I'm would that you're of not I'm most first the good. And sorry… in

Shelby Sherard

So second it's the in the then is residual about and $X.X million, license. the first in license

Operator

no further back And over any you. for to like Ross I'd Thank Ed to queue. closing there call questions in remarks. the the are turn

Ed Ross

look great Thank We this to second and great speaking on quarter early with everyone joining you call for you, in Have August. a a Jimmy us morning. thank our weekend. and you forward day

Operator

Ladies Everyone and does This conclude day. your conference. in great now gentlemen, you and thank have your for you program, may a disconnect. today's participation

Fidus Investment (FDUS) 4 May 182018 Q1 Earnings call transcript