Group 1 - iREIT+HOYA Capital focuses on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1] - The service offers a free two-week trial for potential investors to explore exclusive income-focused portfolios [1] Group 2 - The article emphasizes that successful investing should not be based on popularity, as favored stocks often come with high valuations that can diminish future returns [2] - The focus is on defensive stocks with a medium- to long-term investment horizon [2]

Group 1 - iREIT+HOYA Capital focuses on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1] - The service offers a free two-week trial to explore top ideas across exclusive income-focused portfolios [1] Group 2 - The article emphasizes that successful investing should not be based on popularity, as favored stocks often come with high valuations that can diminish future returns [2] - The author has over 14 years of investment experience and focuses on defensive stocks with a medium- to long-term investment horizon [2]

Group 1 - Fidus Investment (NASDAQ: FDUS) reported Q2 results with a total dividend yield of 10.7% [1] - The company has the same NII price yield and is trading at a 9% premium to NAV [1] - The article suggests exploring Systematic Income for income portfolios that consider both yield and risk management [1]

Core Insights - The article discusses the author's transition from a career in publishing to finance, emphasizing the importance of building an income portfolio using ETFs and CEFs [1]. Group 1 - The author graduated in Languages in 1988 and worked as an editor for 25 years before shifting focus to finance in 2005 [1]. - After losing a job in 2013, the author dedicated efforts to creating an income portfolio, highlighting the use of ETFs and CEFs as investment vehicles [1].

Core Viewpoint - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with 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 balanced approach to investing, focusing on high-quality dividend stocks that provide long-term growth potential and reliable income [1]. - By integrating various asset classes, the company aims to create a portfolio that not only generates income but also captures total returns in line with the S&P 500 [1].

Group 1 - Fidus Investment (NASDAQ: FDUS) has consistently ranked among the top three Business Development Companies (BDCs) for several quarters [1] - The company is led by Roberts Berzins, who has over a decade of experience in financial management and has contributed to the development of financial strategies for top-tier corporates [1] - Berzins has played a significant role in institutionalizing the REIT framework in Latvia, aiming to enhance the liquidity of pan-Baltic capital markets [1] Group 2 - Berzins has been involved in policy-level initiatives, including the creation of 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 from an internship at the Chicago Board of Trade [1] - Berzins is actively engaged in thought-leadership activities to support the development of capital markets in the Baltic region [1]

Financial Data and Key Metrics Changes - For Q2 2025, adjusted net investment income (NII) was $20 million, an increase from $18.4 million in Q2 2024, with fee income accounting for about half of the $1.6 million increase [6] - Adjusted NII per share was $0.57 for both periods, reflecting an increase in average shares outstanding due to the equity ATM program [7] - Total investment income for Q2 was $40 million, a $3.5 million increase from Q1 2025, driven by higher interest income and fee income [12] - Total expenses for Q2 were $21.3 million, a $3.1 million increase over Q1, primarily due to higher capital gains incentive fees and interest expenses [12] Business Line Data and Key Metrics Changes - The debt portfolio totaled $1 billion on a fair value basis, with 81% consisting of first lien investments, while the equity portfolio stood at $138.8 million, or 12% of the total portfolio [10] - The weighted average effective yield on debt investments was 13.1% as of June 30, slightly down from 13.2% at the end of Q1 [15] Market Data and Key Metrics Changes - The company noted that M&A activity was dampened in Q2 due to economic and tariff policy uncertainty but showed signs of improvement in late Q2 and into Q3 [6][20] - The company’s portfolio remains diversified by industry, with non-accrual companies under 1% of the total portfolio on a fair value basis [10] Company Strategy and Development Direction - The company aims to grow net asset value over time by carefully selecting high-quality companies with defensive characteristics and positive growth outlooks [11] - The investment strategy focuses on generating attractive risk-adjusted returns while preserving capital in the fragmented lower middle market [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the increase in deal flow, indicating a better environment for investment activity in the latter half of Q3 and into Q4 [20][23] - The company is well-positioned to grow its portfolio, although repayment activity is expected to be episodic and not as high as in the previous quarter [22][23] Other Important Information - The net asset value grew slightly to $692.3 million at quarter end compared to $677.9 million as of March 31, 2025 [8] - The board declared a total dividend of $0.57 per share for 2025, which includes a supplemental dividend of $0.14 per share [7] Q&A Session Summary Question: What is the outlook for M&A activity in the second half of the year? - Management noted that while Q1 had decent deal flow, Q2 saw a drop due to uncertainty, but activity has improved in late Q2 and continues into Q3, with expectations for a decent market in the latter half of the year [20][23] Question: Are there any changes in the competitive environment? - Management indicated that while the market remains competitive, there has been an increase in competition over the past few years, particularly in the lower middle market [25][26] Question: Can we expect the prepayment fees to decrease in Q3? - Management agreed that the prepayment fees and accelerated amortization seen in Q2 are not expected to repeat at the same levels in Q3 [28] Question: Can you provide insights on Quest Software's performance? - Management described Quest as a cybersecurity solutions provider with a solid long-term outlook, although it has faced challenges due to being over-leveraged and higher interest rates [34] Question: What is the priority for financial sponsors regarding capital structure? - Management noted that financial sponsors are looking for ways to return capital to LPs, but the level of dividend income may not be recurring and is often episodic [38]

