Fidus Investment Corp (FDUS) 2024 Q2 法說會逐字稿

Good day and welcome to the Fidus second quarter 2024 earnings conference Call. All participants will be in listen-only mode. (Operator Instructions). Please note this event is being recorded.

美好的一天，歡迎參加 Fidus 2024 年第二季財報電話會議。所有參與者將處於僅聽模式。（操作員說明）。請注意此事件正在被記錄。

I would now like to turn the conference over to Jody Burfening. Please go ahead.

我現在想把會議交給喬迪·伯芬寧。請繼續。

Thank you, Cindy, and good morning, everyone. And thank you for joining us today for Fidus Investment Corporation's second quarter 2024 earnings conference call. With me this morning are Ed Ross, Fidus Investment Corporation's Chairman and Chief Executive Officer, and Shelby Sherard, Chief Financial Officer.

謝謝你，辛迪，大家早安。感謝您今天參加 Fidus Investment Corporation 的 2024 年第二季財報電話會議。今天早上和我在一起的有 Fidus Investment Corporation 董事長兼執行長 Ed Ross 和財務長謝爾比謝拉德 (Shelby Sherard)。

Fidus Investment Corporation issued a press release yesterday afternoon with the details of the company's quarterly financial results. The copy of the press release is available on the investor relations page of the company's website at FDUS.com. I'd also like to call your attention to the Customary Safe Harbor Disclosure regarding forward-looking statements included on today's call.

Fidus Investment Corporation 昨天下午發布了一份新聞稿，詳細介紹了該公司的季度財務表現。新聞稿的副本可在公司網站 FDUS.com 的投資者關係頁面上取得。我還想提請您注意有關今天電話會議中包含的前瞻性陳述的慣例安全港披露。

The conference call today will contain forward-looking statements, including statements regarding the goals, strategies, beliefs, future potential, operating results, and cash flows of Fidus Investment Corporation. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, August 2nd, 2024, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay.

今天的電話會議將包含前瞻性陳述，包括有關 Fidus Investment Corporation 的目標、策略、信念、未來潛力、經營績效和現金流的陳述。儘管管理階層認為這些陳述是基於截至今天（2024 年 8 月 2 日）的估計、假設和預測是合理的，但這些陳述並不能保證未來的績效。時間敏感資訊在任何電話或網路廣播重播時可能不再準確。

Actual results may differ materially as a result of risks, uncertainties, and other factors including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission. Fidus undertakes no obligation to update or revise any of these forward-looking statements.

由於風險、不確定性和其他因素（包括但不限於公司向美國證券交易委員會提交的文件中列出的因素），實際結果可能會存在重大差異。Fidus 不承擔更新或修改任何這些前瞻性陳述的義務。

With that, I would now like to turn the call over to Ed. Good morning, Ed.

有了這個，我現在想把電話轉給艾德。早上好，艾德。

Good morning, Jody, and good morning, everyone. Welcome to our second quarter 2024 earnings conference call. On today's call, I'll start with a review of our second quarter performance and our portfolio at quarter end, and then share with you our outlook for the second half of 2024. Shelby will cover the second quarter financial results in our liquidity position. After we have completed our prepared remarks, we'll be happy to take your questions.

早安，喬迪，大家早安。歡迎參加我們的 2024 年第二季財報電話會議。在今天的電話會議上，我將首先回顧我們第二季度的業績和季度末的投資組合，然後與大家分享我們對 2024 年下半年的展望。謝爾比將在我們的流動性狀況中報告第二季的財務表現。在我們完成準備好的演講後，我們將很樂意回答您的問題。

Our second quarter results demonstrate the strength of our portfolio and the power of our investment strategy. Our debt portfolio generated high levels of adjusted net investment income, amply covering our base dividend. Our equity portfolio produced net realized gains of $9.2 million.

我們第二季的業績證明了我們投資組合的實力和投資策略的力量。我們的債務投資組合產生了高水準的調整後淨投資收益，足以涵蓋我們的基本股利。我們的股票投資組合產生了 920 萬美元的已實現淨收益。

In the face of a less than robust M&A environment, we stayed focused on deals in the lower middle market that met our underwriting standards, investing in companies with strong competitive advantages and resilient business models. Adjusted net investment income for the quarter grew 17.7% to $18.4 million compared to $15.6 million last year, primarily reflecting higher interest income for the quarter.

面對不太強勁的併購環境，我們仍然專注於符合我們承銷標準的中低端市場的交易，投資於具有強大競爭優勢和彈性業務模式的公司。該季度調整後的淨投資收入成長 17.7%，達到 1,840 萬美元，而去年同期為 1,560 萬美元，主要反映了該季度利息收入的增加。

Taking into account the higher average share count from ATM issuances, adjusted net investment income was $0.57 per share compared to $0.62 per share for the same period last year and well in excess of our base dividend. In Q2, in addition to the base dividend of $0.43 per share, we paid a $0.16 per share supplemental dividend for a total distribution to shareholders of $0.59 per share.

考慮到 ATM 發行的平均股數增加，調整後的淨投資收益為每股 0.57 美元，而去年同期為每股 0.62 美元，遠遠超過我們的基本股息。第二季度，除了每股 0.43 美元的基本股息外，我們還支付了每股 0.16 美元的補充股息，向股東分配的總額為每股 0.59 美元。

For the third quarter of 2024, the board of directors declared dividends totaling $0.57 per share, consisting of a base dividend of $0.43 per share and a supplemental dividend of $0.14 per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, which will be payable on September 26, 2024 to stockholders of record as of September 19, 2024.

