Core Insights - This year, two fundamental aspects have negatively impacted Business Development Companies (BDCs), causing investor anxiety particularly regarding yield perspectives [1] Group 1 - The performance of BDCs has been depressed due to specific market conditions [1]

Group 1 - The Q3 earnings season is nearing its end, with most major BDCs having reported their financial results [1] - Roberts Berzins has over a decade of experience in financial management, focusing on corporate financial strategies and large-scale financings [1] - Berzins has contributed to the institutionalization of the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [1] Group 2 - Berzins has been involved in developing national SOE financing guidelines and frameworks to channel private capital into affordable housing [1] - He holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [1] - Berzins actively participates in thought-leadership activities to support the development of pan-Baltic capital markets [1]

Core Insights - Fidus Investment (NASDAQ: FDUS) has been consistently ranked among the top three Business Development Companies (BDCs) since March 2024, indicating strong performance and investor confidence [1] Company Overview - Fidus Investment has shown improvement across various metrics, suggesting a positive trend in its operational and financial performance [1] Analyst Background - The analyst, Roberts Berzins, has over a decade of experience in financial management, focusing on corporate financial strategies and large-scale financings [1] - Berzins has contributed to the institutionalization of the REIT framework in Latvia, aimed at enhancing liquidity in pan-Baltic capital markets [1] - His work includes developing national financing guidelines for state-owned enterprises and frameworks for channeling private capital into affordable housing [1] - Berzins holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [1]

Core Insights - Fidus Investment (NASDAQ: FDUS) has been consistently ranked among the top three Business Development Companies (BDCs) since March 2024, indicating strong performance and investor confidence [1] Company Overview - Fidus Investment is recognized for its improving financial metrics and overall performance, which has attracted attention from analysts and investors alike [1] Analyst Background - The analyst, Roberts Berzins, has over a decade of experience in financial management, focusing on corporate financial strategies and large-scale financings [1] - Berzins has contributed to the institutionalization of the Real Estate Investment Trust (REIT) framework in Latvia, aimed at enhancing liquidity in the pan-Baltic capital markets [1] - His work includes developing national State-Owned Enterprise (SOE) financing guidelines and frameworks to channel private capital into affordable housing [1] - Berzins holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [1]

Core Viewpoint - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with other asset classes like Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The company advocates for a diversified approach to investing, suggesting that a solid base of dividend growth stocks can be complemented by other investment vehicles to create a balanced portfolio [1]. - The strategy aims to boost investment income while still capturing total returns that align with the performance of the S&P 500 index [1]. Performance Insights - The article highlights that the hybrid investment system can yield a total return that is competitive with traditional index funds, indicating a potential for long-term growth and income generation [1].

Core Viewpoint - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with other asset classes like Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The company advocates for a diversified approach to investing, suggesting that a solid base of dividend growth stocks can be effectively supplemented with alternative investments to boost overall returns [1]. - The strategy aims to achieve a total return that aligns with the performance of the S&P index, indicating a balanced focus on both income generation and capital appreciation [1].

