FDUS - Earnings call transcript Q1 2020 | Fidus Investment Corporation

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Fidus Investment Corporation First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded.

to Burfening. conference like speaker to now Jody today, would hand over the your I

begin. may You

Jody Burfening

Thank you, quarter good Ed Executive for call. Tuanda Officer and release me Ross, issued Fidus joining you company's is With afternoon with Sherard, of Chairman Investment us Fidus of for and Investment the Corporation's and quarterly morning Shelby Financial first Relations this results. the yesterday XXXX the on Corporation's conference morning, page earnings are Officer. everyone. Chief Thank the company's at available release press Fidus the Investor Web a press Investment fdus.com. copy financial Corporation A of details Chief site

available this is numbers everyone like telephone A in by and remind conference I'd ID is earnings being using call to press release. provided the replay that recorded. the call of today’s

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

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

morning, With that, over to like Good call to I the Ed. Ed. now would turn

Ed Ross

quarter first loved call. hope to good well. everyone. I and and morning, Jody XXXX morning, all earnings of Welcome our doing Good your are you conference ones

companies and priorities forward. of have government today pandemic economic are we of our depth the the Shelby on uncertainties we time our remarks, at to associated to of COVID-XX Once portfolio our positions. to the this around prepared management in and going first cover going today where on remarks I'm discussing covering and most Given results devote happy downturn, light financial impacts your we'll our questions. will quarter my the take be liquidity duration an and completed and actions

performing middle Through well. mid-March, proceeds reasonably Deal portfolio the from And income the M&A is in producing were investments. and in flow equity lower the healthy. in February's our we repayments sales market deploying was

economic focused portfolio and we working senior businesses. become with our implications the teams management the increasingly closely of been on business the apparent pandemic As acutely sponsors have have and companies, these of

found necessary have have across taken in the portfolio plans manage board prepared our that to a have economic We and disruptions, actions slowdown withstand activity. to business companies the

more little majority a the to companies operational. led by them approximately low the quarter in XX% portfolio our of remain million. today, range, than our of down the at performance of some our financial of or us value shutdowns risk value and companies government portfolio adverse mark-to-market fair accounting Nevertheless, future vast are mandated of the end of $XX on write XX As the of consequences while portfolio medium

$XX.XX $XXX.X $XXX.X million share or or XXXX X.X% a result, per compared to of of per As as NAV the December March XXXX. as share declined XX, XX, million to $XX.XX

with total, on us Food we remains until to non-accrual. manner. portfolio non-accrual. PIK quarter performing two on X.X% the Accent value non-accruals fair non-accrual In Services companies addition, we basis. hit stat pandemic first solid in of on proactively equal on placed been In one portfolio have a ended our a Company the and

COVID-XX The payable knowing supporting XXth unprecedented dividend long of foreseeable dividend our incentive future June as Board stockholders for our to warranted. quarterly In portfolio be, uncertainties of on on XXth. a the quarter. companies of of facing to will second will they which the declared and record time, were quarter fee for of the sheet, $X.XX have weigh in how XX% be the light position focus April a induced be we elected strong XXth, to that And recommended per income the recession additional or the Directors. the we and funding a on liquidity give of reduction liquidity Without our June we're Directors balance Board the while share, how us as on maintaining At same agreed. will second a

and per year. Moving $X.XX excluding investment income, and review capital to Adjusted last $XX for losses, million a $X.X quarter. first we period million the share net to any income, incentive investment which share gains define $X.XX of same net fee or attributable was realized as to per compared unrealized the gain

$XX first debt preferred a and brands a Inc, provider quarter-end, in of originations, and waste LLC, in during for supplier and Subsequent first a for enforcement invested manufacturer debt markets; in $XX.X municipalities; in total law million automation, through security highly of global Industries debt Smokehouse, to lien common and subordinated Systems in of products Western's and first solution firstly, and for Routeware, of a the premium $XX.X systems quarter, and million in loan; debt million the integrated million designer, connection in lien products Combined perfumed we with brands. electrical the companies and totaled $XX.X Inc, we top crafted manufacturing defense million of $XX.X of wide manufacturer in consisted a leading snacks. software retailers premium non-lethal marketer in $XX of fleet lien in debt and LLC, invested and and revolving portfolio recapitalizations. range equity ECM primarily global leading debt in haulers In terms million of new debt in a equity Investments securities