2024年第三季度，董事會宣派股息總額為每股0.57美元，其中基本股息為每股0.43美元，補充股息為每股0.14美元，相當於調整後NII盈餘除基本股息的100%與上一季相比，該款項將於2024 年9 月26 日支付給截至2024 年9 月19 日在冊的股東。

At quarter end, net asset value stood at $646.8 million, 9.7% higher than net asset value of $589.5 million as of December 31, 2023. On a per share basis, net asset value was $19.50 at quarter end and compared to $19.37 per share as of December 31, 2023.

截至季末，資產淨值達到 6.468 億美元，比截至 2023 年 12 月 31 日的資產淨值 5.895 億美元高出 9.7%。以季末計算，每股資產淨值為 19.50 美元，而截至 2023 年 12 月 31 日的每股資產淨值為 19.37 美元。

Originations totaled $62.4 million for the second quarter, including $17.8 million in one new portfolio company. Our portfolio as a whole continued to be very acquisitive in the second quarter, resulting in $44.6 million in follow on investment activity. Net investment totaled $58.1 million, all of which were in first lien securities. Equity investments totaled $4.3 million as we continue to co-invest in the equity of portfolio companies.

第二季的發起總額為 6,240 萬美元，其中包括一家新投資組合公司的 1,780 萬美元。我們的整體投資組合在第二季度繼續保持強勁的收購勢頭，導致後續投資活動達到 4,460 萬美元。淨投資總額為 5,810 萬美元，全部投資於第一留置權證券。我們繼續共同投資投資組合公司的股權，股權投資總額為 430 萬美元。

Proceeds from repayments and realizations totaled $43.1 million for the second quarter, including $12.6 million in proceeds from the monetization of equity investments, primarily in two portfolio companies, Pool and Electrical Products and Virginia Tile, resulting in net realized gains of $9.2 million.

第二季還款和變現收益總計 4,310 萬美元，包括股權投資貨幣化收益 1,260 萬美元，主要投資於 Pool and Electrical Products 和 Virginia Tile 兩家投資組合公司，實現淨收益 920 萬美元。

Subsequent to quarter close, we exited one first lien debt investment and received payment in full of $23.1 million, including prepayment fees. Our portfolio grew to $1.1 billion on a fair value basis as of June 30, 2024, equal to 101.9% of cost and consisting of a debt portfolio totaling $945.7 million, an equity portfolio of $132.7 million at quarter end.

季度結束後，我們退出了一項第一留置權債務投資，並收到了 2,310 萬美元的全額付款，包括預付款費用。截至2024 年6 月30 日，我們的投資組合以公允價值成長至11 億美元，相當於成本的101.9%，其中包括總額為9.457 億美元的債務投資組合，截至季末的股票投資組合為1.327 億美元。

With debt originations consisting entirely of first lien investments for the second quarter, first lien securities grew to 71% of the debt portfolio at quarter end. We ended the quarter with 86 active portfolio companies.

由於第二季的債務起源完全由第一留置權投資組成，第一留置權證券在季末成長至債務投資組合的 71%。本季結束時，我們有 86 家活躍的投資組合公司。

In terms of credit quality, our portfolio remains healthy and in good shape overall. We continue to manage through the issues of two operating companies on non-accrual. As a percentage of the total portfolio on a fair value basis, non-accrual will stay under 1% for the second quarter.

就信貸品質而言，我們的投資組合整體保持健康且狀況良好。我們繼續處理兩家營運公司的非應計費用問題。以公允價值計算，非應計費用佔投資組合總額的百分比在第二季將維持在 1% 以下。

Turning to our outlook, we still expect deal flow and M&A activity for the remainder of the year to be at reasonable levels. While we expect to see higher investment activity levels, we do also expect to see a pickup and repayment as numerous portfolio companies are evaluating strategic alternatives.

談到我們的前景，我們仍然預計今年剩餘時間的交易流量和併購活動將處於合理水平。雖然我們預期投資活動水準會更高，但隨著眾多投資組合公司正在評估策略替代方案，我們也預期投資活動會有所回升和償還。

We remain focused on opportunities that meet our strict underwriting standards, leveraging our relationships with deal sponsors and our industry expertise within the lower middle market. We continue to invest in businesses with strong and sustainable cash flow generating business models and positive long-term outlooks.

我們仍然專注於滿足我們嚴格承保標準的機會，利用我們與交易贊助商的關係以及我們在中低端市場的行業專業知識。我們繼續投資於具有強勁且可持續的現金流生成業務模式和積極的長期前景的企業。

At the same time, we continue to structure our debt investments with a high degree of equity cushion, maintaining a portfolio that produces both high levels of current and recurring income and the potential for enhanced returns from the monetization of equity and securities.

同時，我們繼續以高度股權緩衝來構建債務投資，維持一個既能產生高水平的經常性收入又能產生高水平經常性收入以及通過股權和證券貨幣化獲得更高回報的潛力的投資組合。

With a healthy and growing portfolio, we remain focused on our long-term goals of growing net asset value over time, preserving capital, and generating attractive risk-adjusted returns for our shareholders.

憑藉健康且不斷增長的投資組合，我們仍然專注於隨著時間的推移增加淨值、保存資本並為股東創造有吸引力的風險調整回報的長期目標。

Now I'll turn the call over to Shelby to provide some details on our financial and operating results. Shelby?

現在我將把電話轉給謝爾比，以提供有關我們財務和營運表現的一些詳細資訊。謝爾比？

Thank you, Ed, and good morning, everyone. I'll review our second quarter results in more detail and close with comments on our liquidity position. Please note, I will be providing comparative commentary versus the prior quarter Q1 2024.

謝謝你，艾德，大家早安。我將更詳細地回顧我們第二季的業績，並最後對我們的流動性狀況發表評論。請注意，我將提供與 2024 年第一季相比的比較評論。

Total investment income was $35.7 million for the three months ended June 30. A $1 million increase from Q1 primarily due to a $3.2 million increase in interest income, including PIC, partially offset by a $0.8 million decrease in fee income related to investment activity and a $1.3 million decrease in interest income on excess cash, which was due to the new investments in Q1 being back end loaded.

