Fidus Investment (FDUS) Q1 2025 Earnings Call May 09, 2025 09:00 AM ET Speaker0 Good day, and welcome to the Fidus First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touch tone phone. To withdraw your question, please press then 2. Please note this event is being recorded. I would now like to turn the conference over to Jodi ...

Core Viewpoint - Fidus Investment (FDUS) reported quarterly earnings of $0.54 per share, exceeding the Zacks Consensus Estimate of $0.53 per share, but down from $0.59 per share a year ago, indicating a slight earnings surprise of 1.89% [1][2] Financial Performance - The company achieved revenues of $36.5 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 4.04% and showing an increase from $34.65 million year-over-year [2] - Over the last four quarters, Fidus Investment has exceeded consensus EPS estimates three times and topped revenue estimates four times [2] Stock Performance - Fidus Investment shares have declined approximately 10.6% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for it to outperform the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.53 on revenues of $36.03 million, while for the current fiscal year, the estimate is $2.14 on revenues of $147.18 million [7] - The trend of estimate revisions for Fidus Investment has been favorable leading up to the earnings release [6] Industry Context - The Financial - SBIC & Commercial Industry, to which Fidus Investment belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, suggesting potential challenges ahead [8] - The performance of Fidus Investment may be influenced by the overall outlook for the industry [8]

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 ...

Investment Strategy and Portfolio - 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[300]. - The investment strategy aims to generate attractive risk-adjusted returns through current income from debt investments and capital appreciation from equity investments[300]. - Investments typically range from $5.0 million to $35.0 million per portfolio company, with a focus on maintaining a diversified portfolio[304]. - Equity investments may include direct minority equity investments or warrants to buy equity interests, typically made in conjunction with debt investments[309]. - The investment portfolio consisted of 92 active portfolio companies as of March 31, 2025, compared to 87 active portfolio companies as of December 31, 2024[314][315]. - The Information Technology Services sector represented 35.3% of the portfolio's fair value as of March 31, 2025, up from 34.0% at the end of 2024[324]. Debt Investments - First lien debt investments are secured by a first priority lien on existing and future assets of the borrower, providing a senior position in the capital structure[305]. - Second lien debt investments rank junior to first lien debt but still provide security interests in the assets of the portfolio company[307]. - Subordinated debt investments are typically unsecured and rank subordinate to first and second lien debt, often featuring higher fixed interest rates[308]. - As of March 31, 2025, 72.8% of the debt investment portfolio, or $740.3 million, bore interest at a variable rate[314]. - First lien debt represented 69.4% of the fair value of the investment portfolio as of March 31, 2025, compared to 65.8% as of December 31, 2024[317]. - As of March 31, 2025, debt investments in 52 portfolio companies bore interest at a variable rate, representing $740.3 million, or 72.8% of the portfolio on a fair value basis[378]. Financial Performance - For the three months ended March 31, 2025, the company invested $115.6 million in debt and equity investments, compared to $145.9 million in the same period of 2024, reflecting a decrease of 20.8%[312]. - Total investment income for the three months ended March 31, 2025, was $36.5 million, an increase of $1.8 million or 5.3% from $34.7 million in the same period of 2024[327][328]. - Interest income rose to $30.3 million, up 7.8% from $28.1 million in the prior year, while dividend income surged by 210.1% to $1.2 million[327][328]. - Net investment income increased by $0.6 million, or 3.4%, to $18.2 million during the three months ended March 31, 2025[331]. - The company recorded net unrealized appreciation of $5.6 million as of March 31, 2025, down from $15.3 million as of December 31, 2024[314][315]. - Total net realized gain on investments for the three months ended March 31, 2025, was $13.3 million, significantly higher than the $1.7 million recorded for the same period in 2024[334][335]. Expenses and Cash Management - Total expenses, including income tax provision, increased by $1.3 million or 7.3% to $18.3 million for the three months ended March 31, 2025, compared to $17.0 million in 2024[329][331]. - Interest and financing expenses increased by 12.7% to $6.8 million for the three months ended March 31, 2025, compared to $6.0 million in 2024[329][331]. - The company had $67.5 million in cash and cash equivalents, with total net assets amounting to $677.9 million as of March 31, 2025[338]. - The company experienced a net increase in cash and cash equivalents of $10.3 million for the three months ended March 31, 2025[340]. Risk Factors and Market Conditions - Risks include economic downturns, interest rate volatility, and geopolitical conditions that could impact portfolio companies and investment opportunities[296]. - The company is closely monitoring market volatility and its potential impact on portfolio companies amid economic uncertainties[323]. - The company’s net investment income is sensitive to changes in market interest rates, with potential material adverse effects from significant rate changes[379]. - The Federal Reserve held interest rates steady in Q1 2025, following three consecutive rate reductions in late 2024, with future rate reductions uncertain[378]. Capital Structure and Funding - Fund III and Fund IV received their SBIC licenses, allowing for enhanced returns through SBA-guaranteed debentures[302]. - The company anticipates funding its investment activities through a combination of additional debt and equity capital[341]. - The Credit Facility was increased from $100.0 million to $140.0 million on July 25, 2024, with a maturity date extended to August 17, 2027[343]. - As of March 31, 2025, the company had no borrowings outstanding under its Credit Facility[382]. - The company received exemptive relief from the SEC to exclude senior securities issued by SBIC Funds from the asset coverage ratio requirement, enabling more debt capital for investments[352]. Shareholder Returns - A regular quarterly dividend of $0.43 per share and a supplemental dividend of $0.11 per share were declared, payable on June 25, 2025[375]. - The stock repurchase program allows for the acquisition of up to $5.0 million of outstanding common stock, extended through December 31, 2025[355]. - The company did not make any repurchases of common stock during the three months ended March 31, 2025 and 2024[355].

