FDUS - Earnings call transcript Q3 2024 | Fidus Investment Corporation

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Operator

Good day, and welcome to the Fidus Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Jody Burfening. Please go ahead, ma'am.

Jody Burfening

good Fidus and XXXX Investment Call. and joining you Earnings Chuck, for us Corporation you, morning, thank everyone, for Conference Thank Third Quarter me Financial Officer. Investment Ross, Executive With and are and Officer; Chief Chairman Chief Fidus Sherard, Shelby morning this Corporation's Ed company's issued the financial Investment details Corporation afternoon the press a Fidus results. yesterday release with of quarterly fdus.com. A of the page copy Investor the Relations the of website press at on release is available company's forward-looking information I'd to regarding safe your harbor to attention customary on also the included like call call. today's disclosure will call regarding Fidus Conference cash operating statements the goals, contain of today forward-looking results including strategies, Investment flows potential, statements Corporation. beliefs, future and

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

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

Edward Ross

third our take middle the performance the questions. portfolio expertise through After investment in lower levels our with . Despite the will your quarter call. our outlook earnings happy we'll Good strong the you during call, a industry morning, continued third position. XXXX. be Jody, and relationships remarks, and remainder quarter and deal liquidity our our I'll review financial prepared good market. our overall then of Shelby to quarter our On our end today's knowledge conference of build with of combination we sponsors, investment we lighter with morning, activity have quarter XXXX quarter, to third completed portfolio Welcome and for results to cover third share everyone. start at a in

XX% months, of past cover of companies and build XX debt and which defensive investing dividend. record high strategy characteristics that we our in continue have grown income outlooks has Our generate $XX.X to portfolio, high-caliber free cash healthy interest continue over million Through to selectively amply portfolio. our high-performing of the positive base a generated and flow, long-term levels

higher value share as quarter XX, At $XXX.X quarter end, XX, share at was than of asset asset December to of December net $XXX.X $XX.XX XX.X% XXXX. basis, per asset net of share $XX.XX value as per per a On million value compared stood at million net XXXX. end

the start Before for that the report XX, day on quarter, review new my September I SBIC SBA our last our license to I effective approved the am has of XXXX. the performance quarter, of pleased

Adjusted million share per share $X.XX $X.XX higher year, to income share the also the million onetime grew period which reflecting the net count the for $XX.X quarter, for reflects per was share net fee a income income ATM and lift. compared investment dividend for last adjusted with a compared quarter basis, along XX.X% investment per On income higher to from primarily $XX.X interest same year. issuances. to last average

covered share amply share, per quarter. NII the dividend Adjusted the per $X.XX base for of

dividend total per per a paid $X.XX we share dividend share. to $X.XX shareholders addition, of supplemental In for a

a to declared on which stockholders the XX, XX, of per to per the of XXXX. supplemental XXXX December consisting will be quarter as XXX% share Directors surplus fourth the NII record share, of from and base the the of adjusted December and $X.XX dividend base of quarter, $X.XX of dividends Board of dividend For payable over share, dividend prior per equal a XXXX, of $X.XX totaling

the and quarter investment for Debt of companies. activity million company in which $XX.X a $XX.X reflects investments The million, totaled acquisitions new and which million invested million, $XX.X combination -- Originations follow-on portfolio new refinancings. the of investments vast including million remaining totaled X companies. sorry, totaled $XX.X million portfolio majority portfolio of which was $X.X of were securities. $X.X third lien million in $X.X and million, $X.X first X Equity