截至 6 月 30 日的三個月總投資收入為 3,570 萬美元。較第一季增加 100 萬美元，主要是由於包括 PIC 在內的利息收入增加 320 萬美元，部分被投資活動相關費用收入減少 80 萬美元以及超額現金利息收入減少 130 萬美元所抵銷。的新投資正在後端加載。

Total expenses, including income tax provision, were $18.7 million for the second quarter, a $1.7 million higher than Q1, driven primarily by a $0.9 million increase in the capital gains fee accrual, a $0.4 million increase in base management and income incentive fees, and a $0.2 million increase in the income tax provision related to state tax payments.

第二季總支出（包括所得稅撥備）為 1,870 萬美元，比第一季增加 170 萬美元，主要是由於應計資本利得費增加 90 萬美元、基本管理和收入激勵費增加 40 萬美元，以及與州稅繳納相關的所得稅準備金增加20 萬美元。

Net investment income, or NII, for the three months ended June 30 was $0.53 per share versus $0.57 per share in Q1. Adjusted NII, which excludes any capital gains incentive fee accruals or reversals attributable to realized and unrealized gains and losses on investments, was $0.57 per share in Q2 versus $0.59 in Q1, which includes an increase in the weighted average shares outstanding in Q2.

截至 6 月 30 日的三個月淨投資收益 (NII) 為每股 0.53 美元，而第一季為每股 0.57 美元。調整後的NII（不包括因已實現和未實現的投資損益而產生的任何資本利得激勵費應計或沖銷）第二季度為每股0.57美元，而第一季為每股0.59美元，其中包括第二季已發行加權平均股的增加。

For the three months ended June 30, we recognized approximately $9.2 million of net realized gains primarily related to the sale of our equity investments in pool and electrical products and Virginia tile.

截至 6 月 30 日的三個月，我們確認了約 920 萬美元的已實現淨收益，主要與出售我們對泳池和電氣產品以及維吉尼亞瓷磚的股權投資有關。

We ended the quarter with $472.8 million of debt outstanding, comprised of $175 million of SBA debentures, $250 million of unsecured notes, $32.5 million outstanding on the line of credit, and $15.3 million of secured borrowings.

本季末，我們的未償債務為 4.728 億美元，其中包括 1.75 億美元的 SBA 債券、2.5 億美元的無擔保票據、3,250 萬美元的未償信用額度以及 1,530 萬美元的擔保借款。

Our debt-to-equity ratio as of June 30 was 0.7 times, or 0.5 times, statutory leverage excluding exempt SBA debentures. The weighted average interest rate on our outstanding debt was 4.6% as of June 30.

截至 6 月 30 日，我們的負債股本比率為法定槓桿的 0.7 倍或 0.5 倍（不包括豁免 SBA 債券）。截至 6 月 30 日，我們未償債務的加權平均利率為 4.6%。

Turning now to portfolio statistics. As of June 30, our total investment portfolio had a fair value of $1.1 billion. Our average portfolio company on a cost basis was $11.9 million, which excludes investments in five portfolio companies that sold their operations during the process of winding down.

現在轉向投資組合統計。截至 6 月 30 日，我們的總投資組合公允價值為 11 億美元。我們的投資組合公司的平均成本為 1,190 萬美元，其中不包括在倒閉過程中出售業務的五家投資組合公司的投資。

We have equity investments in approximately 81.3% of our portfolio companies, with an average fully diluted equity ownership of 3.6%. Weighted average effective yield on debt investments was 14% as of June, in line with Q1.

我們對約 81.3% 的投資組合公司進行股權投資，平均完全稀釋股權為 3.6%。截至 6 月份，債務投資的加權平均有效收益率為 14%，與第一季持平。

The weighted average yield is computed using effective interest rates for debt investments at cost, including the accretion of original issued discount and loan origination fees, but excluding investments on non-accrual, if any.

加權平均收益率是使用按成本計算的債務投資的實際利率計算的，包括原始發行的折扣和貸款發放費用的增加，但不包括非應計投資（如有）。

Now I'd like to briefly discuss our available liquidity. In Q2, we issued approximately 1.7 million shares at an average price of $19.80 per share, generating $33 million in net proceeds. As of June 30, our liquidity and capital resources included cash of $48.3 million and $67 million of availability on our line of credit, resulting in total liquidity of approximately $115.8 million. Subsequent to quarter end we increased our line of credit from $100 million to $140 million, giving us $40 million of incremental liquidity.

現在我想簡要討論一下我們的可用流動性。第二季度，我們以每股 19.80 美元的平均價格發行了約 170 萬股股票，產生了 3,300 萬美元的淨收益。截至 6 月 30 日，我們的流動性和資本資源包括 4,830 萬美元的現金和 6,700 萬美元的可用信貸額度，總流動性約為 1.158 億美元。季度末後，我們將信貸額度從 1 億美元增加到 1.4 億美元，為我們提供了 4,000 萬美元的增量流動性。

Now I'll turn the call back to Ed for concluding comments.

現在我將把電話轉回艾德以徵求結論意見。

Thanks, Shelby. As always, I'd like to thank our team and the Board of Directors at Fidus for their dedication and hard work, and our shareholders for their continued support.

謝謝，謝爾比。一如既往，我要感謝我們的團隊和 Fidus 董事會的奉獻和辛勤工作，以及股東的持續支持。

We will now begin the question and answer session. (Operator Instructions) Bryce Rowe, B. Riley.

我們現在開始問答環節。（操作員說明）Bryce Rowe、B. Riley。

Thanks a bunch. Good morning.

非常感謝。早安.

Good morning, Bryce.