[First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) Fidus Investment Corporation reported strong Q1 2025 financial results, marked by significant investment income, NAV growth, and strategic portfolio management [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Fidus Investment Corporation reported Q1 2025 total investment income of $36.5 million, net investment income of $18.2 million, and a $19.39 NAV per share, reflecting strong quarterly performance Q1 2025 Key Financial Metrics | Metric | Value | Per Share | | :--- | :--- | :--- | | Total Investment Income | $36.5 million | N/A | | Net Investment Income (NII) | $18.2 million | $0.53 | | Adjusted NII | $18.5 million | $0.54 | | Net Asset Value (NAV) | $677.9 million | $19.39 | | Investments Made | $115.6 million | N/A | | Proceeds from Repayments/Realizations | $57.3 million | N/A | | Spillover Income | $47.4 million | $1.36 | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized a disciplined investment approach, focusing on high-quality businesses, which led to successful equity monetizations and a healthy portfolio - The company continues its disciplined strategy of investing in high-quality, cash-flow-generative businesses with defensive characteristics[3](index=3&type=chunk) - Monetized two equity investments for a net realized gain of **$11.5 million**, or **$0.33 per share**, which helped increase the **NAV**[3](index=3&type=chunk) - The investment portfolio is considered well-diversified and healthy, constructed to generate attractive risk-adjusted returns[3](index=3&type=chunk) [Detailed Financial Results](index=2&type=section&id=First%20Quarter%202025%20Financial%20Results) The company's Q1 2025 operating results show a 5.3% increase in total investment income and a 3.4% rise in net investment income year-over-year [Operating Results (Q1 2025 vs. Q1 2024)](index=2&type=section&id=Operating%20Results%20(Q1%202025%20vs.%20Q1%202024)) Q1 2025 saw total investment income rise 5.3% to $36.5 million, with net investment income increasing 3.4% to $18.2 million, despite a decrease in NII per share due to higher share count Comparison of Operating Results (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Investment Income | $36,496 | $34,651 | 5.3% | | Total Expenses | $18,273 | $17,044 | 7.2% | | Net Investment Income (NII) | $18,222 | $17,627 | 3.4% | | NII per Share | $0.53 | $0.57 | (7.0%) | | Adjusted NII | $18,509 | $18,126 | 2.1% | | Adjusted NII per Share | $0.54 | $0.59 | (8.5%) | | Net Realized Gain on Investments | $11,480 | $1,799 | 538.1% | - The **$1.8 million** YoY increase in total investment income was mainly due to a **$2.4 million** rise in interest income from a larger average debt portfolio and an **$0.8 million** increase in dividend income, partially offset by a **$1.2 million** decrease in interest on idle funds[6](index=6&type=chunk) - Total expenses rose by **$1.3 million** YoY, primarily driven by a **$0.8 million** increase in interest and financing expenses and a **$0.6 million** net increase in base management fees[7](index=7&type=chunk) [Portfolio, Investment Activity, and Liquidity](index=3&type=section&id=Portfolio%2C%20Investment%20Activity%2C%20and%20Liquidity) This section details the company's investment portfolio status, recent investment activities, and its current liquidity and capital resources [Portfolio Status and Investment Activities](index=3&type=section&id=Portfolio%20Status%20and%20Investment%20Activities) As of March 31, 2025, the investment portfolio reached $1.2 billion across 92 companies, with a 13.2% weighted average yield on debt investments - The investment portfolio totaled **$1.2 billion** at fair value as of March 31, 2025, spread across **92** active portfolio companies[10](index=10&type=chunk) - The weighted average yield on debt investments was **13.2%**, with variable-rate debt constituting **$740.3 million**, or **72.8%** of the debt portfolio's fair value[10](index=10&type=chunk) - Invested in seven new portfolio companies during Q1 2025, including AMOpportunities, Inc., Case IQ, and Fraser Steel LLC[11](index=11&type=chunk)[12](index=12&type=chunk) [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources) Fidus maintained strong liquidity with $67.5 million in cash and $140.0 million available under its credit facility, bolstered by recent capital raises Liquidity and Capital as of March 31, 2025 | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $67.5 million | | Unused Credit Facility | $140.0 million | | SBA debentures outstanding | $182.0 million | | Notes outstanding | $350.0 million | | Weighted average interest rate on debt | 4.8% | - Raised net proceeds of **$20.7 million** from the at-the-market (ATM) equity program during the quarter[11](index=11&type=chunk) - Received net proceeds of **$96.9 million** from the issuance of **$100.0 million** in **6.75%** notes due March 2030[11](index=11&type=chunk) [Dividends and Corporate Actions](index=4&type=section&id=Dividends%20and%20Corporate%20Actions) This section outlines the declared dividends for the second quarter of 2025 and significant corporate events occurring after the quarter-end [Second Quarter 2025 Dividends](index=4&type=section&id=Second%20Quarter%202025%20Dividends) The Board declared total dividends of $0.54 per share for Q2 2025, comprising a $0.43 base and an $0.11 supplemental dividend Q2 2025 Dividend Declaration | Dividend Type | Amount per Share | | :--- | :--- | | Base Dividend | $0.43 | | Supplemental Dividend | $0.11 | | **Total Dividend** | **$0.54** | - The dividend is payable on June 25, 2025, to stockholders of record as of June 13, 2025[13](index=13&type=chunk) - The company has a dividend reinvestment plan (DRIP) that automatically reinvests dividends unless a stockholder opts out[15](index=15&type=chunk) [Subsequent Events](index=4&type=section&id=Subsequent%20Events) Post-quarter, Fidus made a $5.8 million investment in Laboratory Testing, LLC, exited Elements Brands, LLC, and issued additional SBA debentures - On April 15, 2025, invested a total of **$5.8 million** in debt and equity in Laboratory Testing, LLC[16](index=16&type=chunk) - On April 23, 2025, exited debt investments in Elements Brands, LLC, receiving full payment of **$3.7 million**[16](index=16&type=chunk) - On May 5, 2025, issued an additional **$10.0 million** in SBA debentures with a fixed interim interest rate of **5.163%**[17](index=17&type=chunk) [Financial Statements and Supplemental Information](index=6&type=section&id=Financial%20Statements%20and%20Supplemental%20Information) This section presents the consolidated financial statements, including balance sheets and statements of operations, along with a reconciliation of non-GAAP adjusted net investment income [Consolidated Statements of Assets and Liabilities](index=6&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of March 31, 2025, total assets increased to $1.24 billion, driving total net assets to $677.9 million and NAV per share to $19.39 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments, at fair value | $1,154,408 | $1,090,506 | | Cash and cash equivalents | $67,478 | $57,159 | | **Total Assets** | **$1,241,982** | **$1,164,112** | | Total Debt (SBA & Notes) | $521,427 | $417,261 | | **Total Liabilities** | **$564,052** | **$508,446** | | **Total Net Assets** | **$677,930** | **$655,666** | | **NAV per Share** | **$19.39** | **$19.33** | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2025, the company reported $36.5 million in total investment income and a net increase in net assets from operations of $19.7 million, or $0.58 per share Q1 2025 Statement of Operations Highlights (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Investment Income | $36,496 | $34,651 | | Total Expenses, net | $18,273 | $17,044 | | **Net Investment Income** | **$18,222** | **$17,627** | | Total Net Realized Gain | $13,330 | $1,743 | | Total Net Change in Unrealized (Depreciation) | ($9,793) | $1,218 | | **Net Increase in Net Assets** | **$19,658** | **$20,123** | | **Net Increase per Share** | **$0.58** | **$0.65** | [Reconciliation of Adjusted Net Investment Income (Non-GAAP)](index=8&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Investment%20Income%20(Non-GAAP)) The company's non-GAAP Adjusted NII for Q1 2025 was $18.5 million, or $0.54 per share, after excluding capital gains incentive fees - Adjusted NII is a non-GAAP measure that excludes capital gains incentive fee expenses or reversals, which management believes is a useful indicator of operations exclusive of these items[5](index=5&type=chunk)[29](index=29&type=chunk) Reconciliation of NII to Adjusted NII (in thousands, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Investment Income (NII)** | **$18,222** | **$17,627** | | Capital gains incentive fee expense | $287 | $499 | | **Adjusted NII** | **$18,509** | **$18,126** | | **NII per Share** | **$0.53** | **$0.57** | | Capital gains incentive fee per share | $0.01 | $0.02 | | **Adjusted NII per Share** | **$0.54** | **$0.59** |