Overview - Fidus Investment Corporation has a diversified investment portfolio totaling $1.1 billion as of June 30, 2025, invested in 92 companies[12] - The company targets firms with annual revenues between $10 million and $150 million[20] - Fidus' senior investment professionals have an average of over 25 years of relevant experience[31] Investment Strategy & Performance - Fidus targets investments between $5 million and $35 million per portfolio company[18] - The company's cumulative realized net capital gains from equity investments since IPO is $175.2 million[37] - The adjusted NAV per share at June 30, 2025, was $19.57, a 35.3% premium to the IPO level of $14.46[37] - Fidus has a historical annual median GAAP ROE of 12.5% since its initial IPO[41] Portfolio & Financial Review - The weighted average debt yield of the investment portfolio is 13.1%[47] - Secured debt investments constitute 82.5% of the portfolio[49] - Equity represents 12.0% of portfolio fair value versus cost of 8.0%[58] - The company maintains an attractive 11.2% dividend yield based on total LTM dividends of $2.26 per share as of June 30, 2025[68]

Group 1: Earnings Performance - Fidus Investment reported quarterly earnings of $0.57 per share, exceeding the Zacks Consensus Estimate of $0.53 per share, with an earnings surprise of +7.55% [1] - The company posted revenues of $39.97 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.35%, compared to year-ago revenues of $35.66 million [2] - Over the last four quarters, Fidus Investment has consistently surpassed consensus EPS estimates [2] Group 2: Stock Performance and Outlook - Fidus Investment shares have declined approximately 1.3% since the beginning of the year, while the S&P 500 has gained 7.9% [3] - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $0.53 for the coming quarter and $2.10 for the current fiscal year [4][7] - The estimate revisions trend for Fidus Investment was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 3: Industry Context - The Financial - SBIC & Commercial Industry, to which Fidus Investment belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, which may impact stock performance [8]