早上好，布萊斯。

Ed and Shelby, maybe I'll just start on the capital structure and liquidity profile. Last quarter we talked about the potential for a fresh SBIC license. I'd like to get an update there if there is one. And then also, it's nice to see the revolving credit facility get expanded and then getting the investment grade rating subsequent to quarter into was a good thing to see. So, I wanted to get your feel in terms of how you think about managing the capital structure at this point, especially in light of what seems to be the lowest debt-to-equity coverage or debt-to-equity ratio in the industry?

艾德和謝爾比，也許我會從資本結構和流動狀況開始。上個季度我們討論了新的 SBIC 許可證的潛力。如果有的話我想在那裡得到更新。此外，很高興看到循環信貸額度擴大，然後在季度後獲得投資等級評級也是一件好事。因此，我想了解您目前對管理資本結構的看法，特別是考慮到行業中似乎最低的債務股本覆蓋率或債務股本比率？

Great question, Bryce. And I'll let Shelby jump in here as well. I think, obviously the increase in the revolver is a good thing. The investment grade rating is a great point. I appreciate you bringing that up. I think that would be very helpful when we ultimately do issue unsecured notes in the market, which we will at some point in time. And then the SBIC, we continue to go through that process. We still have a fair degree of confidence that we'll get through that by year end. So we are making progress, but when it's completed it's still a little bit of an unknown, but we feel good about it.

好問題，布萊斯。我也會讓謝爾比跳進來。我認為，顯然左輪手槍的增加是件好事。投資等級評級是一個重要點。我很感謝你提出這個問題。我認為，當我們最終在市場上發行無擔保票據時，這將非常有幫助（我們將在某個時間點這樣做）。然後是 SBIC，我們繼續經歷這個過程。我們仍然有相當程度的信心，相信我們將在年底前完成這項任務。所以我們正在取得進展，但當它完成時，它仍然有點未知，但我們對此感覺很好。

So, from an equity capitalization perspective, we did raise some equity through our ATM program last quarter. We're going to keep that open, but generally speaking we were very focused on liquidity here in Q2 and want to make sure we had a good liquidity position as we were making decisions to make new investments or not. And so, we feel good about our capitalization right now and our liquidity position and we also feel good about the fact that we've got some additional places we can go, meaning equity, meaning the SBIC license hopefully soon, as well as use in the revolver. Shelby, do you have any additional thoughts there?

因此，從股權資本化的角度來看，我們上季確實透過 ATM 計畫籌集了一些股權。我們將保持開放，但總的來說，我們在第二季度非常關注流動性，並希望確保在我們決定是否進行新投資時擁有良好的流動性狀況。因此，我們對目前的資本和流動性狀況感到滿意，我們也對我們還有一些可以去的地方感到滿意，這意味著股權，這意味著希望很快獲得 SBIC 許可證，以及用於左輪手槍。謝爾比，你還有其他想法嗎？

No, I would just echo that. We are currently under levered, but in terms of increasing leverage on the balance sheet, its first line of credit and then SBIC debt once that becomes available to us. And we're obviously well positioned in the unsecured market, but that's probably more opportunistic as opposed to a near-term need.

不，我只是重複這一點。我們目前的槓桿水平較低，但就增加資產負債表槓桿而言，我們首先獲得的是第一筆信貸額度，然後是SBIC債務。我們顯然在無擔保市場中處於有利地位，但這可能更具機會主義，而不是近期需求。

Okay. That's great context. Maybe one more from me. Ed, we talked last quarter also about second quarter being a little bit slower in terms of newer originations and certainly that came to be. I think your other commentary last quarter was around the second half of the year picking up and in the press release you noted that. Can you talk a little bit about what the second half might look like and help size it up for us?

好的。這是很好的背景。也許我還會再發一份。艾德，我們上個季度也談到了第二季度在新產品方面的速度有點慢，當然這確實發生了。我認為您上個季度的其他評論是在下半年左右有所回升，您在新聞稿中指出了這一點。您能談談下半場的情況並幫助我們評估嗎？

Sure, sure. Second quarter, as you mentioned and as we mentioned, it was slower than normal from a new investment perspective. We had a feeling it would go that way and some of that's just timing. Some of that we did lose a deal or two from a pricing perspective. But we're sticking to our netting on how we go about things and our risk-adjusted returns are focused. And so, as we look forward, we do feel like M&A activity is below normal levels, so not robust. But the good thing about the lower middle market is that there is always activity going on, including add-on activity in our existing portfolio.

當然，當然。正如您和我們所提到的，第二季從新的投資角度來看比正常情況要慢。我們預感到事情會朝那個方向發展，其中一些只是時機問題。從定價角度來看，其中一些我們確實失去了一兩筆交易。但我們堅持我們的處理方式，我們的風險調整回報是重點。因此，展望未來，我們確實認為併購活動低於正常水平，因此並不強勁。但中低階市場的好處是，總是有活動在進行，包括我們現有投資組合中的附加活動。

So, we are working on several opportunities that would be new platform investments and have high hopes that some of those will take place here in Q3. We also expect just overall M&A activity levels to pick up a little bit here from the summer and so to be decent. And so our hope and expectation is to participate with some of those as we move forward. So it's not a terrible market, it's just not a robust market. And our portfolio will continue to be acquisitive, would be our guess. And so that will also drive some new originations for us. Hopefully that gives you a good feel. I guess one other point I would make is with that comes repayments, right? And we do have numerous companies that are evaluating strategic alternatives.