proceeds million, $XX.X the call gain of million group earnings a received sale including in terms investments million our In net partial of from totaling $XX.X and proceeds that repayments net and of equity February. in of on we last realizations, a $XX.X realized announced we

million addition, recognizing gains Technologies redeploy received yielding equity $XX.X sale assets. in amounting related we Materials debt net into the payments investment. strategy $XX.X totaling In million lien approximately monetized million QX, our $X.X to payments related full net million $XX.X realized equity with of Defense our our in totaling Fiber proceeds in to and to of gain of $X.X Inc., a first Hunter repayment recognizing investment realized to In on equity investments, we million connection and

and our quarter value market XXXX, Turning to and construction ended with March was as portfolio XX fair March underlying equal as of that to million We sold XX, investment have follows. by On active their investment basis, The of four companies value XXst as metrics. type cost. portfolio breakdown the our portfolio the operations. XX.X% $XXX.X companies of fair was a of the of portfolio

portfolio to Having debt basis equity subordinated account XX.X%, of only portion now debt December XX.X%. equity as XX.X% of monetized portfolio, second value sizable of First compared a for on lien investments XX, the XX% X.X% our debt and fair XXXX. a lien

retail crisis. Overall, at portfolio reasonably in operations middle our an the believe businesses gas to this portfolio good time, a companies is our continue related a providers to on and manufacturers diversified. is we is industry close oil quality market more it high while companies and in a On well we with basis weather basis. perspective, keep of and comprised little shape X.X% lower fair of on From accounting service value a portfolio of X% tabs cost our mix than for

models can time. cash with flows us it withstand this economic investing defensive resilient characteristics, make Our in stresses, positive and free that long-term through focus to difficult outlooks business on companies and position strong

maintaining while caution, capital to unknowns, we on long-term mentioned uncertainties that in conservative economic us an our a this have our operating liquidity clarity continuing before. on I priority response facing of none on of prudent believe focus have are faced interest abundance more recovery. that our preservation And to capital the of is until is protecting pace we shareholders. We structure, the earlier of with the

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

Shelby Sherard

I’ll Thank quarter and our Please everyone. liquidity our be on I results comments good with quarter close you, providing prior morning, first position. versus will review XXXX. and the in Ed commentary more note detail comparative QX

million to Total a quarter, net decrease quarter, value due $X.X Total $XX.X the approximately fee million was $XX March of XXXX, the due months fee increase from to accruals depreciation incentive income portfolio. investment $X.X investment increase activity. for for QX, primarily a related were in capital million the first primarily tax provision, and the gains the from in to fair expenses, prior ended income income including lower XX, unrealized the than three an million

As on average outstanding outstanding of $XXX.X line. March million of million public had was of interest of XXst, the rate SBA and the on debt notes million weighted X.X%. comprised of We debentures, million $XXX.X debt $XXX.X $XX our outstanding

QX. Our times ended NII investment three exempt income SBA QX investments Net X.X any which share for share to X accruals was debt unrealized versus gains QX. attributable statutory incentive Adjusted or excludes realized in the $X.XX and debentures. NII, per to per or or per March on share reversals, losses $X.XX equity gains versus in was in months ratio fee $X.XX capital XXst was and times $X.XX excluding leverage

million three and months the of mentioned, portfolio Fiber from our gains, had XX XXst, as of investment Materials. ended the exit $XX.X Fidus of of sale March approximately investments XX% Ed For equity companies in our in equity realized the net

portfolio to now statistics. Turning

portfolio of XXst, March investment of million. value As had $XXX.X fair total our

at cost the portfolio of $XX.X basis on the was investment average company million Our end first quarter. a

investments yield a XXst. equity have fully excluding effective of ownership fees, on The the average effective XX.X% our of of any. debt of computed is Weighted with on companies investments interest origination weighted using investments loan and XX% rates at as non-accrual original for including diluted yield cost, portfolio X.X%. was the discount average if weighted but accretion approximately March investments in equity issued average We debt

to discuss like available I'd liquidity. Now, our briefly

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

subject additional to third approval. requirements license We our also regulatory and have SBA under of to SBIC access debentures million $XXX.X