Core Insights - Fidus Investment Corporation reported a base dividend of $0.43 and a supplemental dividend of $0.11 per share for the second quarter of 2025, reflecting a commitment to returning value to shareholders [13] - The company achieved a net investment income of $18.2 million, or $0.53 per share, for the first quarter of 2025, representing a 3.4% increase compared to the same period in 2024 [9][6] - Total investment income for the first quarter of 2025 was $36.5 million, up 5.3% from $34.7 million in the first quarter of 2024 [6][7] Financial Performance - Interest income increased by $2.2 million, or 7.8%, to $30.3 million in Q1 2025 compared to Q1 2024, driven by higher average debt investment balances [5][7] - The company realized a net gain of $11.5 million from monetizing two equity investments, contributing positively to the net asset value (NAV) [3][10] - The NAV as of March 31, 2025, was $677.9 million, or $19.39 per share, reflecting a slight increase from $655.7 million at the end of 2024 [6][26] Investment Activities - Fidus invested $115.6 million in debt and equity securities during the first quarter of 2025, including seven new portfolio companies [6] - The fair value of the investment portfolio totaled $1.2 billion, consisting of 92 active portfolio companies [11] - The weighted average yield on debt investments was 13.2% as of March 31, 2025 [11] Expense Management - Total expenses for the first quarter of 2025 were $18.3 million, an increase of 7.3% from $17.0 million in Q1 2024, primarily due to higher interest and financing expenses [8][9] - The increase in expenses was attributed to a rise in average borrowings and weighted average interest rates [8] Future Outlook - The company declared dividends totaling $0.54 per share for the second quarter of 2025, indicating ongoing confidence in its financial stability [13] - Fidus continues to focus on building a diversified portfolio of high-quality investments with resilient business models [3]