因此，我們正在尋找一些新平台投資的機會，並寄予厚望，其中一些機會將在第三季發生。我們也預期整體併購活動水準將從夏季開始回升，因此會相當不錯。因此，我們的希望和期望是在我們前進的過程中參與其中的一些活動。所以這不是一個糟糕的市場，只是不是一個強勁的市場。我們猜測，我們的投資組合將繼續進行收購。因此，這也將為我們帶來一些新的創意。希望這能帶給您良好的感覺。我想我要說的另一點是還款，對嗎？我們確實有許多公司正在評估策略替代方案。

Several are equity-only deals, more smallish in nature, but there is a fair number of companies that are evaluating strategic alternatives. So we do expect repayments to pick up a little bit here in Q3 and Q4, but that's in line with our expectation for a bit of a pick-up on the front end, meaning new investment side of things as well.

其中一些是純股權交易，規模較小，但有相當多的公司正在評估策略替代方案。因此，我們確實預計第三季和第四季的還款額會有所增加，但這符合我們對前端有所回升的預期，這也意味著新的投資面向。

Got it. Okay, I'll jump back in queue. Appreciate the time.

知道了。好的，我會插回隊列。珍惜時間。

Thank you. Good talking to you, Bryce.

謝謝。很高興和你交談，布萊斯。

Me too, Ed. Thanks.

我也是，艾德。謝謝。

Robert Dodd, Raymond James

羅伯特·多德，雷蒙德·詹姆斯

Hi, guys. Congratulations on the quarter. Just to follow-up on that theme on repayments, Ed, you're talking about strategic alternatives, et cetera. Can you give us any color or how does it look within the portfolio for repricing requests or refinancing activity versus strategic alternatives, sounds like moving into a different area of the market or getting acquired or whatever.

嗨，大家好。恭喜本季。只是為了跟進有關還款的主題，Ed，您正在談論戰略替代方案等等。您能給我們任何顏色嗎？

So, obviously repayments can be triggered by different things. So, what are you seeing on the different dynamics between a portfolio company having grown and now looking at a different segment of the market versus looking to refinance? Can you give us any color on the different breakdown within the expectation for repayments to increase?

因此，顯然還款可以由不同的事情觸發。那麼，您對已經成長的投資組合公司現在關注市場的不同部分與尋求再融資之間的不同動態有何看法？您能為我們提供有關還款預期增加的不同細分的任何資訊嗎？

Great question, Robert. It's a little nuanced, but what I would suggest is the strategic alternatives comment that I'm making. And again, some of those are now equity-only, pretty mature investments that we have. But we have numerous, and when I mean numerous, over five that are evaluating strategic alternatives at the moment, and that's to be sold. So that's a piece of the puzzle, if you will. Repricing, early in the year we did have one or two, I actually think it was only one, but one or two, I think it was one repricing alone. It was an asset that we obviously wanted to keep and it made good sense. The company had delivered and so we executed that transaction. That's not overly common.

好問題，羅伯特。這有點微妙，但我建議的是我正在做出的策略替代評論。再說一次，其中一些現在是我們擁有的相當成熟的純股權投資。但我們有很多，我的意思是很多，超過五個正在評估戰略替代方案，並將其出售。如果你願意的話，這就是拼圖的一部分。重新定價，今年年初我們確實有一兩次，我實際上認為這只是一次，但是一兩次，我認為這只是一次重新定價。這是我們顯然想要保留的資產，而且它很有意義。該公司已經交付，因此我們執行了該交易。這並不太常見。

And then refinancing of companies that have performed well, gotten bigger, maybe another lender will do things cheaper than us, that has happened. We had one company in Q2 that actually went to the broadly syndicated loan market. Now, we don't have many companies in our portfolio that are big enough for that to happen often, but they did do that and achieved a better level of pricing. And then we had the event in July that's a subsequent event that we announced. That was a full repayment of a first lien loan that we were leading that we did that another lender came in and took at a lower price. That is part of the market as we talked about. I don't expect it to be a huge trend, but it will be part of the market as we move forward. This is kind of how we think about it.

然後對表現良好的公司進行再融資，變得更大，也許另一個貸款人會做比我們更便宜的事情，這種情況已經發生了。我們在第二季有一家公司實際上進入了廣泛的銀團貸款市場。現在，我們的投資組合中沒有多少公司足夠大，足以經常發生這種情況，但他們確實做到了這一點，並實現了更好的定價水平。然後我們在 7 月舉辦了一次活動，這是我們宣布的後續活動。這是我們主導的第一筆留置權貸款的全額償還，另一家貸方進來並以較低的價格接受。正如我們所討論的，這是市場的一部分。我並不認為這會成為一個巨大的趨勢，但隨著我們的前進，它將成為市場的一部分。這就是我們的想法。

I appreciate that. Then on credit quality, I mean, you haven't had the first lien non-accrual since like 2019 and haven't had anything in a year at this point. So, I mean, the portfolio is holding in really well. Rates are up. The economy does seem to be flowing. The liquidity for portfolio companies has got to be getting more squeezed. At the margin, do you have any significant concerns or how are they holding up so well in this situation with the economy and rates, which has been going on a while, and you just haven't had any issues, so can you tell us why?

我很欣賞這一點。然後就信用品質而言，我的意思是，自 2019 年以來，您還沒有獲得第一個非應計留置權，並且在這一點上一年內都沒有任何東西。所以，我的意思是，該投資組合的表現非常好。價格上漲了。經濟似乎確實在流動。投資組合公司的流動性必然受到更多擠壓。順便說一句，您是否有任何重大擔憂，或者在這種情況下，經濟和利率如何保持得這麼好，這種情況已經持續了一段時間，而您只是沒有遇到任何問題，所以您能告訴我們嗎為什麼？

Sure, I'll try. We're very pleased with the overall performance of our portfolio. It comes with a lot of work. We focus on very high caliber, frankly high free cash flow, defensive growth companies. Those are general characteristics that we're looking for. And I think that strategy has worked well for us. We do have two non-accruals, as you noted and well know. We're working through those. And what I would say is the rest of the portfolio is generally performing quite well. This quarter, 65% of the companies grew their cash flow or EBITDA. So we feel good about the portfolio.