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

Ed Ross

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

Operator

Thank you Instructions]. [Operator

Johnson Our from question the of comes first Paul with line KBW.

open. is line Your

Paul Johnson

is leverage effective that I wrong amend an equity debt and And even on amendment in that believe if your Are me going for there. you to in ask you of today's covenant to leverage I'm as for credit that that recall But now I possible back planning one facility, environment? have you covenant? is times guys X:X a April. of correct or

Shelby Sherard

Let out me just kind of one point thing.

and based You leverage. line the our of are correct, covenant in on credit, regulatory however, that's that's

So if And we of we X.X you SBIC in leverage. fair right our a capital regulatory amount times recall, debentures now have have stack.

And XXX a incremental an to whether times so would on really add be regulatory one hit leverage, as line or unsecured it’d result, million of we debt. credit of the have to

have SBIC take into the again for room coverage, does existing ample So even the us exemption it we with because debentures. account

Paul Johnson

repayments and SBIC, little time, And conserving wondering, or are being that additional SBIC a you're, more, point, available just this and I mean, build debentures. know more those with you the guys on little liquidity perhaps an bit, you liquidity? using more said then focusing at at accessing a license cash you and defensive, more de-lever bit I under comfortable but on this to are I'm leverage maybe focused

Ed Ross

makes think I abundance opportunities we’ve going economy sit with an hit investment what’s a lack There's operating is regard of with restart. And think, button the to we of ton clarity a prudent. sense. caution of on of kind that’s to where pause new think the again we how today, and we

is way the And capacity so deliberately that's leverage it, don't about material have at how to our to, point. increase say we I this it we in that would how but doesn't we're mean thinking aren’t working a

Paul Johnson

of any to from mean, addition I unfunded then have curious. or your seen companies of high very portfolio PPP to a demand you liability. of in have any have a also think additional But manageable of available the and for companies And support? on your companies, And any able loan you from financing? your the any been access reserve that, lines fed portfolio I'm benefit of commitment programs I

Ed Ross

high been of to And I at take one in point, think the it's terms to point. first is, from answer no, relatively low. demand the this that our I'll portfolio companies this

so out funded that's you with think things. if how And well, $X.X today, sharing amount help help low. I just groups constituents, the million has situations round think or as that's to in that's something have frankly, but typically will. other quite structures, we liquidity as we to I equity connection been of dollar doing situations, with we've pain, private approach relatively to-date But that capital how

As I just mentioned.

right, hold if think we want makes but that and in. don't point. to warranted million as we're prepared for I position as sense, to I'm be the that's at at and me it, that this is more $X.X necessary, But

Paul Johnson

to any able of fed access you reserve of the portfolio And programs. of Have those do have of, you lines? or any companies then on PPP of been know your heard any or loans, the

Ed Ross

is, answer The short yes.

focus a our number days, situation that access portfolio access our tight situations And liquidity number this. at like did have the can did all companies lower on moment. improved change program. those the we which in these is middle Thankfully, not the a as short But also liquidity companies times the of market, obviously with but the a of our Given that things list companies in moment. that's PPP in the at the that's for good mind positive program, is

Paul Johnson

little portfolio just sort did I that sort about the and tell deals what opportunity a of my the that just curious it’s possible, quarter on post perhaps company. question, Industries, on yield that deal, thing? in us deal? if Can a And last bit Maybe was was the presented in the what was you I'm new believe ECM you the business of

Ed Ross

the Interestingly, kind we mean, situation pandemic. of fact free I of committed that to that

it It's flow in the yield right. I business, in think our of don't was opinion me, high be cash will high a I I over have larger quality, so very think very but those haul. long And front resilient XX.X%, I'm free

prior scared So and not we situation to the we're fully that made but that to investment, that we pandemic that's the committed there. so

Operator

question next Matt of line James. Jaden comes Our from Raymond with the

Matt Jaden

kind release. from hammer So press the down question first to just on the language of

we new that? non-accrual take the mean replaced So when you non-accruals, and just we paid interpret Should to say on should that XQ in after proactively. interest they how