Financial Data and Key Metrics Changes - Total investment income for Q3 2025 was $37.3 million, a decrease of $2.7 million from Q2 2025, primarily due to a decline in interest income and fee income [10] - Net investment income (NII) for Q3 was $0.49 per share, down from $0.53 per share in Q2 2025 [11] - Adjusted NII was $0.50 per share in Q3, compared to $0.57 per share in Q2 2025 [12] - Total expenses for Q3 were $19.9 million, a decrease of $1.5 million from Q2 2025 [11] - Net asset value grew 2.7% to $711 million at quarter end, compared to $692.3 million as of June 30, 2025 [6] Business Line Data and Key Metrics Changes - Originations for Q3 included $69.7 million in first-lien securities and $4.7 million in equity investments, totaling $74.5 million [7] - The portfolio grew to $1.2 billion on a fair value basis as of September 30, 2025, equal to 102% of cost [7] - First-lien investments comprised 82% of the debt portfolio, while equity investments stood at $143.4 million, or 12% of the total portfolio [8] Market Data and Key Metrics Changes - M&A activity increased in Q3 compared to the first half of the year, with expectations for continued deal flow into Q4 [5] - The weighted average interest rate on outstanding debt was 4.9% as of September 30, 2025 [12] Company Strategy and Development Direction - The company focuses on investing in high-quality, lower-middle-market companies with resilient business models that generate recurring revenue [4] - The strategy includes supporting portfolio companies with growth capital and leveraging long-standing relationships with deal sponsors [5] - The company aims to preserve capital and generate attractive risk-adjusted returns for shareholders [9] Management's Comments on Operating Environment and Future Outlook - Management noted that market activity is expected to be relatively decent in Q4 2025, with strong expectations for originations [8] - The company has limited exposure to tariff impacts from China, with only 5% to 6% of the total portfolio affected [24] - There are no significant concerns regarding the impact of the government shutdown on portfolio companies [26] Other Important Information - Total dividends paid for Q3 amounted to $0.57 per share, including a supplemental dividend of $0.14 per share [5] - The board declared a total dividend of $0.50 per share for Q4, payable on December 29, 2025 [6] Q&A Session Summary Question: Market activity outlook for Q4 - Management indicated that deal flow has picked up and is expected to remain strong in Q4, with several add-on investments already made [17][18] Question: Deal terms and pricing - Management noted that pricing in the lower middle market has stabilized, with no significant changes in deal structures [19][20] Question: Exposure to tariff policy related to China - Management confirmed limited exposure to tariffs, with only two companies significantly affected, both performing well [24][25] Question: Impact of government shutdown - Management stated that exposure to government contracts is limited and not currently impacting portfolio companies [26][27]

Core Insights - Fidus Investment (FDUS) reported quarterly earnings of $0.5 per share, matching the Zacks Consensus Estimate, but down from $0.61 per share a year ago [1] - The company posted revenues of $37.25 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 0.79%, but down from $38.38 million year-over-year [2] - Fidus Investment shares have underperformed the market, losing about 1% since the beginning of the year compared to the S&P 500's gain of 15.6% [3] Earnings Performance - The company has surpassed consensus EPS estimates three times over the last four quarters [1] - Fidus Investment has topped consensus revenue estimates four times over the last four quarters [2] - The current consensus EPS estimate for the coming quarter is $0.46 on revenues of $38.35 million, and for the current fiscal year, it is $2.07 on revenues of $151.75 million [7] Market Outlook - The estimate revisions trend for Fidus Investment was unfavorable ahead of the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] - The outlook for the Financial - SBIC & Commercial Industry, to which Fidus Investment belongs, is currently in the bottom 23% of Zacks industries, suggesting potential challenges ahead [8] Comparative Analysis - Crescent Capital BDC (CCAP), another company in the same industry, is expected to report quarterly earnings of $0.47 per share, reflecting a year-over-year decline of 26.6% [9] - Crescent Capital BDC's revenues are anticipated to be $42.42 million, down 17.8% from the year-ago quarter [10]