當然，我會嘗試的。我們對我們產品組合的整體表現非常滿意。它伴隨著大量的工作。我們專注於非常高素質、坦白說高自由現金流、防禦性成長型公司。這些是我們正在尋找的一般特徵。我認為這個策略對我們來說效果很好。正如您所指出和眾所周知的，我們確實有兩項非應計費用。我們正在解決這些問題。我想說的是，投資組合的其餘部分總體表現相當不錯。本季度，65% 的公司現金流或 EBITDA 有所成長。所以我們對這個投資組合感覺很好。

Having said that, you always have some companies that are greatly exceeding expectations and you have some companies that are not meeting expectations, in some cases in a more meaningful fashion than you would like. And we're not immune to either one of those. That's the good news. On the positive, we've got more than a few that are doing great. And we've got a few that also are underperforming relative to expectations. But that's all part of it. I think our leverage levels are 4.3 times in the core lower middle market, so much more modest than the broader and the bigger market or the larger EBITDA market. I think that's one of the things that helps us and helps us from a cash interest coverage perspective.

話雖如此，總有一些公司大大超出了預期，也有一些公司沒有達到預期，在某些情況下，其方式比您希望的更有意義。我們也不能倖免於其中任何一個。這是個好消息。從正面的方面來看，我們有不少表現出色的公司。我們有一些表現也低於預期。但這只是其中的一部分。我認為我們的槓桿水平在核心中低端市場是 4.3 倍，比更廣泛、更大的市場或更大的 EBITDA 市場要溫和得多。我認為這是對我們有幫助的事情之一，從現金利息保障的角度來看也對我們有幫助。

And then, when our portfolio is gravitated towards more of a first lien portfolio, as you well know, and when things aren't going exactly how the sponsor wants it to or the ownership group or we do, that's a discussion. And in those cases where there is tighter liquidity, for instance, because of underperformance, we typically ask the owners to put money in. It doesn't mean there's not a discussion in a two-way street because there typically is, but we very much ask for support to make sure that we're protected on our side of things and the company has room to operate. So that's the general strategy, but I think the strategy of moving to a first lien strategy has helped us when things don't go as well as expected. Also, I think the overall strategy of where we focus and the types of deals and types of companies we're looking for, I think, has helped us as well.

然後，當我們的投資組合更傾向於第一留置權投資組合時，如您所知，當事情沒有完全按照贊助商或所有權集團或我們的意願進行時，這就是一場討論。在流動性緊張的情況下，例如，由於業績不佳，我們通常會要求所有者投入資金。這並不意味著雙方之間不會進行討論，因為通常都會有這種情況，但我們非常請求支持，以確保我們這邊的事情受到保護，並且公司有運作的空間。這就是整體策略，但我認為，當事情進展不如預期時，轉向第一留置權策略對我們有所幫助。此外，我認為我們關注的整體策略以及我們正在尋找的交易類型和公司類型也對我們有所幫助。

Got it. Thank you for the color on that.

知道了。謝謝你的顏色。

One last one, if I can, following up on Bryce's first question. Activity is expected to pick up in repayments. In the first half of the year, you grew the portfolio net just a little over $100 million. Most of that was in Q1, which was really, really active, obviously. If we look at $100 million as a six-month growth number, I mean, do you think in the second half, what's the over-under on that?

如果可以的話，最後一個是布萊斯第一個問題的後續。預計還款活動將會增加。今年上半年，您的投資組合淨額成長了 1 億多美元。其中大部分是在第一季度，顯然，這一季度非常非常活躍。如果我們將 1 億美元視為六個月的成長數字，我的意思是，您認為下半年的成長幅度是多少？

As I sit here today, I would guess that it's going to be less than that, because of repayments, because repayments will become a bigger part of the equation. I think it's probably that simple. I think my belief system is originations will most likely outpace repayments, but hopefully that gives you the context. It's very hard to look at Q4 at this point and know what's going to happen, but we expect decent activity levels on both ends of the coin, if you will, meaning originations and repayments.

當我今天坐在這裡時，我猜測由於還款，它會比這個少，因為還款將成為等式中更重要的一部分。我想事情大概就是這麼簡單。我認為我的信念體係是起源很可能會超過還款，但希望這能為您提供背景資訊。目前很難看第四季並知道會發生什麼，但我們預計硬幣兩端都會有不錯的活動水平，如果你願意的話，這意味著發起和償還。

Got it. Thank you.

知道了。謝謝。

Thank you. Good talking to you, Robert.

謝謝。很高興跟你談話，羅伯特。

Mickey Schleien, Ladenburg.

米基‧施萊恩，拉登堡。

Yes. Good morning, everyone. Ed, spreads in the sponsored middle market are under enormous pressure with so much capital available. So I'm curious whether that's driving you toward looking at more non-sponsored deals. And if you are, how do you look at the underwriting and structuring of non-sponsored deals versus sponsored deals?

是的。大家早安。艾德，由於可用資金如此之多，贊助中間市場的利差承受著巨大的壓力。所以我很好奇這是否會促使您考慮更多非贊助交易。如果您是，您如何看待非贊助交易與贊助交易的承銷與結構？

Great question, Mickey. And I think we've always looked at non-sponsored deals. There was a time, actually, when it was 30% to 40% of our portfolio. That is not the case today. I'd say, our portfolio is over 90%. 90% of our companies are controlled by private equity groups.