Ed Ross

and full scenarios. late circumstances did to was What in meaningfully say due all directives not so impacted the They place were the interest both fully those And is and companies. was other what's similar would I shelter in place in operational different company is pay quarterly facts that orders. are three One non-accruals. paying us the both us our shelter

well were a has the those as some was is SIP and in in of operations meaningfully impacted northeast EbLens, and that second the One it's there. Virginia they obviously Tile due Michigan orders to retailer

later designated also Mirage place actually Our business. was PIK non-accrual experienced shelter an but orders, in essential

pay non-accrual they to, supposed points. that's risk we them put what more So on did helpful. -- due us they that's to did but all that how Hopefully, But proactive unfolded. were they

Matt Jaden

Access I Foods. to moving guess on

So outlook just long perspective. a kind term of from

as Given their with to it, people off be Even I seems returning the things it and to breakroom like breakroom things solutions like are operations work, focus returning while on, and that and normal. definitely understand going a to like that.

you color can any for give outlook that term asset? on long So

Ed Ross

this to thing a answer, is any perspective with outlook credit very difficult term point. to from my Long at regard

well we with didn’t sound But XX% what very to over I actually I is but So have see would we mean of is portfolio or say over company perfect great this shape, as regard imagine our sound impacted that doesn't XX. of creditors, any think in situation that might a the management sure by they're that is you kind which orders. job is managing understand in was facing, the shelter accident I'm of doing place and

lot situation, have difficult done managing of comes the they navigate of through situation. that good we it, so there's And thus very How the to the how a job with and very handicap. company it's a uncertainty out of far

going for that So reason. to to I'm not try

Matt Jaden

any Can just versus give spread we on quarter-to-date and/or of of you forward widening? And deterioration be that so incorporated markdowns how actual question the some then saw. credit last color would outlook NAV, on much

Ed Ross

can What that it second definitely and jump a of in part according I policies would is, and was say, and to evaluation spread in was Shelby widening whatnot.

deterioration the credit looking, case. would a information of how we're which March backward that doing terms from -- is In the evaluation that not have at when was I say most we XXth,

and want you to the that account So the about we we into and Shelby add that's it. see situations the that? various valuations to so taken how outlooks went could were

Shelby Sherard

valuations obviously, GAAP this light volatility just for bit that, BDCs is and a all of add of requirements. just quarter mark challenge and fair market in would uncertainty I a to

as line some a obviously, equity did of with find with downward. just to So public we it's into I It's appropriate particularly we the mentioned, capital methodology calibration on would Ed fair public say do cost multiples really invest. a of the assumptions. where movements, an in of comp. granted higher take account kind from to value side, to of multiples true to But hard given calibrate comps do perspective, thing had

this be kind the with had blend into point in is months factor conversations and and the financial did it's on probably recognizing probably point, But updated management, portfolio whatever a we our would your into portfolio by to XX in we more of metrics to for not either materially but particularly to early we be months companies as expected best that insights forecasted factor XX or future opposed solely it’d forecasts. drivers, valuation economic of uncertainty trailing for we relying companies forecasts yes, in for in shutdowns, financials And any performance we discounts did impacted trailing time. indicator or driver

Operator

line with comes of Securities. Bryce question National next from the Rowe Our

Bryce Rowe

here. being mentioned Ed, number bucket. companies questions that of in the of to within of that volume medium just dollar or lower risk think you type you about actual Couple in portfolio? Do XX% terms the

Ed Ross

volume It's frankly. more dollar quite

default did once we around of was to and higher a it twice just we're a To what into kind are doing, a now projected the risk to our in doing have a higher a to little different through our most that portfolio orders a impacted we're meaningful split companies default by and going that it we What stay on it. place been in would So put work got manner being the situations, covenant get likely hands and in have situation companies we've color week particular. look, are covenant being impacted week. risk or

paid; then doesn't have in It manage risk we comfortable are just covenant And preservation. that's be a how manage, what can medium and that terms pretty low mean we not company the and A, this through from to getting risk then there happen, may B, of preservation. capital capital but considered with; we a going we

a again, nine next things over risk And so, but majority, comfortable large about and thankfully work feel months we with. may and then the to that, And low in -- is and more year, good step the covenants large require like the category, next majority those good or is they medium. things assets the a were

would highest ones category. And now more shutdown then And risk for are the got hands that you right that on be in instance.

