10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

 

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 814-00861

 

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Maryland

27-5017321

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

1603 Orrington Avenue, Suite 1005

Evanston, Illinois

 

60201

(Address of Principal Executive Offices)

(Zip Code)

 

(847) 859-3940

(Registrant’s telephone number, including area code)

________________

n/a

(Former name, former address and former fiscal year, if changed since last report)

_______________

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

FDUS

The NASDAQ Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer

Smaller reporting company ☐

Emerging growth company ☐

(Do not check if a smaller reporting company)

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 2, 2022, the Registrant had outstanding 24,437,400 shares of common stock, $0.001 par value.

 

 

 

1


 

FIDUS INVESTMENT CORPORATION

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

 

 

PART I — FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

 

Consolidated Statements of Assets and Liabilities — June 30, 2022 (unaudited) and December 31, 2021

3

 

Consolidated Statements of Operations — three and six months ended June 30, 2022 (unaudited) and 2021 (unaudited)

4

 

Consolidated Statements of Changes in Net Assets — three and six months ended June 30, 2022 (unaudited) and 2021 (unaudited)

5

 

Consolidated Statements of Cash Flows — three and six months ended June 30, 2022, (unaudited) and 2021 (unaudited)

6

 

Consolidated Schedules of Investments — June 30, 2022 (unaudited) and December 31, 2021

7

 

Notes to Consolidated Financial Statements (unaudited)

15

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

37

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

55

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings.

58

Item 1A.

Risk Factors.

58

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

58

Item 3.

Defaults Upon Senior Securities.

58

Item 4.

Mine Safety Disclosures.

58

Item 5.

Other Information.

58

Item 6.

Exhibits.

59

Signatures

60

Exhibit Index

 

 

 

2


 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

 

 

 

June 30,

 

 

 

 

 

 

2022

 

 

December 31,

 

 

 

(unaudited)

 

 

2021

 

ASSETS

 

 

 

 

 

 

Investments, at fair value:

 

 

 

 

 

 

   Control investments (cost: $6,833 and $6,833, respectively)

 

$

 

 

$

2,151

 

   Affiliate investments (cost: $45,537 and $55,519, respectively)

 

 

106,374

 

 

 

137,284

 

   Non-control/non-affiliate investments (cost: $687,344 and $559,434, respectively)

 

 

704,146

 

 

 

579,689

 

Total investments, at fair value (cost: $739,714 and $621,786, respectively)

 

 

810,520

 

 

 

719,124

 

Cash and cash equivalents

 

 

72,466

 

 

 

169,417

 

Interest receivable

 

 

13,109

 

 

 

8,231

 

Proceeds receivable from investments sold

 

 

11,895

 

 

 

 

Prepaid expenses and other assets

 

 

1,131

 

 

 

413

 

Total assets

 

$

909,121

 

 

$

897,185

 

LIABILITIES

 

 

 

 

 

 

SBA debentures, net of deferred financing costs (Note 6)

 

$

124,447

 

 

$

103,978

 

Notes, net of deferred financing costs (Note 6)

 

 

245,567

 

 

 

245,016

 

Borrowings under Credit Facility, net of deferred financing costs (Note 6)

 

 

(370

)

 

 

(595

)

Secured borrowings

 

 

17,263

 

 

 

17,637

 

Accrued interest and fees payable

 

 

4,492

 

 

 

4,668

 

Base management fee payable, net of base management fee waiver – due to affiliate

 

 

3,542

 

 

 

3,135

 

Income incentive fee payable – due to affiliate

 

 

1,183

 

 

 

2,622

 

Capital gains incentive fee payable – due to affiliate

 

 

22,756

 

 

 

29,227

 

Administration fee payable and other – due to affiliate

 

 

645

 

 

 

668

 

Taxes (receivable) payable

 

 

343

 

 

 

2,410

 

Payables for investments purchased

 

 

2,773

 

 

 

-

 

Accounts payable and other liabilities

 

 

2,505

 