We the continue us of give equity debt high potential investments degree which our for investments to while of structure enhanced gives equity us cushion, safety, margin a our returns. with a

third million equity in of Proceeds our investments. including portion debt investments this debt for deal on companies. year. and compared common exit portfolio quarter, of expected, were that equity mentioned year quarter We've realizations the $X.X alternatives first proceeds Subsequent we totaled X in a previous repayments proceeds exits strategic that repayments of number third quarter. for companies portfolio $XX.X As were million the in lien of the million from and received accounted the this $XX.X end, from the to $XX.X quarter of activity calls evaluating the a the larger during from half of and monetization companies X X in million invested to first portfolio and new in

of value for end, quarter, nearly security originations for $XXX.X the all quarter $X.X at portfolio September $XXX.X this on as end. on and lien a at investments billion third basis first value fair XX, XX% basis for XXXX, and an of of accounted accounting a equal equity quarter debt at portfolio XXX.X% of of debt with a stood portfolio million investments consisting million costs of totaling debt to fair Our

a portfolio. term. We net with absorb gains losses over ended on equity XX to through portfolio quality the the long equity our portfolio structured companies. is the realized portfolio with investments healthy active quarter Furthermore, remains and credit Overall, sound well-positioned

on by for on loss debt in third of we a $X.X a that nearly a investment quarter, realized gain example, the million. an realized loss net As realized offset an equity investment was a

track record months the from on value second million, first of our were X extending remained first well the generating realized Nonaccruals year quarter. X% we've under fair net basis quarters in of for the enhanced realized the year, and any returns. gains of unchanged this losses, of For third and excess of a $XX.X

we in expect the other expect portfolio strategic modest quarter last reasonable a the words, levels. M&A still of year, For the to year. repayments quarter activity. companies alternatives, another some we do of as a see uptick still are year-end the that, in investment activity level evaluating In said Having remainder higher of of

may outpace New they third the quarter. originations repayments did in as

selection to models strong we As we resilient apply on and underwriting to outlook. focusing continue flow evaluate standards generating cash investment businesses investment business with strict long-term our positive opportunities,

potential income maintain produces equity to that incremental healthy Our high current and levels from monetizing for returns portfolio the goal both of investments. is and a recurring

our both focused investment and asset enable on Adhering our long-term us generating risk-adjusted time. disciplines and goals to will over value underwriting returns net strategy for to attractive our growing shareholders stay of

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

Shelby Sherard

$XX.X our an Please ended of comparative primarily from investment million QX, the Ed, increase I'll everyone. which increase a XX, quarter note, increase fee $X.X million by more QX a million review approximately be million and prior income September was income good I and was will in driven Thank $X.X morning, X prepayment detail commentary XXXX. in comments versus you, the providing liquidity with $X.X in months quarter, third fees. close for results our position. on Total

and versus including from million investments. to the Net management QX. than share $X.XX were $X.XX accruals capital primarily Adjusted income or million $XX incentive fees XX a losses shares gains, tax by in lower to NII, expenses, investment the increase share increase in fee attributable in which for a NII income million months X $X.XX of increase capital on for in million base third $X.X quarter, September share related $X the the $X.X dividend average a had we increase equity our Total was the includes QX addition, which fees. investments, $X.X fee distribution gains in provision, excludes unrealized income in ended in in million million weighted $X.XX in was gains realized incentive a driven QX, and outstanding QX. by decrease In accrual per or per reversals income offset $X.X QX per and versus X any

September a equity our investment debt primarily in on XX, a losses our X investments $X we approximately optimization. of recognized realized million to of net ended million million in exit by the offset loss of sale For Trelix, realized related $X.X the months realized Nerobi $X.X on gain

of We credit of notes, ended and of of $XXX line quarter million million of outstanding million with the of outstanding $XXX debt $XX million SBA $XXX the on million borrowings. secured $XX comprised debentures, unsecured

X.Xx Our our XX The outstanding September rate as debt-to-equity of was XX. statutory average debt September X.X% was leverage, exempt as ratio X.Xx on interest debentures. of SBA weighted or excluding

of as statistics portfolio to September turning XX. Now

portfolio had fair a Our $X.X total of value billion. investment

their a of in on was portfolio excludes investment the are operations X company process in that Our companies average portfolio million, down. which basis sold $XX.X investments cost winding

in our of We portfolio approximately fully with have XX.X% investments companies X.X%. equity of diluted ownership equity average

