Fidus Investment (FDUS) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net investment income for Q2 2020 was $9 million or $0.37 per share, compared to $8.4 million or $0.34 per share for the same period last year, and $8.5 million or $0.35 per share for Q1 2020 [19] - Net asset value per share held steady at $15.39, slightly up from $15.37 as of March 31, 2020 [20] - Total investment income was $20.4 million for Q2 2020, a $0.4 million increase from Q1 2020 [31] Business Line Data and Key Metrics Changes - The fair market value of the investment portfolio as of June 30, 2020, was $732.6 million, equal to 98.2% of cost [25] - The portfolio breakdown by investment type included first lien debt at 19.1%, second lien debt at 50%, subordinated debt at 20.7%, and equity investments at 10.2% [26] - The weighted average effective yield on debt investments was 12% as of June 30, 2020 [36] Market Data and Key Metrics Changes - The portfolio remains well diversified, with oil and gas-related businesses accounting for 4.3% and retail for a little more than 3%, unchanged from the previous quarter [27] - Companies serving retail and leisure markets are performing despite previous shutdowns, with no direct exposure to restaurants or hospitality sectors except for one minor equity investment [28] Company Strategy and Development Direction - The company continues to focus on selectively investing in companies with defensive characteristics and resilient business models that can withstand economic stresses [29] - The strategy includes maintaining liquidity to support portfolio companies and preserving capital for long-term shareholder interests [30] - The company is cautiously reopening channels for new investments while prioritizing capital preservation [23] Management's Comments on Operating Environment and Future Outlook - Management noted that portfolio companies are adjusting operations, conserving cash, and maintaining spending discipline amid varying economic conditions [14] - The overall risk levels of the portfolio have improved, with about 88% now in the low-to-medium risk range [18] - Management expressed confidence in the long-term outlook of portfolio companies, which are navigating the economic challenges effectively [29] Other Important Information - The company invested $16.9 million in debt and equity securities during the quarter, primarily in two new portfolio companies [22] - Total liquidity as of June 30 was approximately $76.4 million, with access to an additional $161.5 million of SBA debentures [37] Q&A Session Summary Question: Was there catch-up income related to non-accruals in Q2? - Approximately $100,000 of the $0.6 million recognized in Q2 was catch-up income from Q1, with the rest related to Q2 [39] Question: What is the outlook for the dividend level going forward? - The company is focused on maintaining a strong balance sheet and liquidity, and discussions about dividend structure are ongoing [49][52] Question: How is the competitive landscape changing? - There is a mixed landscape with some lenders slowing down while others are looking to deploy capital in resilient companies [90][92] Question: What is the current leverage and EBITDA for the portfolio? - The average EBITDA is about $11.3 million, with a leverage ratio of 4.7 times [87]