[Executive Summary](index=1&type=section&id=Executive%20Summary) Fidus reported strong Q2 2025 results, with adjusted net investment income at $20.0 million and Q3 dividends of $0.57 per share | Metric | Q2 2025 Value | | :-------------------------------- | :------------ | | Total investment income | $40.0 million | | Net investment income | $18.6 million | | Adjusted net investment income | $20.0 million | | Adjusted net investment income per share | $0.57 | | Investments made | $94.5 million | | Proceeds from repayments/realizations | $109.3 million | | Total dividends paid (Q2 2025) | $0.54 per share | | NAV as of June 30, 2025 | $692.3 million | | NAV per share as of June 30, 2025 | $19.57 | | Estimated spillover income | $49.0 million | | Estimated spillover income per share | $1.39 | - Management highlighted the portfolio's continued strong performance and sound credit quality, with ample liquidity to build the portfolio and generate attractive risk-adjusted returns[3](index=3&type=chunk) [Second Quarter 2025 Operating Results](index=2&type=section&id=Second%20Quarter%202025%20Operating%20Results) Fidus's Q2 2025 total investment income increased 12.1% to $39.97 million, driving net investment income up 9.9% to $18.6 million | Metric | Q2 2025 ($M) | Q2 2024 ($M) | $ Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Interest income | 32.211 | 31.507 | 0.704 | 2.2% | | Payment-in-kind interest income | 2.451 | 1.845 | 0.606 | 32.8% | | Dividend income | 0.631 | 0.357 | 0.274 | 76.8% | | Fee income | 3.884 | 1.522 | 2.362 | 155.2% | | Interest on idle funds | 0.793 | 0.433 | 0.360 | 83.1% | | **Total investment income** | **39.970** | **35.664** | **4.306** | **12.1%** | | **Net investment income** | **18.628** | **16.950** | **1.678** | **9.9%** | | Net investment income per share | 0.53 | 0.53 | - | 0.0% | | **Adjusted net investment income** | **19.959** | **18.380** | **1.579** | **8.6%** | | Adjusted net investment income per share | 0.57 | 0.57 | - | 0.0% | | Net increase in net assets from operations | 25.284 | 24.099 | 1.185 | 4.9% | | Net increase in net assets from operations per share | 0.72 | 0.75 | (0.03) | (4.0%) | - The **$4.3 million** increase in total investment income was primarily driven by a **$2.4 million** increase in fee income (prepayment and origination fees), a **$1.3 million** increase in total interest income, and a **$0.3 million** increase in dividend income[6](index=6&type=chunk) - Total expenses increased by **$2.6 million (14.0%)** to **$21.3 million**, mainly due to a **$1.7 million** increase in interest and financing expenses, a **$0.4 million** net increase in base management fee, and a **$0.3 million** increase in income incentive fee[7](index=7&type=chunk) - Net realized loss on investments, net of income tax, was **$(7.6) million** for Q2 2025, compared to a gain of **$9.2 million** in Q2 2024[9](index=9&type=chunk) [Portfolio and Investment Activities](index=3&type=section&id=Portfolio%20and%20Investment%20Activities) Fidus's $1.1 billion portfolio (92 companies) as of June 30, 2025, featured 71.1% variable rate debt (13.1% yield) and four new investments | Metric | Value as of June 30, 2025 | | :-------------------------------- | :------------------------ | | Fair value of investment portfolio | $1.1 billion | | Number of active portfolio companies | 92 | | Portfolio investments as % of cost basis | 101.8% | | Variable rate debt investments | $718.6 million (71.1% of debt portfolio) | | Weighted average yield on debt investments | 13.1% | | Average active portfolio company investment (amortized cost) | $12.3 million | - New portfolio company investments in Q2 2025 included: * E-PlanSoft Buyer, LLC: **$8.0 million** first lien debt and **$1.5 million** preferred equity * Laboratory Testing, LLC: **$5.0 million** first lien debt, **$0.4 million** preferred equity, **$0.4 million** common equity, and additional commitments * Pronto Plumbing & Drain, Inc.: **$1.5 million** first lien debt, **$0.6 million** common equity, and additional commitments * True Environmental Inc.: **$20.0 million** first lien debt, **$0.5 million** common equity, and additional commitments[14](index=14&type=chunk) [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources) Fidus maintained strong liquidity with $91.2 million in cash and $140.0 million of unused credit capacity as of June 30, 2025 | Metric | Value as of June 30, 2025 | | :-------------------------------- | :------------------------ | | Cash and cash equivalents | $91.2 million | | Unused capacity under Credit Facility | $140.0 million | | SBA debentures outstanding | $202.0 million | | January 2026 Notes outstanding | $100.0 million | | November 2026 Notes outstanding | $125.0 million | | March 2030 Notes outstanding | $100.0 million | | Weighted average interest rate on total debt | 4.8% | - During Q2 2025, Fidus received **$7.5 million** from its ATM Program, **$20.0 million** from SBA debentures, and redeemed **$25.0 million** of its January 2026 Notes[11](index=11&type=chunk) [Dividends](index=3&type=section&id=Dividends) The Board declared a total dividend of $0.57 per share for Q3 2025, comprising a $0.43 base and $0.14 supplemental dividend | Dividend Type | Amount Per Share (Q3 2025) | | :-------------------- | :------------------------- | | Base Dividend | $0.43 | | Supplemental Dividend | $0.14 | | **Total Dividend** | **$0.57** | - Dividends are payable on September 25, 2025, to stockholders of record as of September 18, 2025[12](index=12&type=chunk) - Fidus has a dividend reinvestment plan (DRIP) where stockholders automatically reinvest dividends into additional common stock unless they opt out[15](index=15&type=chunk) [Subsequent Events](index=4&type=section&id=Subsequent%20Events) After quarter-end, Fidus made a new investment in Sogno Toscano, LLC, realized a gain from PowerGrid Services, and exited Choice Technology Solutions - On July 2, 2025, Fidus invested **$8.5 million** in first lien debt and **$4.3 million** in preferred equity in Sogno Toscano, LLC[16](index=16&type=chunk) - On July 2, 2025, Fidus received a distribution from PowerGrid Services Acquisition, LLC, resulting in a realized gain of **$0.9 million**[16](index=16&type=chunk) - On July 30, 2025, Fidus exited its first lien debt investment in Choice Technology Solutions, LLC, receiving **$10.6 million** payment in full, but recognized a **$0.5 million** loss on its preferred equity investment[17](index=17&type=chunk) [Company Overview](index=4&type=section&id=Company%20Overview) Fidus Investment Corporation is a BDC and RIC providing customized debt and equity financing to lower middle-market U.S. companies - Fidus provides customized debt and equity financing solutions to lower middle-market companies (revenues between **$10 million** and **$150 million**) based in the U.S[20](index=20&type=chunk) - The company's investment objective is to provide attractive risk-adjusted returns by generating current income from debt investments and capital appreciation from equity-related investments[20](index=20&type=chunk) - Fidus is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a Business Development Company (BDC) and a Regulated Investment Company (RIC) for tax purposes[21](index=21&type=chunk) [Conference Call Information](index=4&type=section&id=Conference%20Call%20Information) Management will host a conference call on August 8, 2025, at 9:00 AM ET to discuss Q2 2025 financial results - A conference call to discuss Q2 2025 financial results will be held on Friday, August 8, 2025, at 9:00 AM ET[18](index=18&type=chunk) - Participants can dial (844) 808-7136 (domestic) or (412) 317-0534 (international), or access a live webcast at http://investor.fdus.com/news-events