- Total investment income of $14.4 million
- Net investment income of $6.7 million, or $0.35 per share
- Adjusted net investment income of $7.1 million, or $0.37 per share (1)
- Net increase in net assets resulting from operations of $8.6 million, or $0.45 per share
- Invested $60.0 million in debt and equity securities including three new portfolio companies
- Received proceeds from sales and realizations of $45.9 million
- Paid regular quarterly dividend of $0.39 per share on September 23, 2016
- Net asset value (NAV) of $299.3 million, or $15.58 per share, as of September 30, 2016
(1) Supplemental information regarding adjusted net investment income:On a supplemental basis, we provide information relating to adjusted net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income. Adjusted net investment income represents net investment income excluding any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The management agreement with our advisor provides that a capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized losses. In addition, we accrue, but do not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. As such, we believe that adjusted net investment income is a useful indicator of operations exclusive of any capital gains incentive fee expense or (reversal) attributable to realized and unrealized gains and losses. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Reconciliations of net investment income to adjusted net investment income are set forth in Schedule 1. Third Quarter 2016 Financial Results For the three months ended September 30, 2016, total investment income was $14.4 million, an increase of $0.9 million, or 6.4%, over the $13.6 million of total investment income for the three months ended September 30, 2015. The increase was attributable to a $1.0 million increase in fee income resulting from a higher level of investment activity for the three months ended September 30, 2016, as compared to the three months ended September 30, 2015, and a $0.4 million increase in dividend income due to increased levels of distributions received from equity investments, which were partially offset by a $0.5 million decrease in interest income resulting from the reversal of uncollectible interest income on a non-accrual debt investment.
For the three months ended September 30, 2016, total expenses, including income tax provision, were $7.7 million, an increase of $1.2 million or 18.3%, over the $6.5 million of total expenses, including income tax provision, for the three months ended September 30, 2015. Interest and financing expenses for the three months ended September 30, 2016 were $2.6 million, an increase of $0.3 million or 10.9%, compared to $2.4 million for the three months ended September 30, 2015 as a result of higher average balances of SBA debentures and borrowings under the Credit Facility outstanding during 2016. The base management fee increased $0.1 million, or 7.0%, to $2.1 million for the three months ended September 30, 2016 due to higher average total assets less cash and cash equivalents for the three months ended September 30, 2016 than the three months ended September 30, 2015. The incentive fee for the three months ended September 30, 2016 was $2.1 million, a $0.8 million, or 56.8%, increase from the $1.4 million incentive fee for the three months ended September 30, 2015 which was primarily the result of a $0.7 million increase in the capital gains incentive fee to $0.4 million. The administrative service fee, professional fees and other general and administrative expenses totaled $0.8 million for both the three months ended September 30, 2016 and 2015.Net investment income for the three months ended September 30, 2016 was $6.7 million, which was a decrease of $0.3 million, or 4.5%, compared to net investment income of $7.1 million during the three months ended September 30, 2015 as a result of the $0.9 million increase in total investment income and the $1.2 million increase in total expenses, including income tax provision. For the three months ended September 30, 2016, the total net realized (loss) on investments was $(6.0) million. During the three months ended September 30, 2016, we recorded a net change in unrealized appreciation on investments of $7.8 million attributable to (i) the reversal of net unrealized depreciation of $11.0 million related to the exit or sale of investments, resulting in unrealized appreciation, (ii) net unrealized depreciation of $1.7 million on debt investments and (iii) net unrealized depreciation of $1.5 million on equity investments. During the three months ended September 30, 2016, no income tax provision for realized gains on investments was recorded.