 

 

655

 

Total liabilities

 

$

425,146

 

 

$

409,421

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,437,400 shares

 

 

 

 

 

 

 issued and outstanding at June 30, 2022 and December 31, 2021, respectively)

 

$

24

 

 

$

24

 

Additional paid-in capital

 

 

361,807

 

 

 

361,807

 

Total distributable earnings

 

 

122,144

 

 

 

125,933

 

Total net assets

 

 

483,975

 

 

 

487,764

 

Total liabilities and net assets

 

$

909,121

 

 

$

897,185

 

Net asset value per common share

 

$

19.80

 

 

$

19.96

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

3


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2022

 

 

2021

 

2022

 

 

2021

 

Investment Income:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

$

 

 

$

975

 

$

 

 

$

1,568

 

Affiliate investments

 

 

657

 

 

 

711

 

 

1,541

 

 

 

1,559

 

Non-control/non-affiliate investments

 

 

18,716

 

 

 

16,105

 

 

34,913

 

 

 

33,802

 

Total interest income

 

 

19,373

 

 

 

17,791

 

 

36,454

 

 

 

36,929

 

Payment-in-kind interest income

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

 

 

 

596

 

 

 

 

 

937

 

Affiliate investments

 

 

 

 

 

84

 

 

30

 

 

 

195

 

Non-control/non-affiliate investments

 

 

367

 

 

 

424

 

 

884

 

 

 

940

 

Total payment-in-kind interest income

 

 

367

 

 

 

1,104

 

 

914

 

 

 

2,072

 

Dividend income

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

 

 

 

568

 

 

 

 

 

568

 

Affiliate investments

 

 

69

 

 

 

110

 

 

725

 

 

 

110

 

Non-control/non-affiliate investments

 

 

7

 

 

 

149

 

 

40

 

 

 

242

 

Total dividend income

 

 

76

 

 

 

827

 

 

765

 

 

 

920

 

Fee income

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

 

 

 

 

 

 

 

 

400

 

Affiliate investments

 

 

160

 

 

 

85

 

 

297

 

 

 

268

 

Non-control/non-affiliate investments

 

 

1,176

 

 

 

2,018

 

 

3,237

 

 

 

4,526

 

Total fee income

 

 

1,336

 

 

 

2,103

 

 

3,534

 

 

 

5,194

 

Interest on idle funds

 

 

1

 

 

 

1

 

 

4

 

 

 

1

 

Total investment income

 

 

21,153

 

 

 

21,826

 

 

41,671

 

 

 

45,116

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Interest and financing expenses

 

 

4,639

 

 

 

4,562

 

 

9,051

 

 

 

9,756

 

Base management fee

 

 

3,618

 

 

 

3,215

 

 

6,961

 

 

 

6,391

 

Incentive fee - income

 

 

1,183

 

 

 

2,550

 

 

2,236

 

 

 

5,219

 

Incentive fee (reversal) - capital gains

 

 

(605

)

 

 

3,883

 

 

(335

)

 

 

3,974

 

Administrative service expenses

 

 

510

 

 

 

430

 

 

932

 

 

 

843

 

Professional fees

 

 

290

 

 

 

312

 

 

805

 

 

 

635

 

Other general and administrative expenses

 

 

531

 

 

 

396

 

 

818

 

 

 

741

 

Total expenses before base management fee waiver

 

 

10,166

 

 

 

15,348

 

 

20,468

 

 

 

27,559

 

Base management fee waiver

 

 

(76

)

 

 

(29

)

 

(152

)

 

 

(29

)

Total expenses, net of base management fee waiver

 

 

10,090

 

 

 

15,319

 

 

20,316

 

 

 

27,530

 

Net investment income before income taxes

 

 

11,063

 

 

 

6,507

 

 

21,355

 

 

 

17,586

 

Income tax provision (benefit)

 

 

55

 

 

 

34

 

 

9

 

 

 

32

 

Net investment income

 

 

11,008

 