Investment Strategy and Objectives - Fidus Investment Corporation provides customized debt and equity financing solutions to lower middle-market companies with revenues between $10.0 million and $150.0 million[315]. - The investment objective is to generate attractive risk-adjusted returns through current income from debt investments and capital appreciation from equity investments[320]. - Investments typically range from $5.0 million to $35.0 million per portfolio company, with a focus on maintaining a diversified investment portfolio[320]. - The company aims to mitigate potential adverse economic effects by maintaining a diversified portfolio of investments[315]. Debt Investments - Fidus Investment Corporation's first lien debt investments are secured by a first priority lien on existing and future assets of the borrower[321]. - The majority of debt investments provide for a variable interest rate, generally with a prime or SOFR floor[322]. - Subordinated debt investments typically rank junior to first and second lien debt but senior to common and preferred equity in the capital structure[324]. - As of September 30, 2025, 72.0% of the debt investment portfolio, or $755.3 million, bore interest at a variable rate[330]. - First lien debt accounted for 72.1% of the fair value of the investment portfolio as of September 30, 2025, totaling $859.3 million[333]. Equity Investments - Equity investments may include direct minority equity investments or warrants to buy a minority equity interest, often made in conjunction with debt investments[325]. Financial Performance - For the nine months ended September 30, 2025, the company invested $284.5 million in debt and equity investments, compared to $274.2 million in the same period of 2024, reflecting a 4.7% increase[328]. - The company received proceeds from sales or repayments of $203.3 million in the nine months ended September 30, 2025, up from $154.1 million in 2024, representing a 32% increase[328]. - Total investment income for the three months ended September 30, 2025, was $37.3 million, a decrease of $1.1 million or 2.9% from $38.4 million in the same period of 2024[343]. - For the nine months ended September 30, 2025, total investment income increased to $113.7 million, up $5.0 million or 4.6% from $108.7 million in 2024[346]. - Net investment income decreased by $4.0 million, or 18.9%, to $17.4 million for the three months ended September 30, 2025, due to a decrease in total investment income[353]. - Net investment income for the nine months ended September 30, 2025, decreased by $1.8 million, or 3.2%, to $54.2 million[354]. Expenses and Losses - Total expenses, including income tax provision, for the three months ended September 30, 2025, were $19.9 million, an increase of $2.9 million or 17.2% from $17.0 million in 2024[346]. - The total net realized loss on investments for the three months ended September 30, 2025, was $(0.9) million, while the nine-month total was $4.8 million[355]. - The net change in unrealized appreciation for the three months ended September 30, 2025, was $3.4 million, compared to a depreciation of $(4.6) million in the same period of 2024[357]. Portfolio and Valuation - As of September 30, 2025, the fair value of the investment portfolio totaled $1.2 billion, consisting of 92 active portfolio companies, compared to $1.1 billion and 87 companies as of December 31, 2024[330][331]. - The weighted average yield on debt investments was 13.0% as of September 30, 2025, slightly down from 13.3% as of December 31, 2024[332]. - The weighted average investment rating of the portfolio as of September 30, 2025, was 2.0 on a fair value basis, unchanged from December 31, 2024[340]. - The fair value of portfolio investments is determined using a multi-step valuation process, with independent third-party valuation firms consulted for 34.1% and 27.5% of total portfolio investments as of September 30, 2025, and December 31, 2024, respectively[383]. Cash and Capital Management - As of September 30, 2025, the company had $62.3 million in cash and cash equivalents, with total net assets of $711.0 million[359]. - The company anticipates funding its investment activities through a combination of additional debt and equity capital[361]. - The company paid cash dividends to stockholders totaling $56.5 million during the nine months ended September 30, 2025[360]. Debt and Borrowing - The company has received SBIC licenses for Fund III and Fund IV, which will enhance returns to stockholders through the sale of SBA-guaranteed debentures[317]. - The company repaid $28.5 million of SBA debentures during the nine months ended September 30, 2025, with remaining outstanding SBA debentures maturing from 2029 to 2036[359]. - The company had $15.0 million in outstanding borrowings under the Revolving Credit Facility as of September 30, 2025, which was terminated after the fiscal quarter[366][367]. - The weighted average interest rates for SBA debentures and the Notes were 4.139% and 4.885%, respectively, as of September 30, 2025[373]. Market Conditions and Risks - The company is closely monitoring market volatility and its potential impact on portfolio companies amid economic uncertainties, including elevated interest rates and geopolitical instability[339]. - The Federal Reserve reduced its benchmark interest rate by 0.25% in September and October 2025, lowering it to the 3.75% to 4.00% range[410]. Recent Investments and Transactions - The Company invested $16.0 million in first lien debt and $1.0 million in common equity in Bobcat of Connecticut, LLC on October 1, 2025[398]. - On October 17, 2025, the Company invested $23.2 million in first lien debt in GPS Insight, Inc.[399]. - The Company realized a gain of approximately $2.3 million from exiting its preferred and common equity investments in Aldinger Company[399]. - The company issued an additional $100.0 million in March 2030 Notes on October 3, 2025, bringing the total outstanding principal amount to $200.0 million[401]. - The company issued an additional $3.5 million and $13.0 million in SBA debentures on October 14 and 21, 2025, respectively, with fixed interim interest rates of 4.74% and 4.73% until March 2026[402].