Core Viewpoint - Fidus Investment Corporation will report its first quarter 2025 financial results on May 8, 2025, and will host a conference call to discuss these results on May 9, 2025 [1][2]. Company Overview - Fidus Investment Corporation provides customized debt and equity financing solutions to lower middle-market companies, defined as U.S. companies with revenues between $10 million and $150 million [4]. - The company's investment objective is to generate attractive risk-adjusted returns through current income from debt investments and capital appreciation from equity-related investments [4]. - Fidus seeks to partner with business owners, management teams, and financial sponsors for financing related to ownership changes, recapitalizations, strategic acquisitions, and business expansions [4]. - 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 [5]. - The company was formed in February 2011 and is licensed by the U.S. Small Business Administration as a Small Business Investment Company (SBIC) [5].

A financial researcher and avid investor with a keen eye for innovation and disruption, as well as growth buy-outs and value stocks. Keeping an eye on the pace of high tech and early growth companies, I write about current events and the biggest news surrounding the industry, and strive to provide readers with ample research and investment opportunities.Analyst’s Disclosure: I/we have a beneficial long position in the shares of FDUS either through stock ownership, options, or other derivatives. I wrote this ...

Group 1 - Fidus Investment Corporation (FDUS) is identified as one of the six Business Development Companies (BDCs) held by the investor, with plans to reinvest all received dividends [1] Group 2 - Roberts Berzins has over a decade of experience in financial management, assisting top-tier corporates in shaping financial strategies and executing large-scale financings [2] - He has contributed to institutionalizing the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [2] - His policy-level work includes developing national SOE financing guidelines and frameworks for channeling private capital into affordable housing [2] - Roberts is a CFA Charterholder and holds an ESG investing certificate, with experience from an internship at the Chicago Board of Trade [2] - He is actively involved in thought-leadership activities to support the development of pan-Baltic capital markets [2]

Group 1: Fidus Investment (FDUS) - Fidus Investment shares increased by 7.9% to close at $18.69, following a broader market rally due to President Trump's announcement of a 90-day tariff pause for non-retaliating nations [1] - The stock experienced a notable trading volume, with more shares traded than in a typical session, contrasting with a 19.6% loss over the past four weeks [1] - The consensus EPS estimate for the upcoming quarterly report is $0.53, reflecting a year-over-year decline of 10.2%, while revenues are expected to be $35.08 million, up 1.2% from the previous year [2] Group 2: Earnings Estimates and Trends - Over the last 30 days, the consensus EPS estimate for Fidus Investment has been revised 1.9% lower, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [3] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [3] - Fidus Investment is part of the Zacks Financial - SBIC & Commercial Industry, where another stock, Main Street Capital (MAIN), saw a 7.7% increase to $52.94, despite a -11.9% return over the past month [3] Group 3: Main Street Capital (MAIN) - Main Street Capital's consensus EPS estimate remains unchanged at $1, representing a 4.8% decline from the previous year [4] - Main Street Capital currently has a Zacks Rank of 4 (Sell), indicating a negative outlook [4]