Fidus Investment (US:FDUS)2024-05-02 20:06PART I — FINANCIAL INFORMATION This section presents the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Financial Statements This section provides the consolidated financial statements, including assets, liabilities, operations, changes in net assets, cash flows, and investment schedules for the quarter ended March 31, 2024 Consolidated Statements of Assets and Liabilities The company reported total assets of $1.093 billion and net assets of $608.3 million as of March 31, 2024, with stable NAV per share Consolidated Statements of Assets and Liabilities (in thousands) | Account | March 31, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total investments, at fair value | $1,048,071 | $957,906 | | Cash and cash equivalents | $27,122 | $119,131 | | Total assets | $1,092,743 | $1,090,898 | | SBA debentures, net | $170,176 | $204,472 | | Notes, net | $247,521 | $247,243 | | Total liabilities | $484,403 | $501,424 | | Total net assets | $608,340 | $589,474 | | Net asset value per common share | $19.36 | $19.37 | Consolidated Statements of Operations Total investment income increased to $34.7 million, leading to a $17.6 million net investment income and a $20.1 million net increase in net assets from operations Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total investment income | $34,651 | $29,056 | | Total expenses, net | $17,044 | $14,296 | | Net investment income | $17,627 | $14,723 | | Net gain (loss) on investments | $3,017 | $766 | | Net increase in net assets from operations | $20,123 | $15,489 | | Net investment income per share | $0.57 | $0.59 | | Net increase in net assets per share | $0.65 | $0.62 | | Dividends declared per share | $0.65 | $0.66 | Consolidated Statements of Changes in Net Assets Net assets increased by $18.9 million to $608.3 million in Q1 2024, driven by a public offering and net increase from operations, partially offset by dividends Changes in Net Assets - Q1 2024 (in thousands) | Description | Amount | | :--- | :--- | | Balances at December 31, 2023 | $589,474 | | Public offering of common stock, net | $19,170 | | Net investment income | $17,627 | | Net realized gain on investments, net of taxes | $1,799 | | Net unrealized appreciation on investments | $1,218 | | Realized losses on extinguishment of debt | ($521) | | Dividends declared | ($20,427) | | Balances at March 31, 2024 | $608,340 | Consolidated Statements of Cash Flows The company reported a net cash decrease of $92.0 million in Q1 2024, primarily due to cash used in operating and financing activities Cash Flow Summary - Q1 2024 vs Q1 2023 (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used for operating activities | ($77,823) | ($41,208) | | Net cash (used for) provided by financing activities | ($14,186) | $15,276 | | Net (decrease) in cash and cash equivalents | ($92,009) | ($25,932) | | Cash and cash equivalents, beginning of period | $119,131 | $62,350 | | Cash and cash equivalents, end of period | $27,122 | $36,418 | Consolidated Schedules of Investments The investment portfolio's fair value reached $1.048 billion, primarily in First Lien Debt (60.3%) across 87 companies, with a 14.0% weighted average yield Portfolio Composition by Investment Type (Fair Value) | Investment Type | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | First Lien Debt | 60.3% | 60.3% | | Second Lien Debt | 12.9% | 12.5% | | Subordinated Debt | 14.2% | 14.1% | | Equity | 12.0% | 12.6% | | Warrants | 0.6% | 0.5% | | Total | 100.0% | 100.0% | - The total fair value of the investment portfolio increased to $1.048 billion as of March 31, 2024, from $957.9 million as of December 31, 2023301 - As of March 31, 2024, the company held investments in 87 active portfolio companies, an increase from 81 at the end of 2023164165 - Three portfolio companies remained on non-accrual status as of March 31, 2024, with a total fair value of $10.1 million and a cost basis of $32.0 million174310311 Notes to Consolidated Financial Statements (unaudited) This section details the company's BDC and RIC structure, accounting policies, portfolio valuation, debt facilities, and shareholder activities, including a 14.0% portfolio yield - Fidus operates as a BDC and RIC, utilizing its SBIC subsidiary, Fund III, to access up to $350 million in SBA-guaranteed debentures for leverage124125126 - The company's investment portfolio is valued in good faith by the Board, with a significant portion (Level 3 assets) reviewed by independent third-party valuation firms186190193 - As of March 31, 2024, the company had $463.1 million in total debt outstanding, including SBA debentures, credit facility borrowings, notes, and