好問題，米奇。我認為我們一直在關注非贊助交易。事實上，有一段時間它占我們投資組合的 30% 到 40%。今天的情況並非如此。我想說，我們的投資組合超過了 90%。我們90%的公司由私募股權集團控制。

Having said that, when companies that are domiciled in industries that we know well and we really like the characteristics of the business and the outlook, we do look to participate in those situations. The bar is very high, as you might imagine, and they need to be companies that aren't dependent on people as much, and the relationships with the customers is really, so there's an underwriting there that you've got to be very, very careful about. But we do always have looked at that as a source of deal flow and of good opportunities, and so we do continue to look, but the bar remains very, very high.

話雖如此，當公司所在的行業是我們熟悉的行業並且我們確實喜歡該行業的特徵和前景時，我們確實希望參與這些情況。正如你可能想像的那樣，門檻非常高，他們需要成為不太依賴人的公司，並且與客戶的關係確實如此，所以那裡有一個承保，你必須非常，非常小心。但我們確實一直將其視為交易流和良好機會的來源，因此我們確實會繼續尋找，但門檻仍然非常非常高。

So if I could follow up on that, in terms of your actionable pipeline, are non-sponsored deals a meaningful portion of that at this time?

那麼，如果我可以跟進一下，就您的可操作管道而言，非贊助交易目前是否是其中有意義的一部分？

The deals that are most likely, and that's more than a couple, are all sponsored deals and part of a fund complex if you will, of committed funds. Having said that, we had some discussions this week about a couple non-sponsored deals, and we also have one in a longer-term pipeline that's more of a search fund deal, which is quasi-sponsored, definitely. So you're right, it's part of the equation for us, but sponsored-driven deals are still going to be the majority of our flow and our activity, but for the right opportunities, we are interested in those types of situations.

最有可能的交易，而且不只幾筆，都是贊助交易，並且是基金綜合體的一部分，如果你願意的話，是承諾基金的一部分。話雖如此，我們本週就幾項非贊助交易進行了一些討論，而且我們還在長期管道中進行了一項更多是搜索基金交易的討論，這肯定是準贊助的。所以你是對的，這對我們來說是等式的一部分，但贊助驅動的交易仍將是我們流量和活動的大部分，但對於合適的機會，我們對這些類型的情況感興趣。

Okay, I understand. I want to follow up on the balance sheet question, and I do recall that in the last earnings call, you guided for lower originations in the second quarter, which is indeed what happened, but you also kept issuing a lot of equities. So now you're holding a lot of cash, and you're under-levered, which is causing your adjusted NII yield to run below last year. So what's the rationale for that process, and why not pay off at least the balance on the credit facility?

好吧，我明白了。我想跟進資產負債表問題，我確實記得在上次財報電話會議中，您指導第二季度的起源較低，這確實發生了，但您也繼續發行大量股票。因此，現在您持有大量現金，但槓桿率不足，這導致調整後的 NII 收益率低於去年。那麼這個過程的理由是什麼？

Shelby, you want to take that?

謝爾比，你想要那個嗎？

Yes, I'll jump in there. Some of that, Mickey, as a 630 and seeing that excess cash is timing subsequent to quarter-end, we did in fact pay off the line of credit. I would expect us to start borrowing on the line of credit again before the end of the second quarter, but there's just some timing nuances about where the pipeline is and what might be coming down the road and where cash sits.

是的，我會跳進去。其中一些，米基，作為 630，看到多餘的現金出現在季度末之後，我們實際上還清了信貸額度。我預計我們將在第二季末之前再次開始透過信貸額度借款，但在管道的位置、未來可能會發生什麼以及現金的位置方面，只是存在一些時間上的細微差別。

And Shelby, just from a working capital perspective, what's sort of the minimum amount of cash you typically want to hold on your balance sheet?

謝爾比，僅從營運資金的角度來看，您通常希望在資產負債表上持有的最低現金金額是多少？

I mean, I really, less than $10 million. I mean, our line of credit is fairly facile, so it's easy to go up and down, and we don't have any concerns from a covenant or borrowing-based perspective. So there's really no need to sit on excess cash out of, I'll clarify, from the RIC. As you know, we do have some SBIC funds, and so from time to time there can be reasons why we might need to sit on some excess cash at an SBIC fund. But generally speaking, there's not a need. But I'm not going to pay down the line and then turn around and borrow shortly thereafter. And timing of closings is very fluid, so it's kind of hard to predict.

我的意思是，我真的不到 1000 萬美元。我的意思是，我們的信貸額度相當寬鬆，因此很容易上下浮動，從契約或借貸的角度來看，我們沒有任何擔憂。因此，我澄清一下，確實沒有必要從 RIC 那裡持有多餘的現金。如您所知，我們確實有一些 SBIC 基金，因此有時我們可能需要在 SBIC 基金中持有一些多餘的現金。但一般來說，沒有必要。但我不會先還清貸款，然後很快就轉身借錢。而且關閉的時間非常不穩定，因此很難預測。

Right. So just in terms of a trajectory, if Ed's plan or hope for net portfolio growth pans out in the second half, your first source of funds is cash, and then the credit facility, and then down the road perhaps more SBIC debt. Is that correct?

正確的。因此，就軌跡而言，如果艾德的計劃或投資組合淨增長的希望在下半年實現，那麼你的第一個資金來源是現金，然後是信貸安排，然後可能是更多的 SBIC 債務。這是正確的嗎？

Correct.

正確的。

Okay. Those are all my questions this morning. Thanks for your time.

好的。這些都是我今天早上的問題。感謝您抽出時間。

Thanks, Mickey. Good talking to you.

謝謝，米奇。很高興跟你說話。

Paul Johnson, KBW

保羅·約翰遜，KBW

Yes, good morning. Thanks for taking my questions. Congrats on a good quarter and a couple more successful exits. Kind of on that and kind of following on some of the questions for M&A, obviously it's been slower across the market, but your portfolio obviously continues to have these realizations along the way.