maybe impacted shutdown others we stretch, then and that of portfolio And dollar higher one of not And risk be a their not from so are any their have that falls by a operational couple are we've market shelter them basis, perspective. that the obviously, today shutdown in From thing. and meaning perspective, than XX% in orders, malaise less a -- economy. but got just way, are shutdown that the we place several impacted being all company three that and category. then shutdown And on that others just end then of by or of the got it’s kind meaningful in plants in by may the plants are a a

that's So helpful. hopefully

of how that's we kind with managing So up came that's we're statement. and business how that the

Bryce Rowe

lien exposure interacting the type And portion. of of process grown portfolio well the you're curious, the exposure. with maybe parties second curious sponsors lender different this lien senior decent mean, in the you're and a Obviously, and amount subordinated involved? how working with how I you've together I'm deal kind But more the has throughout first

Ed Ross

of partially got we're think I took working very going mean, X.X us. they of side. million company in million near-term were a the earlier, to us liquidity get frankly, was they to collectively And to needs I this. X.X liquidity and lenders or quite first company those giving mentioned need the And They in be banks There’s the down also some give together to the lien well. from put example help place. shut ahead knew I put that to and and that XXX,XXX other

everyone an together example of to other And the having so get and supportive side that was working sponsor. a to

that near-term was those and So happen.

What forward on are be lenders you case happen to conversations We by well, will the financial I to as things second solution. more all move increase do expect or could which dealt some QX. as as be know. And in that could quarters. be that couple then will negotiations a in case sure How sponsors, go multi-party sub-debt, be will be the us broken or and over will we there lien in QX. and I'm expect is covenants with forward us next participate two Meaning basis, a

So there's six, that months risk could incremental non-accruals the next transpire. three, nine over clearly,

companies, our important high which portfolio the the is perspective, very and long group from And quality we of in have run. a factor resilient most

there's quite I about in to think from all we to meaningfully there's impacted shelter perspective. And those those feel forwards portfolio consider. to to orders, the have going that we're of I place But For be think solutions the with the portfolio and that's from, good negotiations. we a assets more go start underlying uncertainty number table But at our limitless our I of place frankly. think companies regard them, having from in the

Bryce Rowe

understand the cautionary move a and one if question ask I nothing If move, lower the certainly about as else. dividend could

you you grown the spillover having how income year. against gains of weighed the you’ve at quarter dividend that then the reduction the spillover the curious, And had in first booked? income realized end of here with level the the Just kind of

Ed Ross

let figured that some I a bit little version me it. question you'd Well, give dividend. on or you ask of the

think best shareholders that of to mindset and the we level everyone's feel the to operated to uncertainty high of with long-term our given it's is I our this with the experiencing current start including economic company. And approach operate of the We how interest to it's environment volatile it's that handicap. caution, like distribution in abundance and policy. dividend always regard an conservative operating with is a difficult have

We're a highly and sheet maintaining portfolio warranted liquidity our and focused resilient particular in as equally able to maintaining and balance we're as focused necessary. on be as position, on one, to a a strong strong support

It what that positive so, it’s and we're exactly is uncertain we best positions we run us nature, very is preservation and subject always believe portfolio just gets the of we long with for companies over of back in constructed this more an that quality critical hands the on a environment, which the interim it's capital outlooks. good cash So invest abilities in are market possess has believe doing. And to and towards and defensive and doing then been focus run. resilient mind in very generating top and long-term was for In on us. eye it believe the long-term long possess

about thought we determined there didn't in how said thing, dividend we factored it very our with anyone is scenario when up was of we downside say and perspective, worst Meaning we the position really XX cut -- from we did scenarios. good dividend scenario following worst that, Having will but decision. decision, I'd What say our process all was the in say factor So think or the so know can of our think we to it. that the to cover that’s far a when out not, dividend be that we dividend and came From we cover you very, of and a construct. not our our in in dividend would didn't it's we it I spillover on a wanted

we happen. those XX if We it need a position in materialize, cover we wouldn't where to but will scenarios that to clearly able don't at think to does be weather be

a like so in And we that's our and position feel at weather us that's to plan. we're anything thrown

do possible side And So, we're times. as just all process do be as as to a living what to we're to is prepared we other positioned thought Hopefully would get from I to in how that's well need the unprecedented helpful perspective. we say.