secured borrowings251 - In Q1 2024, the company raised $19.2 million in net proceeds through its at-the-market (ATM) program by issuing 987,170 shares262 - Subsequent to the quarter's end, on April 29, 2024, the Board declared a regular quarterly dividend of $0.43 per share and a supplemental dividend of $0.16 per share279 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 19.3% increase in total investment income to $34.7 million, portfolio growth to $1.05 billion, and strong liquidity with $27.1 million cash - Investment activity was robust in Q1 2024, with $145.9 million invested in debt and equity, including seven new portfolio companies, compared to $51.5 million in Q1 2023299 - The weighted average yield on debt investments was 14.0% as of March 31, 2024, a slight decrease from 14.2% at the end of 2023303 - The portfolio's asset quality remains stable, with 83.5% of investments at fair value rated as '2' (performing as expected), and the weighted average rating was 2.0309 - Net investment income increased by 19.7% to $17.6 million in Q1 2024, up from $14.7 million in Q1 2023, due to higher total investment income outpacing the rise in expenses317 Results of Operations Total investment income increased by 19.3% to $34.7 million in Q1 2024, leading to a 19.7% rise in net investment income and a $3.0 million net gain on investments Comparison of Results of Operations (in millions) | Metric | Q1 2024 | Q1 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total investment income | $34.7 | $29.1 | $5.6 | 19.3% | | Total expenses | $17.0 | $14.3 | $2.7 | 18.8% | | Net investment income | $17.6 | $14.7 | $2.9 | 19.7% | | Net realized gain on investments | $1.7 | $0.1 | $1.6 | N/A | | Net unrealized appreciation | $1.2 | $0.7 | $0.5 | N/A | | Net increase in net assets | $20.1 | $15.5 | $4.6 | 29.7% | Liquidity and Capital Resources The company maintains strong liquidity with $27.1 million cash and $77.5 million available credit, supported by a 311.1% asset coverage ratio and diversified capital sources - The company maintains a diversified capital structure with access to SBA debentures, a revolving credit facility, and unsecured notes324326330331 - Fund III has $175.0 million of outstanding SBA debentures, with potential access to an additional $175.0 million through a new SBIC fund, subject to SBA approval325 - The company's asset coverage ratio of 311.1% as of March 31, 2024, significantly exceeds the regulatory minimum of 150%245335 - The ATM program was increased to an aggregate offering price of $300.0 million in February 2024, with $162.8 million remaining available as of March 31, 2024338 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility, with 72.5% of its debt portfolio in variable-rate investments, providing a natural hedge - As of March 31, 2024, $664.6 million (72.5%) of the company's debt investment portfolio at fair value consisted of variable-rate investments, mitigating risk in a rising rate environment360 Interest Rate Sensitivity Analysis (in millions) | Basis Point Change | Net Increase (Decrease) in Net Investment Income | | :--- | :--- | | (200) | $(10.2) | | (100) | $(5.1) | | 100 | $5.2 | | 200 | $10.2 | | 300 | $15.4 | Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during Q1 2024 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period364 - No changes in internal control over financial reporting occurred during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, internal controls365 PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Legal Proceedings The company is not currently subject to any material legal proceedings - Fidus Investment Corporation and its Investment Advisor are not currently subject to any material legal proceedings366 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have been made to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023368 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered equity sales and made no repurchases under its $5.0 million stock repurchase program in Q1 2024 - There were no sales of unregistered securities during the reporting period369 - The company did not repurchase any of its equity securities during the three months ended March 31, 2024, under its existing $5.0 million stock repurchase program339370 Defaults Upon Senior Securities None - There were no defaults upon senior securities during the period371 Mine Safety Disclosures None - No mine safety disclosures were reported372 Other Information None - No other information was reported under this item373 Exhibits This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, indentures, and officer certifications as required by the Sarbanes-Oxley Act