Fidus Investment (US:FDUS)2022-05-06 16:15Financial Data and Key Metrics Changes - Adjusted net investment income was $10.6 million or $0.43 per share, down from $11.2 million or $0.46 per share year-over-year [8] - Net asset value remained steady at $48.5 million or $19.91 per share, reflecting solid operating performance and net realized gains [8] - Total investment income decreased to $20.5 million, a $3.6 million decline from the previous quarter [23] - Total expenses were $10.2 million, approximately $11.5 million lower than the prior quarter [24] - Debt-to-equity ratio as of March 31 was 0.8 times, with a weighted average interest rate on outstanding debt at 3.7% [26][27] Business Line Data and Key Metrics Changes - Net originations for the quarter were $91.2 million, with $114.4 million invested in debt and equity securities [11] - The largest percentage of debt investments was in first lien debt, amounting to $76.7 million for the first quarter [11] - The fair value of the portfolio at quarter-end was $812 million, equal to 112.8% of cost [17] Market Data and Key Metrics Changes - The portfolio composition has shifted, with senior debt now comprising almost 70% of the debt portfolio [33] - The weighted average effective yield on debt investments was 11.9% as of March 31 [30] Company Strategy and Development Direction - The company aims to continue investing in high-quality, lower middle market businesses with resilient business models [7] - The focus remains on maintaining underwriting standards and generating attractive risk-adjusted returns [21] - The outlook for 2022 remains unchanged, expecting continued healthy deal activity driven by M&A and refinancing [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of the portfolio, stating it is as good as it has ever been [33] - The company is focused on businesses with pricing power to manage risks associated with inflation and supply chain issues [43] - There is a belief that the current investment environment remains favorable for high-quality assets despite economic uncertainties [38] Other Important Information - The company paid a total dividend of $0.53 per share during the first quarter, with a base dividend of $0.36 and a supplemental cash dividend of $0.17 [10] - Subsequent to the quarter, the company invested a total of $19.5 million in two new portfolio companies [16] Q&A Session Summary Question: Credit outlook for year-end 2022 - Management noted that the portfolio quality is strong and does not expect material negative changes [33] Question: Deal flow for equity co-invest opportunities - Management confirmed continued incremental equity investments and a healthy level of M&A activity [35] Question: Current marketplace evaluation and investment focus - Management emphasized a focus on companies with pricing power and free cash flow to mitigate risks [43] Question: Changes in yields and spreads in the current market - No significant pushback on spreads has been observed, and no demand for fixed rates has emerged [47] Question: Access to future SBA debentures - Management provided details on the current status of SBA debentures and future borrowing capacity [49] Question: Spillover income and potential for special dividends - Management is monitoring spillover income but does not foresee significant adjustments at this time [52]