FIDUS INVESTMENT CORPORATION Investor Presentation
NASDAQ:
Common Stock - FDUS
Disclosure
Fidus Investment Corporation ("Fidus") cautions that statements in this presentation that are forward- looking, and provide other than historical information, involve risks and uncertainties that may impact our future results of operations. The forward-looking statements in this presentation are based on current conditions and include statements regarding our goals, beliefs, strategies and future operating results and cash flows, including but not limited to the equivalent annual yield represented by our dividends declared, the tax attributes of dividends and the amount of leverage available to us. Although our management believes that the expectations reflected in any forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct. Those statements are made based on various underlying assumptions and are subject to numerous uncertainties and risks, including, without limitation: our continued effectiveness in raising, investing and managing capital; adverse changes in the economy generally or in the industries in which our portfolio companies operate; changes in laws and regulations that may adversely impact our operations or the operations of one or more of our portfolio companies; the operating and financial performance of our portfolio companies; retention of key investment personnel; competitive factors; and such other factors described under the caption "Risk Factors" and described in the sections regarding forward looking statements included in our filings with the Securities and Exchange Commission (www.sec.gov). We undertake no obligation to update the information contained herein to reflect subsequently occurring events or circumstances, except as required by applicable securities laws and regulations.
This presentation is neither an offer to sell nor a solicitation of an offer to buy Fidus securities. An offering is made only by an applicable prospectus. This presentation must be read in conjunction with a prospectus in order to fully understand all of the implications and risks of the offering of securities to which the prospectus relates. A copy of such a prospectus must be made available to you in connection with any offering.
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Table of Contents
- Overview
- Investment Strategy & Performance
- Portfolio & Financial Review IV. Conclusion
- Appendices
- Investment Portfolio as of March 31, 2024
- Balance Sheet
- Income Statement
- Reconciliation of Adjustment Net Investment Income
- Corporate Information
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- Overview
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Fidus Investment Corporation
Long term focus on delivering stable dividends, preserving capital and growing net asset
value for our shareholders
History
- May 2007- Closed initial fund and licensed as Small Business Investment Company ("SBIC")
- June 2011- Launched Initial Public Offering as externally managed Business Development Company ("BDC")
- Today- Diversified investment portfolio totaling $1.0 billion in 87 companies (March 31, 2024)
Target Company Characteristics
- Niche market leaders with defensible market positions
- Diversified customer and supplier bases
- Strong free cash flows or asset support
- Significant enterprise value / equity cushions
- Strong management teams with meaningful equity ownership or incentives
Strategy
- Provide customized debt and equity financing solutions primarily to lower middle market companies based in the U.S.
- Well-established direct origination network
- Deep industry sector experience
- Disciplined investment and asset management process
Key Investment Highlights
- Lower middle market offers significant opportunity for attractive risk-adjusted returns
- SBIC licenses provide access to low cost, fixed rate unsecured debt financing
- Seasoned management team with a proven track record of preserving capital, growing NAV and generating cumulative adjusted NII in excess of cumulative dividends
- Consistently deliver higher ROE vs. BDC peers
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- Investment Strategy & Performance
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Proven Investment Strategy
- Provide custom-tailored debt and equity financing solutions for lower middle market companies
- Finance event-driven transactions such as leveraged buyouts, refinancings, recapitalizations, acquisitions and growth capital
- Opportunistic investments in special situations with high downside protection or asset support
- Partnership approach with long-term investment perspective
- Disciplined investment and asset management process
- Highly selective, "PE style" underwriting methodology
- Focus on industries and sponsors we know well
- Manage the credit documentation process to ensure structural protections
- Proactive risk management
- Target investments between $5 - $35 million per portfolio company
- First lien / unitranche debt
- Second lien and subordinated debt
- Equity, including preferred, common and/or warrants
Emphasis on Capital Preservation with Upside Potential
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Lower Middle Market Focus
- Large, fragmented market
- More than 100,000 companies in the lower middle market
- Target firms with annual revenues between $10 and $150 million
- Consistent long-term need for investment capital
- Lower middle market predominantly comprised of private companies
- Limited access to the broader capital markets
- Underserved by traditional capital providers
- Great Recession led to the exit of many traditional financing sources
- Recent COVID-19 crisis has exacerbated the problem
- Opportunity for attractive risk-adjusted returns
- Lower leverage and higher pricing
- Structural protections and covenants that allow for proactive risk management
- Ability to co-invest in equity securities alongside deal partners or management teams
- Fidus professionals have been active in the lower middle market for > two decades
Fidus Is Well Positioned in the attractive Lower Middle Market
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Investment Criteria
Target established, profitable companies with the following characteristics:
- Niche market leaders with defensible market positions
- Products or services of enduring value and/or sustainable competitive advantages
- Diversified customer and supplier bases
- Proven business models with strong free cash flows or asset support
- Annual EBITDA of $5 to $30 million
- Significant margin of safety / meaningful enterprise value cushion
- Robust assessment of relative value using public and private data sources
- Significant equity cushions and multiple refinancing / exit options
- Experienced and successful management teams with meaningful ownership stakes
- Well-definedvalue creation strategies:
- Growth: Business plans with growth potential supported by underlying industry themes
- Consolidation: Numerous acquisition or sale opportunities, often with high synergy capture rate
- Operational: Under-developed companies with clearly stated improvement areas
- Opportunistic: Strong intrinsic value and asset support; adversely impacted by isolated events, industry cycles, or temporary stress
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Proprietary Direct Origination Platform
Extensive, diverse relationships across the lower middle market drive attractive deal flow
and present significant growth opportunities
Platform Overview | Broad Origination Network |
- Unique platform with direct origination capabilities across multiple channels
- Leading private equity firms
- Independent deal sponsors
- "The Lower Middle Market Ecosystem"
- Emphasis on repeat clients and high quality partners building real relationships
- 2+ transactions completed with 22 firms
- Three regional offices allow for nationwide deal sourcing and strong local presence
- Evanston
- New York
- Charlotte
Committed Private | Independent Sponsors |
Equity Funds | |
Intermediaries | Other Lower Middle |
and Advisors | Market Participants |
Number of Middle Market Companies: 200,000 (1)
Number of Deals Reviewed:
4,734
Deals Screened by
Investment Committee:
170
Deals Closed:
116
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Disclaimer
Fidus Investment Corporation published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 May 2024 12:36:09 UTC.