是的，早安。感謝您回答我的問題。恭喜您度過了一個良好的季度，並取得了幾次成功的退出。就這一點以及對併購的一些問題的關注，顯然整個市場的進展速度較慢，但您的投資組合顯然在此過程中繼續實現這些目標。

I'm just curious, I mean, is there any effect where that's just due to these are inherently smaller companies and there's maybe just more potential buyers out there for these businesses and private equity, communities obviously under pressure to return more capital. So maybe these are potentially outperforming companies and easier places to potentially prune within their portfolios. But I'm just wondering if there's just anything out there, I guess, that would be kind of, I guess, supporting these realizations that need to have in your portfolio despite the slower M&A market?

我只是很好奇，我的意思是，這是否會產生任何影響，因為這些公司本質上都是較小的公司，而且這些企業和私募股權可能有更多的潛在買家，社區顯然面臨著返還更多資本的壓力。因此，也許這些公司可能表現優異，並且更容易在其投資組合中進行調整。但我只是想知道，儘管併購市場放緩，但我想是否有什麼東西可以支持您的投資組合中所需的這些認識？

Sure. I mean, I think what it speaks to is the lower middle market is, as you know, large, right? It's 90% of the transactions that take place in M&A. They're just not talked about as much in the newspapers. And then, one of our strategies is to invest in the lower end of the lower middle market. And if you grow those businesses, there's typically a pretty good opportunity to do one of two things, sell to another private equity group or sell to a strategic. And so, it's one of the strategies. And what I would say is the names that I'm mentioning are all pretty mature investments for us, meaning they're not. They weren't made two or three years ago.

當然。我的意思是，我認為它說明的是中低端市場，正如你所知，很大，對吧？90%的交易發生在併購中。只是報紙上很少談論它們。然後，我們的策略之一是投資中低階市場的低端。如果你發展這些業務，通常有一個很好的機會做兩件事之一，出售給另一個私募股權集團或出售給策略。因此，這是策略之一。我想說的是，我提到的這些名字對我們來說都是相當成熟的投資，這意味著它們還不是。它們不是兩三年前製造的。

And so, we have, as you may know, probably 17 to 20, I don't know the exact number of equity investments that are, we no longer have debt investments associated with those equity investments. And so some of those names, the ones I'm talking about, so it's just at some point they do need to realize they're mostly private equity driven deals and they've just taken a little bit longer. So I think it really just speaks to the portfolio size of 86 companies and the fact that the lower middle market is always somewhat active. And that's where in terms of numbers, that's the majority of the deals taking place. M&A is not dead. It's just not robust right now. And that's one of the things we like about the lower middle market.

因此，如您所知，我們可能有 17 到 20 個，我不知道確切的股權投資數量，我們不再有與這些股權投資相關的債務投資。所以其中一些名字，我正在談論的那些，所以只是在某些時候他們確實需要意識到它們主要是私募股權驅動的交易，而且他們只是花了更長的時間。所以我認為這實際上只是說明了 86 家公司的投資組合規模以及中低端市場總是有些活躍的事實。從數量上看，這就是大多數交易發生的地方。併購並未消亡。只是現在還不夠強大。這就是我們喜歡中低階市場的原因之一。

Thanks for that, Ed. That's helpful. And then just kind of when you mention new platform deals that you've done, I'm just curious, when you're evaluating a new platform deal, does that mean that's a deal that's in a specific industry or vertical that's potentially new for that buyer? And that's an industry that you've already identified as attractive and have experience and investment expertise built up around that? Or is that a new platform and potentially industry for you as well?

謝謝你，艾德。這很有幫助。然後，當您提到您已經完成的新平台交易時，我只是好奇，當您評估新平台交易時，這是否意味著該交易屬於特定行業或垂直領域，並且可能是新的那個買家？您已經認為這是一個有吸引力的行業，並且擁有圍繞該行業積累的經驗和投資專業知識？或者這對您來說也是一個新平台和潛在行業嗎？

No, typically not a new industry for us. We really try to focus on where we have experience and expertise and think about the one new platform company last quarter to tech enabled services business, which is a 30% to 40% of our portfolio today. Within that segment, we have a lot of different end markets and whatnot, but its tech enabled type services, software, what have you. So we really try to stick to what we understand. So when I say new platform, those are change of control transactions, typically private equity driven. So a new ownership group is the private equity group, and we're financing that buyout and then also co-investing in the equity of the securities alongside the private equity group.

不，對我們來說通常不是一個新行業。我們確實努力專注於我們擁有經驗和專業知識的領域，並考慮上個季度新平台公司的技術支援服務業務，該業務占我們今天投資組合的 30% 到 40%。在這個細分市場中，我們有許多不同的終端市場等等，但它的技術支援型服務、軟體等等。所以我們真的盡力堅持我們所理解的。因此，當我說新平台時，這些都是控制權交易的變更，通常是私募股權驅動的。因此，一個新的所有權集團是私募股權集團，我們為收購提供融資，然後與私募股權集團共同投資證券的股權。

Yes, I got it. That makes sense. All right, that's all for me. Congrats on a good quarter.

是的，我明白了。這是有道理的。好吧，這就是我的全部了。恭喜季度表現良好。

Thank you, Paul. Good talking to you.

謝謝你，保羅。很高興跟你說話。

This concludes our question-and-answer session. I would like to turn the conference back over to the Ed Ross, CEO for any closing remarks.

我們的問答環節到此結束。我想將會議轉回執行長 Ed Ross 發表閉幕詞。

Thank you, Cindy, and thank you everyone for joining us this morning. We look forward to speaking with you on our third quarter call in early November. Have a great day and a great weekend.

謝謝你，辛迪，也謝謝大家今天早上加入我們。我們期待在 11 月初的第三季電話會議上與您交談。祝你有美好的一天和愉快的周末。

And the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。