As a result of these events, our net increase in net assets resulting from operations during the three months ended September 30, 2016 was $8.6 million, an increase of $3.1 million, or 56.6%, compared to a net increase in net assets resulting from operations of $5.5 million during the prior year period.Per share results for the third quarter ended September 30, 2016 are based on weighted average shares outstanding of 19.2 million, compared to 16.3 million weighted average shares outstanding for the third quarter of 2015, an increase of 18.0%. Portfolio and Investment Activities As of September 30, 2016, Fidus had debt and equity investments with an aggregate fair value of $470.1 million, or 102.4% of cost, in 49 active portfolio companies and five portfolio companies that have sold their underlying operations. The average portfolio investment on a cost basis was $9.4 million, which excludes investments in the five portfolio companies that have sold their operations and are in the process of winding down. Fidus held equity ownership in 85.2% of its portfolio companies. During the third quarter ended September 30, 2016, Fidus made debt and equity investments of $60.0 million, including investments in three new portfolio companies and received proceeds from sales and realizations of $45.9 million. As of September 30, 2016, the weighted average yield on debt investments (excluding any debt investments on non-accrual) was 13.1%. Third quarter 2016 investment activity included the following new portfolio company investments:
- Hilco Plastics Holdings, LLC, doing business as Hilco Technologies, a manufacturer of injection molded plastic and hard coated products primarily for use in the automotive and medical end markets. Fidus invested $8.5 million in subordinated notes and common equity.
- Rohrer Corporation, a manufacturer of high visibility, graphically intensive packaging for consumer products. Fidus invested $17.3 million in subordinated notes and common equity.
- SES Investors, LLC, doing business as SES Foam, a provider of spray foam insulation for the U.S. residential and commercial sectors. Fidus invested $11.1 million in senior loans and common equity and committed $1.5 million in a senior secured revolving loan ($0.5 million of which was funded at closing).
Liquidity and Capital ResourcesAs of September 30, 2016, Fidus had $42.2 million in cash and cash equivalents. SBA debentures outstanding were $214.0 million and unfunded SBA commitments totaled $61.0 million as of September 30, 2016. Fidus had no borrowings outstanding on its senior secured revolving credit facility as of September 30, 2016. The weighted average interest rate on debt outstanding as of September 30, 2016 was 4.2%. Subsequent Events
- On October 4, 2016, we exited our investment in Premium Franchise Brands, LLC and recognized a gain of approximately $1.1 million on our equity investment.
- On October 13, 2016, we restructured our subordinated note investment in Pinnergy, Ltd. As part of the restructuring, we converted $3.0 million of our subordinated note investment into an equity investment in Pinnergy, Ltd. and recognized a loss of approximately $8.9 million on our subordinated note investment. In addition, we made a $3.0 million investment in additional equity interests of Pinnergy, Ltd.
- On October 25, 2016, we received payment in full on our existing subordinated note in K2 Industrial Services and reinvested $12.0 million in new subordinated notes.
- On November 3, 2016, we invested $9.9 million in senior secured notes and common equity of Palmetto Moon, LLC, a retailer of apparel, giftware, and accessories.
Fidus has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.Third Quarter 2016 Financial Results Conference Call Management will host a conference call to discuss the operating and financial results at 9:00am ET on Friday, November 4, 2016. To participate in the conference call, please dial (877) 810-3368 approximately 10 minutes prior to the call. International callers should dial (914) 495-8561. Please reference conference ID # 92115971. A live webcast of the conference call will be available at http://investor.fdus.com/events.cfm. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software. A telephone replay of the conference call will be available from 12:00pm ET on November 4, 2016 until 11:59pm ET on November 9, 2016 and may be accessed by calling (855) 859-2056 (domestic dial-in) or (404) 537-3406 (international dial-in) and reference conference ID # 92115971. An archived replay of the conference call will also be available in the investor relations section of the Company's website. ABOUT FIDUS INVESTMENT CORPORATION Fidus Investment Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $150.0 million. Fidus' investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Fidus seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.