Operator

Our line Oppenheimer. question comes the next of Chris Kotowski from with

is open. line Your

Chris Kotowski

thinking honestly of discounts you shape, they’re they're of presumably about Palmetto see I decision that the Most at, on I and fair look if you is XX% good you asked. non-accrual. Fitness, between value are have that the Moon, did other some then just not? But XX% I companies guess was put on been mine But significant in curious the other keeping mentioned Hilco, there been proactively. I'm you that then to versus before of put mean kind marks process what companies is I’m kind non-accrual ones deep, And some area companies discounts. the but where in the same as not all of think those marked? FDS,Bandon And non-accrual universe you of quite when deep have the at decision guess the

Ed Ross

material at now, that think the be in ones been place obviously, I the not see depreciation would to think last looking I that list generally impacted, quarter so reflected you the relative orders stay would The correct. be Chris particular. by right have the we That's would Those I'm generally would in probably mean, question, where on correct. ones before.

case. definitely that's So the

a the made regard get few wanting situation, first uncertainty. in situation in situation. with there through that's a for and frankly. have we a shutdown participated came people involved different decisions, months, well, and future. than this helped money lending sponsor were That's of quite with for where company community, to that basis, That's because room it on to I how comes lien think as running of think ago went to different six the table gave clarity I and a I five a where minutes ahead don't the the I it the

gives thought have. you so, sense how thinking then they just late XX frankly, situation, And and and would what where great. for they someone's quite we’re paid. days I they know it, you be they are about things better which now, worried they But hopefully And ever in were would didn't finally have XX about more or a that that clarity, is and we they where right than tell

So tells hopefully made down we you, uncertainty my comes clarity perspective that those and to how it decisions. really on from

Chris Kotowski

I would then with I this they your days more guess might I'm be, eligible stress, cases debentures haven't have companies some second been question years on funding for all years? And your than two over where just SBA roughly last of wondering two the drawn are you really portfolio there now. for And these mean, be my SBA

Ed Ross

a beginning quarter Well, really second I license last We or call the and year. running couple it things. think the our license got third of up

that's no we it sure. haven't So for ramped

have started We using it.

in that. was down year last first Our until wind license repaid and we

that years. repayments, quite was capital. when And couple one second had we the we utilized, of frankly fully past recycled for Our

now the We've had that's operational of really So dynamic. SBA a less the right year fund. than for a bit new little

those we the second are thing unwritten there qualifies what obviously, is, The and I'd what doesn't regulations follow including on ones. strict qualify, regs, say and very

don't them put we some put that in there, them fund. qualify and so we don't don't in And

There's types, that equities say And going certain have factors. qualify for I'd do they you not get financing, some that and specifics, financing are have There's SBA. if don't or -- the do. that those two driven there's private fun some types equity a into private I'm fun so

that's follow those so are And dynamic. regs, those so -- the we

Shelby Sherard

add would And of just big Ed I is part but the it, management. and just Chris, mentioned equation a cash

And so let's to year. it extent, call license up had the and past the we third for the operational,

first a equation. However, the additional borrowing fund was cash, if debentures, our second so put SBIC and before would we that sitting that's we idle work on I of part in SBI received repayment to

Operator

comes Schleien Our the next of from question Ladenburg. line with Mickey

Mickey Schleien

questions of morning, lot Good and to morning, this a Ed Shelby, good just

are how given to you you would are, tough understand uncertainty that trying all disposable modestly supplies I'm all even some anything about out interesting any second will hospitals to be Ed, and whether great, approaching can. I certainly or to extent things that? if that at But obviously deal there's the more, underwriting couple like to like of you. selling that. you quarter flow seeing are a just looks year? candidates, the the how And second There's somebody's be half there the medical morning, that the This