Weighted using at computed original loan rates including investments any. at average of as effective yield and debt interest on fees, QX. yield origination is versus excluding end investments on nonaccrual, cost, accretion but effective XX% XX.X% the of September if weighted was The debt issue average for investments of the discount

we per net I'd million Now average liquidity. discuss shares share, our briefly issued $XX.X at like X.X generating approximately proceeds. In QX, $XX.XX price to available of million an in

our $XX.X line access the million giving regulatory in debentures, included and additional liquidity credit, us of our resulting Further, our liquidity mentioned, XX, approximately and in a SBIC for million September on SBA approved SBA $XXX new cash million of of As has $XXX $XXX.X resources availability requirements Ed as and conditions. million. subject to request to total of license, of capital

I'll the for turn comments. back Ed to call Now concluding

Edward Ross

Shelby. Thanks,

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

Operator

question from Raymond the [Operator James. with Instructions] first And Robert will Dodd come

Robert Dodd

increase pretty restabout looking said I you today, right? are not gave a you mean stage. I mean the some if QX, early you year, On this see good any you outlook at new obviously. on closing color seeing that. But it's approach in deal still

a consistent early-stage you're probably early strong year stage heard how not, tell? just to mean for expectations to the that opportunities? we've I of BDCs a from in well, several indicators that 'XX? is from seeing the to end strong too Is early looking that is what pushing with Or So XXXX. now their they're Because

Edward Ross

one has QX relatively is competition uptick robust, still relatively but we activity from M&A know. your manner. I What quality QX be the we're candidate what question, hit answer definitive I Great continues market today the in a miss. nature, say, Robert. decent. seeing you then this seeing would as been are deal perspective obviously, to in knew And lackluster flow our wish or typical that I in is to quarter. well

we QX for expect seeing And pretty relative to have investment uptick an active So are -- for be us, right quarter do we QX, going a instance. to now. we on

that more hopeful our XXXX seeing we're that's much M&A very that an And are from robust perspective. not be We yet. expectation, really will but

too it's early perspective. think I tell from to our

Robert Dodd

is that helpful. Yes,

theme before. lien mean, overall a onboarded the biggest first I in patrons portfolio up. On mean put But of been the line I the lien on looked average right you obviously I it's competitive side, like that, of compressing that with everything expense. I'll on it spreads, new I for mean your the first the the out, in spread kind one spreads

there spread is any the So on us it any Has -- I that we compression from? give mean, can still any Is you has Or there? areas away stabilized? there? of market maybe Was stay in on color color increasing compression momentum it that? spread

Edward Ross

Sure. of know, depending basis has to to, great XX on way, last the Anywhere months a let's it moved XXX quality say, from you points. the as It's XX question. in credit, And right? a the meaningful over XX

spread. it's net little -- is XX a at lower. quarter, that points. perspective, originations yields no, look our obviously, down tight it's being comes overall are but accelerating a were not at the And We generally from third basis our I pretty which from bit XX.X%, think If I

were and our those originations are loans. So new rate at variable XX.X%

little a our down from So repayments were But at also they come average. XX.X% on there. bit will

and know little you on But what that of But gives is it going manner -- a kind we the quite of hope not, and down in just sense it going that there's the see don't definitely, competitive, not plenty a I the market. would of are. market So in material I state from frankly. of today. where is that's competition. it I expect

Robert Dodd

since read is if course, any had Got is that into course obviously, we And that? I quarter, good, right? of there that it. haven't I one, a of was horizon. last in amendment on that those should $XXX,XXX, anything then with not is amendments are moved, or an haven't -- last could. indicators anything -- beginning mean very amendments new I is the mean, this normal fees uptick I huge. sign there But about this year. notice Not you But quality because credit a your the the there's mean

Edward Ross

was $XXX,XXX, Shelby me interesting. a It mistaken, if quarter, healthy right? from think, That it's a Well, . prepayments, correct fee was I can big if number, not some so. I'm pretty

Shelby Sherard

correct. That's

Edward Ross

then And just which XXs. in portfolio terms XX level activity. high amendments the also, in think of the got to I investments speaks of companies debt We've