Fidus is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. In addition, for tax purposes, Fidus has elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. Fidus was formed in February 2011 to continue and expand the business of Fidus Mezzanine Capital, L.P., which commenced operations in May 2007 and is licensed by the U.S. Small Business Administration as a small business investment company.FORWARD-LOOKING STATEMENTS This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Fidus' filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Fidus undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
|FIDUS INVESTMENT CORPORATION|
|Consolidated Statements of Assets and Liabilities|
|(in thousands, except shares and per share data)|
|September 30, 2016 (unaudited)||December 31, 2015|
|Investments, at fair value|
|Control investments (cost: $0 and $12,042, respectively)||$||—||$||618|
|Affiliate investments (cost: $105,004 and $105,930, respectively)||119,101||111,846|
|Non-control/non-affiliate investments (cost: $354,052 and $330,366, respectively)||350,956||330,805|
|Total investments, at fair value (cost: $459,056 and $448,338, respectively)||470,057||443,269|
|Cash and cash equivalents||42,165||31,657|
|Prepaid expenses and other assets||1,051||1,222|
|SBA debentures, net of deferred financing costs (Note 6)||$||209,943||$||209,394|
|Borrowings under credit facility, net of deferred financing costs (Note 6)||(549||)||14,734|
|Accrued interest and fees payable||731||2,840|
|Due to affiliates||7,780||5,762|
|Accounts payable and other liabilities||117||176|
|Commitments and contingencies (Note 7)|
|Common stock, $0.001 par value (100,000,000 shares authorized, 19,212,425 and 16,300,732 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively)||19||16|
|Additional paid-in capital||290,543||246,307|
|Undistributed net investment income||11,465||13,887|
|Accumulated net realized (loss) gain on investments, net of taxes and distributions||(13,827||)||(6,145||)|
|Accumulated net unrealized (depreciation) appreciation on investments||11,146||(6,703||)|
|Total net assets||299,346||247,362|
|Total liabilities and net assets||$||517,573||$||480,668|
|Net asset value per common share||$||15.58||$||15.17|
|FIDUS INVESTMENT CORPORATION|
|Consolidated Statements of Operations (unaudited)|
|(in thousands, except shares and per share data)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Total interest income||12,206||12,748||38,450||36,787|
|Total dividend income||929||498||1,920||793|
|Total fee income||1,253||288||2,478||1,558|
|Interest on idle funds and other income||43||23||106||56|
|Total investment income||14,431||13,557||42,954||39,194|
|Interest and financing expenses||2,648||2,388||7,902||6,821|
|Base management fee||2,055||1,920||6,043||5,575|
|Administrative service expenses||356||362||1,044||1,077|
|Other general and administrative expenses||246||227||963||983|
|Net investment income before income taxes||6,758||7,064||18,829||19,327|
|Income tax provision (benefit)||23||14||69||(9||)|
|Net investment income||6,735||7,050||18,760||19,318|
|Net realized and unrealized gains (losses) on investments:|
|Net realized gains (losses) on control investments||(12,041||)||—||(12,041||)||—|
|Net realized gains (losses) on affiliates investments||—||1,531||458||1,531|
|Net realized gains (losses) on non-control/non-affiliate investments||6,083||86||5,885||5,363|
|Net change in unrealized appreciation (depreciation) on investments||7,817||(3,234||)||16,070||(8,124||)|
|Income tax benefit (provision) from realized gains on investments||—||54||(205||)||54|
|Net gain (loss) on investments||1,859||(1,563||)||10,167||(1,176||)|
|Net increase in net assets resulting from operations||$||8,594||$||5,487||$||28,927||$||18,142|
|Per common share data:|
|Net investment income per share-basic and diluted||$||0.35||$||0.43||$||1.06||$||1.19|
|Net increase in net assets resulting from operation per share — basic and diluted||$||0.45||$||0.34||$||1.64||$||1.12|
|Dividends declared per share||$||0.39||$||0.39||$||1.17||$||1.17|
|Weighted average number of shares outstanding — basic and diluted||19,201,024||16,268,328||17,616,540||16,172,454|
|($ in thousands) Three months ended September 30, (unaudited)||($ in thousands) Nine months ended September 30, (unaudited)|
|Net investment income||$||6,735||$||7,050||$||18,760||$||19,318|
|Capital gains incentive fee (reversal) expense||372||(313||)||2,034||(236||)|
|Adjusted net investment income||$||7,107||$||6,737||$||20,794||$||19,082|
|(Per share) Three months ended September 30, (unaudited)||(Per share) Nine months ended September 30, (unaudited)|
|Net investment income||$||0.35||$||0.43||$||1.06||$||1.19|
|Capital gains incentive fee (reversal) expense||0.02||(0.02||)||0.12||(0.01||)|
|Adjusted net investment income (1)||$||0.37||$||0.41||$||1.18||$||1.18|
Company Contact: Edward H. Ross Chief Executive Officer Fidus Investment Corporation847-859-3940Investor Relations Contact:Jody BurfeningLHA(212) email@example.com