 

 

6,473

 

 

21,346

 

 

 

17,554

 

Net realized and unrealized gains (losses) on investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

(204

)

 

 

 

 

(65

)

 

 

957

 

Affiliate investments

 

 

15,300

 

 

 

 

 

15,624

 

 

 

 

Non-control/non-affiliate investments

 

 

3,212

 

 

 

2,150

 

 

9,617

 

 

 

4,409

 

Total net realized gain (loss) on investments

 

 

18,308

 

 

 

2,150

 

 

25,176

 

 

 

5,366

 

Income tax (provision) benefit from realized gains on investments

 

 

(122

)

 

 

 

 

(121

)

 

 

 

Net change in unrealized appreciation (depreciation):

 

 

 

 

 

 

 

 

 

 

 

Control investments

 

 

(2,151

)

 

 

(6,877

)

 

(2,151

)

 

 

(5,985

)

Affiliate investments

 

 

(15,049

)

 

 

12,416

 

 

(20,928

)

 

 

16,368

 

Non-control/non-affiliate investments

 

 

(4,013

)

 

 

11,724

 

 

(3,453

)

 

 

6,301

 

Total net change in unrealized appreciation (depreciation) on investments

 

 

(21,213

)

 

 

17,263

 

 

(26,532

)

 

 

16,684

 

Net gain (loss) on investments

 

 

(3,027

)

 

 

19,413

 

 

(1,477

)

 

 

22,050

 

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

(198

)

 

 

(2,180

)

Net increase (decrease) in net assets resulting from operations

 

$

7,981

 

 

$

25,886

 

$

19,671

 

 

$

37,424

 

Per common share data:

 

 

 

 

 

 

 

 

 

 

 

Net investment income per share-basic and diluted

 

$

0.45

 

 

$

0.26

 

$

0.87

 

 

$

0.72

 

Net increase in net assets resulting from operations per share — basic and diluted

 

$

0.33

 

 

$

1.06

 

$

0.80

 

 

$

1.53

 

Dividends declared per share

 

$

0.43

 

 

$

0.39

 

$

0.96

 

 

$

0.77

 

Weighted average number of shares outstanding — basic and diluted

 

 

24,437,400

 

 

 

24,437,400

 

 

24,437,400

 

 

 

24,437,400

 

 

See Notes to Consolidated Financial Statements (unaudited).

4


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)

 

 

 

Common Stock

 

 

Additional

 

 

Total

 

 

 

 

 

 

Number of

 

 

Par

 

 

paid-in

 

 

distributable

 

 

Total net

 

 

 

shares

 

 

value

 

 

capital

 

 

earnings

 

 

assets

 

Balances at December 31, 2020

 

 

24,437,400

 

 

$

24

 

 

$

363,751

 

 

$

46,985

 

 

$

410,760

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

11,081

 

 

 

11,081

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

3,216

 

 

 

3,216

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(579

)

 

 

(579

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(2,180

)

 

 

(2,180

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(9,286

)

 

 

(9,286

)

Balances at March 31, 2021

 

 

24,437,400

 

 

$

24

 

 

$

363,751

 

 

$

49,237

 

 

$

413,012

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

6,473

 

 

 

6,473

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

2,150

 

 

 

2,150

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

17,263

 

 

 

17,263

 

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(9,531

)

 

 

(9,531

)

Balances at June 30, 2021

 

 

24,437,400

 

 

$

24

 

 

$

363,751

 

 

$

65,592

 

 

$

429,367

 

Balances at December 31, 2021

 

 

24,437,400

 

 

$

24

 

 

$

361,807

 

 

$

125,933

 

 

$

487,764

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

10,338

 

 

 

10,338

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

6,869

 

 

 

6,869

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(5,319

)

 

 

(5,319

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(198

)

 

 

(198

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(12,952

)

 

 

(12,952

)

Balances at March 31, 2022

 

 

24,437,400

 

 

$

24

 

 

$

361,807

 

 