And active portfolio. and it's -- so very a

what different would that you, So say with have regards I an driving portfolio. different have what or there are acquisitions, we to that. amendments is occurrences But are active

lot going a just So there's on.

as we companies And we that have high there's rate been I quality, are we environment. a credit in expectations you But -- are of underperforming. terms that know, and exceeding it. feel some good some about always are In interest think

of in other and level higher a We out are geopolitical there a kind is risk issues, from perspective there. a

weathering consumer discretionary overall, nature, there but but And companies. are industrial not well. And so pockets are manufacturing think within definitely down those softer markets . Overall, -- the about those it's are areas as if and the softness, purchases pretty there not softer. -- areas storms you you feels what about say, in are, those seeing, that economy good of think we're that's and recessionary I'd we're are

as are things a through work there to result. So

it. good about work things feel Overall, to but of we it, so part are that's there And through.

Operator

come from Instructions] Johnson Our will next KBW. Paul question [Operator with .

Paul Johnson

on of Would license some year the buy possibly you about next secured maybe that -- start that on congrats SBIC sharing able kind to on thinking market. ramping issuing license, and timing be the on the So little for tapping approval on act are a that? to on how debentures you

Edward Ross

Sure. Great question. to want do Shelby, you that take one?

Shelby Sherard

Sure.

you're access debt is, line bunch right, it us capital. the does give think I to additional

it's So have debt it We to don't heftier opportunistically, coming a secured we consider down markets. need pipe. But could something the us the tap back buys SBA time. the program. mean, some to with repayments I

to capital investments. need fund QX, equity for we're looking obviously first eligible the from For We'll the contributed several parent. with

the does half I start So to with the stack expanding debentures. but . see borrowing additional up us SBA wouldn't lot capital next debt debentures a of QX, set on of it to expect in SBA here in first year our

Paul Johnson

very of this kind performance -- And generally in then just or how stable, level, how you the quarter That's portfolio. positive. would this migration describe of company But credit it's higher helpful. obviously, maybe mean, credit mean, I or would you the maybe describe of quarter I quarter, kind is just year of kind or

Edward Ross

up, performance, Sure. healthy year. it's it's it's but let's if nature. just, It's EBITDA, question. flattish look say this great company growth this really a been I'd quarter, generally in I in at say,

when market grew if have little a think, core portfolio bit credit, than robust I of economic you then of And little middle are with lower I bit others. lower companies less been think And I think those EBITDA that reflective so the environment, a will. little there dealing the think I for And this a underperformance that's, our in portfolio are XX% situations. slower companies type maybe in about quarter, while.

cases, work those are there high. through. in are rates still relatively Interest And things to

and positioning not we we so issues about feel work to And through. portfolio portfolio, things but good the really to our and immune we're got the of

still it's a equity -- I credit so solid But in relative migration deal navigate issues would think maybe overall, sound very to those some healthy I been X with and say very there's and and so a months portfolio we very, And ago. to in -- cases, there's portfolio. towards are

So stuff we always, work feel good as to there's about frankly. through, things. But clearly, quite

Paul Johnson

you're of answer such. the just also the trend there. larger at maybe of of And the least I the appreciate curious and one end I kind in in anything market, I secondary I'm portfolio? examples secondaries that guess, helpful. more has sort perhaps mean, in is of transactions Very more -- equity market, seeing in activity potential option portfolio market interest exit fund lower of seen, there middle for private sort in the that that been the any you've with on

Edward Ross

I to want sure your question. understand I make

of just portfolio generally talking You're companies. refinancing, speaking, about existing our

Paul Johnson

at more Or transaction another past, equity done X you've sleeve the the for you've a sold to companies least co-investments. In where other investors. of

interest that market, I'm seen. as similar well that's with just anything that or So the secondary curious fund anything if you've there's in to