Ed Ross

grow a would and extent, large, and lot is in on that, given portfolio way a on going now, underwrite. our And including ability uncertainty portfolio deliberately is our given to reasons What I a just Mickey that’s XX% to focus large of not time. to now the the right try say, representing right the of is we're for there’s meaningful to

what hit So honest, we've be done lenders to pause we've most I the have and is, what button. call would

as some the to out make to have come and Just regard to of, here it. wait with of we or we unfolds are restart kind see as clarity sure we continue where and

for make going very capital play, comfort to say know So them. line. liquidity. a a maintain focus of to things want has deploying and aggressive which tell lot I at looking looking that and we if are would I businesses, we a huge profitability are looking a ours and few big but underwrite, for where We will revenue recurring not But ones with investments, leverage are a long much a we have line where that we to at to not would time what revenue given you we're been be you be from But there's are going strong are we at we're that perspective. at very we going

there there, So have fair a just portfolio are categories, majority risk of that large I been you businesses companies there's out in. There's of told number dollars large others our a that fine. to invested majority shutdown. forced doing our low of of what and are And then have be we lot actually businesses are we a

very So to that's regard prudent. With going to the we new situation. be are business,

highly the of credits more right as the the we but thing focused obviously be situation. on are highly, best button We focused we're middle the that's of still on going in pause think portfolio, we best it, come do the to now. selective of to and our But because out right

Mickey Schleien

the in helpful? fixed could know what portfolio, that you of interest investments clearly, the us about say a would rates. debt are context it's for the but anything you obviously, terms suppose downward some don't the difficult an most portfolio? but of give and in markets effectively expect rates of there's I be trajectory themselves Ed, overall the question given risk that to Could prepayment shutdown, borrowers

Ed Ross

falling When prepayment so sure you like make sounds risk say you… you, I'm I'll

Mickey Schleien

other have and their position go want I Well, borrowers you price. rates enough to dropping. better do a strong are say, are words, in look, to interest lenders

Ed Ross

and fall of We category on size sell million interestingly they from were that do the update yesterday going have that $XX one with an our partners than I to deal of some small, that have that a intent is the in company. less

it and to and they're going focused our flow Now interest hold reducing they're to on on rate. cash

one. will that that opportunity probably will that next But But those I the there of you we could we get repaid scenarios. I think be see over tell some capital. definitely I happening redeploy also to will on So year. have

and concern and more quite than it welcome So frankly. me doesn't

about that's So I how think that.

Mickey Schleien

But to lower would us. actually whether tighter could very that philosophical middle all Could range number upper helpful broad is I than the of the in give of least discussions the sense us there's give range portfolio's not. or EBITDA? these And a terms risk, or middle published average but if riskier fairly And range. market at it's Ed. it you borrowers' a understanding portfolio you a be you know

Ed Ross

in to now, range contractual pretty lien of will The obviously you it, are The company. hold feel they several of $XX and way and and we have average And a the less but it's software cut in focused the think I on can great right million first and EBITDA but feel average think I is, me have on the got revenue, ARR don’t the more tell the that focused $XX up. range get front about loans EBITDA investments statement. expenses in -- that situations those I don’t me, couple we've to million I with EBITDA, comfortable

And be assets the great a are $XXX So couple would of businesses we're not about million EBITDA, smaller part but then those it. lot we've feel in big EBITDA lien. that first that's got we a and not a

a the weighted is low-double is there from digits the wide in So average perspective. But range. average a

Mickey Schleien

of on EBITDA, what to given and can ratio? trajectory this give alluded sense guidance that of portfolio's guess I be is us the March, that? to of where you that's the as debt-to-EBITDA any think I would likewise, you violate And And probably And Any you potential think headed? covenant.

Ed Ross

numbers. reflect think our everything. loans average times, that February not and incorporates that's incorporate does does was but -- that X.X I ARR And more

would of So the undoubtedly, priority leverage The an go the interest the more on as average basis. I focusing times expect to going coverage is was up as obviously but opposed on here February, our X.X forward backwards. to

Mickey Schleien

And couple of questions. housekeeping sort of just a

that waiving the Is correct? incentive mentioned of income I you fee. voluntarily in XX% think your remarks that you're prepared

Ed Ross

is That correct.

Mickey Schleien

the Okay, or release. but I see press in that Q didn't elsewhere the

So that voluntary…

Ed Ross

from cases. in and Mickey, see unfortunate numbers. many very in us, eliminated shelter around also in it's we're that's fear mean infection, second it place cases second quarter of incredibly orders, experiencing our you'll it's for sad all the So and a it’s quarter, perspective, all And jobs forward I been the what many go in so sad

to the the in in of COVID-XX needing and place unfortunate. dividend same sad orders So place shelter of reduce stay exact in falls and orders really category or our because

So as reflection and put and a a firm. who that, we've our of shareholders always this we reflection first it's a of are also is decision

about hopefully, helpful. how That's So that's we thought it.