$

124,671

 

 

$

486,502

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

11,008

 

 

 

11,008

 

Net realized gain (loss) on investments, net of taxes

 

 

 

 

 

 

 

 

 

 

 

18,186

 

 

 

18,186

 

Net unrealized appreciation (depreciation) on investments

 

 

 

 

 

 

 

 

 

 

 

(21,213

)

 

 

(21,213

)

Realized losses on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(10,508

)

 

 

(10,508

)

Balances at June 30, 2022

 

 

24,437,400

 

 

$

24

 

 

$

361,807

 

 

$

122,144

 

 

$

483,975

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

5


 

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net increase (decrease) in net assets resulting from operations

 

$

19,671

 

 

$

37,424

 

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:

 

 

 

 

Net change in unrealized (appreciation) depreciation on investments

 

 

26,532

 

 

 

(16,684

)

Net realized (gain) loss on investments

 

 

(25,176

)

 

 

(5,366

)

Interest and dividend income paid-in-kind

 

 

(914

)

 

 

(2,177

)

Accretion of original issue discount

 

 

(60

)

 

 

(605

)

Accretion of loan origination fees

 

 

(711

)

 

 

(1,139

)

Purchase of investments

 

 

(160,098

)

 

 

(167,349

)

Proceeds from sales and repayments of investments

 

 

68,008

 

 

 

191,560

 

Proceeds from loan origination fees

 

 

1,023

 

 

 

1,171

 

Realized losses on extinguishment of debt

 

 

198

 

 

 

2,180

 

Amortization of deferred financing costs

 

 

1,058

 

 

 

1,117

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Interest receivable

 

 

(4,878

)

 

 

(219

)

Receivables from investments sold

 

 

(11,895

)

 

 

 

Prepaid expenses and other assets

 

 

(718

)

 

 

(1,164

)

Accrued interest and fees payable

 

 

(176

)

 

 

1,976

 

Base management fee payable, net of base management fee waiver – due to affiliate

 

 

407

 

 

 

(58

)

Income incentive fee payable – due to affiliate

 

 

(1,439

)

 

 

(60

)

Capital gains incentive fee (reversal) – due to (from) affiliate

 

 

(6,471

)

 

 

3,974

 

Administration fee payable and other – due to affiliate

 

 

(23

)

 

 

(393

)

Payables for investments purchased

 

 

2,773

 

 

 

 

Taxes payable

 

 

(2,067

)

 

 

(700

)

Accounts payable and other liabilities

 

 

1,850

 

 

 

463

 

Net cash provided by (used for) operating activities

 

 

(93,106

)

 

 

43,951

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds received from SBA debentures

 

 

41,500

 

 

 

11,500

 

Repayments of SBA debentures

 

 

(20,000

)

 

 

(19,200

)

Principal payments on Notes

 

 

 

 

 

(100,000

)

Proceeds received from (repayments of) borrowings under Credit Facility, net

 

 

 

 

 

 

Proceeds received from (repayments of) Secured Borrowings, net

 

 

(374

)

 

 

13,500

 

Payment of deferred financing costs

 

 

(1,511

)

 

 

(1,031

)

Dividends paid to stockholders, including expenses

 

 

(23,460

)

 

 

(18,817

)

Net cash provided by (used for) financing activities

 

 

(3,845

)

 

 

(114,048

)

Net increase (decrease) in cash and cash equivalents

 

 

(96,951

)

 

 

(70,097

)

Cash and cash equivalents:

 

 

 

 

 

 

Beginning of period

 

 

169,417

 

 

 

124,308

 

End of period

 

$

72,466

 

 

$

54,211

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

8,169

 

 

$

6,663

 

Cash payments for taxes, net of tax refunds received

 

$

2,197

 

 

$

732

 

 

See Notes to Consolidated Financial Statements (unaudited).

6


 

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

June 30, 2022

(in thousands, except shares)

 

Portfolio Company (a)(b)

 

Variable Index

Rate (e)