Investment Income - Total investment income for Q3 2025 was $37.3 million, a decrease of 2.9% compared to $38.4 million in Q3 2024[4] - Net investment income decreased by 18.9% to $17.4 million, or $0.49 per share, down from $21.4 million, or $0.64 per share in the same period last year[8] - Adjusted net investment income was $17.7 million, or $0.50 per share, compared to $20.4 million, or $0.61 per share in Q3 2024, reflecting a 13.2% decline[6] - Net investment income for the three months ended September 30, 2025, was $17,369,000, compared to $21,411,000 for the same period in 2024, reflecting a decrease of approximately 18.5%[32] - Adjusted net investment income for the three months ended September 30, 2025, was $17,723,000, down from $20,424,000 in 2024, reflecting a decline of 13.3%[36] - For the nine months ended September 30, 2025, net investment income totaled $54,219,000, slightly down from $55,988,000 in 2024, a decrease of 3.2%[36] - Adjusted net investment income for the nine months ended September 30, 2025, was $56,191,000, compared to $56,930,000 in 2024, a decline of 1.3%[36] Investment Activity - The company invested $74.5 million in debt and equity securities during the quarter, including one new portfolio company[4] - Subsequent to the quarter end, the company invested $40.2 million in two new portfolio companies, indicating a strong pipeline for future investments[3] Asset and Portfolio Valuation - As of September 30, 2025, the net asset value (NAV) was $711.0 million, or $19.56 per share[4] - The fair value of the investment portfolio totaled $1.2 billion, consisting of 92 active portfolio companies[10] - Total assets increased to $1,277,748,000 as of September 30, 2025, compared to $1,164,112,000 on December 31, 2024, representing a growth of approximately 9.7%[30] - Total investments at fair value rose to $1,192,748,000, up from $1,090,506,000, indicating an increase of about 9.4%[30] - Net asset value per common share increased to $19.56 as of September 30, 2025, from $19.33 at the end of 2024, a rise of approximately 1.2%[30] Expenses and Liabilities - Total expenses for Q3 2025 were $19.9 million, an increase of 17.2% from $17.0 million in Q3 2024[7] - Interest and financing expenses increased to $7,649,000 for the three months ended September 30, 2025, compared to $6,026,000 in 2024, an increase of approximately 26.9%[32] - The total liabilities increased to $566,714,000 as of September 30, 2025, from $508,446,000 at the end of 2024, representing a rise of approximately 11.5%[30] Dividends - The company declared total dividends of $0.50 per share for Q4 2025, consisting of a base dividend of $0.43 and a supplemental dividend of $0.07[13] - The company declared dividends of $0.57 per share for the three months ended September 30, 2025, consistent with the same period in 2024[32] Realized Losses - The company reported a net realized loss on investments of $930,000 for the three months ended September 30, 2025, compared to a loss of $366,000 in 2024[32] - The capital gains incentive fee expense for the three months ended September 30, 2025, was a reversal of $354,000, compared to an expense of $(987,000) in 2024[36] - The capital gains incentive fee expense for the nine months ended September 30, 2025, was $1,972,000, up from $942,000 in 2024[36]