Edward Ross

Got very you. answer some working don't at time. next, having said whether activity -- that portfolio future all. our Got The and not it's near feel do think and that, also on the equity cases, planning over you. X or in are mature a on in we that over is, good that's X, from and We about -- -- like XX I portfolio, it's, for we months perspective, a in ripe transaction I built one to the been and and some it's our

some so events of a And we others. further and basis, episodic have say, today. a of XX% equity cost would our But is what well than realizations. companies debt, are big kind I it's and positioned I along X% for a think But part strategy, XX% it's equity on

to -- that. I probably how that as kind take of what it don't . doing gets we're I We're them bunch that's question. more proactive would basis. that's transactions your sell of at -- Hopefully, looking on So answer place. a think a

Operator

Rowe with question will B. come from Next Bryce Riley.

Bryce Rowe

maybe were quarter kind result to to Ed, of that an guess, process. update portfolio the Are of up the of to the seen step through the plate Have X? of exits of there maybe give you that. noted that just the more companies you And in of concept processes strategic those kind X exploring third to processes? more us of some on want first, companies terms in there out hit of, explore portfolio continuing go the I the kind

get get Just feel the for a we might what trying kind within portfolio? to churn of

Edward Ross

not back think a companies time, obviously, we're that And I'd at Sure. X X question. Not versus happens do I I will transpire be ones I I we not of what I which place this going next a is to great just bunch activity had sense that transacted. sure think frankly, mean, and of and But exploring the in -- expect, have well. kind Sure. early you investments. quarter on, also some refinancing it additions. or what X It's robust continues in transpire, which portfolio, It's so of to of a a from our that quarter, say, we it as we've will had some market, But don't if gives some kind taking expect they're levels. debt new M&A and an do of there middle But of these lower speak. processes were some we we churn at know last perspective. as the quite think

grow hard perspective. it's the realization to and just coin. of new to active makes a of which whether going If think it's given then quarter. kind ends that from the investment the be be or of within repayment level I as well, active both our and an will portfolio about not, sense. And when to on portfolio So portfolio think it of growth, activity I kind active It's be we'll going handicap

Bryce Rowe

to we discussion the the tied basis compression much how was was that. quarter? surprise much of saw around yield to that of of the yield drop SOFR third spread was XX quarter-over-quarter, a compression, was not There and to in that it helpful. points of the compression I curious in some how that's Yes, Okay. kind see tied big

Edward Ross

quick and was October. Yes. quarter little Shelby on. will, I fourth SOFR. of The to tied give a you mean, to early place answer add in Most resets, I'll answer in if quick wants take the very is those

little So took place. very

where just had And we what the to that fact the comparable so were. and -- really lower that at it new it's originations was repayments though rates

Bryce Rowe

stable kind of nonaccruals. one last and in credit me, talked for was Maybe we've about the Okay. portfolio,

you've Robert I with relative in did more Anything add quarter internal nothing this I especially time. and versus added notice, to just already As that. exhausted last. read on for here there's change have quite said to and call, mean but to some into that you credits guess, relative already mentioned, if a there risk ratings else the the X curious explained anything what I it rated might it, to

Edward Ross

into I time do the it than got there don't know mature place every I and that are think and we've company. other that there's ups take portfolio anything a obviously downs all portfolio, read than to

did means risk we and gone so the couple in for additions to expectations there's have portfolio. up. as And the a feel And Overall, a that risk portfolio, relative us, about. good portfolio to of X we really underperformance the our Grade probably has

in think values to I loan still the low XXs. are

I think they're at XX% or so.

always I great feel we're -- company to it's see. specific have overall, that's you but issues have it's what issues got we So and you really, economic through. just a what that's portfolio I idiosyncratic and driven, portfolio, within not work don't you within that a see

a And levels are as risk little bit result. a so elevated

Operator

conference I closing CEO. any sir. concludes the Ed go question-and-answer Ross, ahead remarks, our our to turn to This back over would like Mr. for Please session.

Edward Ross

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

Operator

conference has Thank concluded. today's now The attending presentation. you for

disconnect. now may You

Fidus Investment (FDUS) 1 Nov 242024 Q3 Earnings call transcript