Fidus Investment (US:FDUS)2021-05-07 17:45Financial Data and Key Metrics Changes - The adjusted net investment income (NII) for Q1 2021 was $11.2 million or $0.46 per share, an increase from $0.44 per share in Q4 2020 [10] - The net asset value (NAV) at the end of Q1 2021 was $413 million or $16.90 per share, which is above the NAV prior to the pandemic [13] - Total investment income for Q1 2021 was $23.3 million, a decrease of $0.3 million from Q4 2020 [34] Business Line Data and Key Metrics Changes - The portfolio consisted of 67 active companies, with a fair market value of $711.9 million, down from $742.9 million at year-end 2020 [25][41] - First lien debt investments accounted for 27.5% of the portfolio on a fair value basis, up from 25.2% as of December 31, 2020 [26] - The weighted average effective yield on debt investments was 12.3% as of March 31, 2021 [42] Market Data and Key Metrics Changes - Deal flow activity in Q1 was driven by M&A and refinancing opportunities, with $63.1 million invested in debt and equity securities [14] - The company received proceeds totaling $98.6 million from repayments, indicating strong M&A activity [17] - The weighted average investment rating for the portfolio was two on a fair value basis, indicating a stable investment quality [29] Company Strategy and Development Direction - The company aims to build a well-diversified portfolio of debt and equity investments in lower middle market businesses to generate high levels of recurring income [8] - The focus remains on first lien investments and strong credits, with a disciplined approach to capital preservation and risk-adjusted returns [32][56] - The company is targeting the $5 million to $30 million EBITDA market, maintaining its strategy despite the changing economic environment [89] Management's Comments on Operating Environment and Future Outlook - Management noted that while some portfolio companies are facing supply chain disruptions and higher input costs, they are managing these challenges effectively [28] - The outlook for M&A activity remains robust, with expectations for continued strong deal flow throughout the year [31][56] - Management expressed confidence in the portfolio's ability to grow, anticipating that originations will outpace repayments [56] Other Important Information - The company declared a base quarterly dividend of $0.31 per share and a supplemental cash dividend of $0.07 per share for Q1 2021 [11] - The liquidity position as of March 31, 2021, included cash of $60.2 million and total liquidity of approximately $150.7 million [43] Q&A Session Summary Question: Expectations for fee income levels in Q2 compared to Q1 - Management indicated that fee income in Q1 was higher than normal due to large events, and they expect fees to decrease in Q2 [46][48] Question: Outlook on portfolio growth and competitive environment - Management expects originations to maintain or exceed repayments, with a robust M&A market anticipated [56][58] Question: Use of SBA debentures and new originations - Management is focused on growing SBIC-3 and expects to see more growth in this area over the next 12 to 36 months [62] Question: Impact of government support on portfolio performance - Management acknowledged that government support was helpful but emphasized the importance of investing in businesses with strong fundamentals [88][90] Question: Industry opportunities in the current environment - Management is focused on cash flow and recurring revenue businesses, particularly in healthcare and technology sectors [81][82]