Mickey Schleien

is the it's is the management confirm, shareholders in change permanent as well. contract? quarter, for I'm it No, I do second a appreciate sure not and And voluntary just to

Ed Ross

That's correct.

Mickey Schleien

quarter… last And

Ed Ross

and we're facts are all in this the time all aware. circumstances as The changing environment

And keep and the thought to going something we that in of continue quarter it’s do. so to good our to thing shareholders we're felt do mind. the And here to top want we right second

Mickey Schleien

there -- so on lower And number. Is --- been you sheet maybe before, but mean, It's now cash I million, that? is Shelby? for a which the would us you've walk Shelby. balance Why $XX I through can expected much have there

Shelby Sherard

while new had had and mentioned events, made Ed deal absolutely Mickey close like It's a the have and practical But of frankly, that correct, was, the simple Quite as that interest minimize a run our did been here. in and a we we commitment back. subsequent tight answer, expense. ship one then we've reality fairly kind because pipeline you're I and to a

just as transaction the kind March events mid so deal. kind that cash of And had to unfolding, of I ready that end started reserves and certain timing flipped. of of fund to

explanation as March. the And cash my the to at so of that's balance part higher was end of why

Operator

B. Our question Riley. Hayes comes line next from Tim the of with

Tim Hayes

might Most have the tightened? an point. quarter answered, multiple marks just spreads far the and reversed have of of been But much have it a you been market broader so as how of the tough rallied at but quick them this approximately gauge one, driven spread second to in do and driven and be Shelby, estimate is

Shelby Sherard

don't. really I

three inputs. Just our level observable really on are of because you're all aware, as investments

the don't the look at on a to valuations updated of And with It's so and time. taking QX financials, weekly which have on yet that can at value point process our dependent quarter a kind comps getting is something that end company of easily then we somewhat public end not of in basis. we so

Tim Hayes

covenants the the quarter curious and quick impacts headwinds like from it's quarter interest But deferred something about yet And of period, principal any to work I'll just through outbreak. going that or first going forbearance else? to I'm borrowers, anything in eliminated if first granted measures at of forward? probably to that the more you'll face the took didn't sounds future point have think ask that's one or It is truly that results Have the you extended or economic curious that or you'll just come only question. forward? just provide relief you this near the reflect to in payments, kind worst if how the you

Ed Ross

point. general, In this suggesting haven't to do a you're had of we lot what at

you to As an around situation -- another couple there a give just I QX were on, example. mentioned in early

we with And months. Not been very while, sponsor can time, and we're we And set already levels. withstand those $X.X a the projections at in a same comfortable a that we've were of we that, with default put for levered, in through put overly next Someone situation. very have covenant liquid working XX situation feel the think million.

we with So, obviously borrowers. through It's obviously conversation. We sided will the not one situations participate. to work a expect everyone

the forward. I any there so needed positioning that is those seeing be would ones to breaches companies issues portfolio of people any with will obviously are gotten in covenant And trying that I think And move liquidity the attention to side. the get other it. or general, of as potential to have we and idea of more we're say that get what ahead

assets and without opinion fault, but great should it's quite feel about, we side. in this ones And there's so the question. those it portfolio where again, with of we've some there's make the ones to good have, underlying conversation, there's that risk not good conversations going that But no those also back one to, is more And It's be I to go got those other of our conversations. a to of be, pretty frankly.

those got best conversations as protect can at all that we do companies that, with our to a not… regard do and our to And and so we're there's the of place capital. the as BDCs, those time take interests well more to help same to we've lot But

Operator

like At to this back for remarks. Ross the closing over Ed call turn the time, to I'd

Ed Ross

everyone you, you speaking thank look And joining our with early be Everyone Twanda. you, for call to please Thank quarter We morning. safe. on this us second August. forward in

Operator

you gentlemen, Ladies concludes for this Thank conference. participation. today's your and

a now may have You Everyone day. wonderful disconnect.

Fidus Investment (FDUS) 1 May 202020 Q1 Earnings call transcript