Core Viewpoint - Fidus Investment Corporation has announced a public offering of $100 million in 6.750% notes due 2030, aimed at refinancing existing debt and supporting investment strategies in lower middle-market companies [1][3]. Group 1: Offering Details - The notes will mature on March 19, 2030, and can be redeemed at the company's option before September 19, 2029, at par plus a "make-whole" premium, and at par thereafter [2]. - Interest on the notes will be paid semi-annually at a rate of 6.750%, starting from September 19, 2025 [2]. - The offering is expected to close on March 19, 2025, pending customary closing conditions [2]. Group 2: Use of Proceeds - The net proceeds from the offering will be used to repay a portion of the $125 million outstanding under the company's senior secured revolving credit facility [3]. - The company may re-borrow under the credit facility to invest in lower middle-market companies and for general corporate purposes [3]. Group 3: Company Overview - Fidus Investment Corporation specializes in providing customized debt and equity financing solutions to lower middle-market companies, defined as U.S.-based companies with revenues between $10 million and $150 million [7]. - The company's investment objective is to achieve attractive risk-adjusted returns through current income from debt investments and capital appreciation from equity investments [7]. - Fidus is structured as a closed-end, non-diversified management investment company and has elected to be treated as a business development company under the Investment Company Act of 1940 [8].

Financial Data and Key Metrics Changes - Adjusted net investment income (NII) increased by 49% to $18.8 million in Q4 compared to $12.6 million last year, driven by interest income growth from higher average debt balances and yields [55][66] - The weighted average interest rate on outstanding debt was 4.3% as of December 31, 2023 [50] - Net investment income per share for Q4 was $0.58, down from $0.63 in Q3, while adjusted NII per share was $0.65, down from $0.68 in Q3 [50][55] Business Line Data and Key Metrics Changes - Total investment income for Q4 was $36.3 million, a $2.1 million increase from Q3, primarily due to higher interest and fee income [65] - The portfolio's fair value at quarter end was $957.9 million, with first lien investments accounting for 69% of the debt portfolio [59][52] - Originations totaled $132.7 million, with $123.5 million in debt and $9.2 million in equity, indicating a focus on high-quality companies [58] Market Data and Key Metrics Changes - The company noted an increase in competition in the lower middle market, with spreads tightening by approximately 50 basis points compared to 12 months ago [44] - The company experienced a year-end push in deal activity, reflecting a more active environment despite subdued M&A activity throughout the year [69] Company Strategy and Development Direction - The company is focused on building a portfolio of income-producing assets and enhancing earnings power through strategic pruning of higher-risk investments [5][4] - The company plans to apply for a fourth SBIC license to access an additional $175 million in SBA debentures, aiming to utilize this in 2024 [32][53] - The strategy emphasizes investing in high-quality companies with resilient cash flow and maintaining conservative leverage ratios [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's overall quality, with only two companies on nonaccrual, representing about 1% of the total portfolio [60] - The outlook for M&A activity remains cautiously optimistic, with expectations for continued activity at reasonable levels above last year [21] - Management highlighted the importance of maintaining rigorous underwriting standards to ensure long-term growth and capital preservation [70] Other Important Information - The company paid total cash dividends of $2.88 per share in 2023, up from $2 in 2022, reflecting a commitment to returning value to shareholders [51][56] - The company ended Q4 with total liquidity of approximately $219.1 million, including cash and available credit [53] Q&A Session Summary Question: Can you provide more details on the strategic pruning of the portfolio? - Management indicated that the pruning involved exiting a successful equity investment and some debt investments due to higher risk levels [3][4] Question: How comfortable is the company with the credit situation in the portfolio? - Management noted that the majority of portfolio companies are performing well, with only a few experiencing idiosyncratic issues, and they are optimistic about managing these situations [6][9] Question: What is the timeline for the fourth SBIC license? - Management expects the application process to take about six months, with hopes to start utilizing the license in 2024 [16][32] Question: How has the increased allocation to first lien and unitranche impacted target debt to equity? - Management stated that they are maintaining a conservative one-to-one target leverage ratio, despite the ability to leverage more [35][36] Question: What is the sensitivity of earnings to interest rate changes? - Management estimated that a 25 basis point cut in rates would reduce NII by approximately $1 million per quarter [47][48]

Financial Metrics - The net asset value per share is determined quarterly, reflecting the total assets minus liabilities and preferred stock, divided by the total number of shares outstanding[75]. - The base management fee is set at an annual rate of 1.75% based on the average value of total assets, excluding cash equivalents, and is payable quarterly[81]. - The incentive fee includes a capital gains portion, calculated as 20.0% of net capital gains at the end of each fiscal year[85]. - The hurdle rate for pre-incentive fee net investment income is fixed at 2.0% per quarter, with potential for higher returns in a rising interest rate environment[84]. Investment Performance - In Year 1, Company A received a $4.0 million investment, Company B received $7.5 million, and Company C received $6.25 million[92]. - In Year 2, Investment A was sold for $12.5 million, while the fair market value (FMV) of Investment B and C was determined to be $6.25 million each[92]. - In Year 3, the FMV of Investment B increased to $6.75 million, and Investment C was sold for $7.5 million[92]. - The cumulative realized capital gains from Investment A and C amounted to $9.75 million, with a capital gains incentive fee of $1.8 million paid in Year 2 and Year 3[92][94]. Agreements and Compliance - The Investment Advisory Agreement was approved to continue until June 20, 2025, with automatic annual renewals unless terminated earlier[96][102]. - The Administration Agreement was also approved to continue until June 20, 2025, with similar renewal terms as the Investment Advisory Agreement[102]. - The company must distribute at least 90% of its investment company taxable income to maintain its RIC status and avoid U.S. federal income tax on distributed income[136]. - The company is subject to compliance with the Sarbanes-Oxley Act of 2002, which imposes various regulatory requirements on publicly held companies[134]. - The company is in compliance with NASDAQ Global Select Market corporate governance regulations applicable to BDCs[135]. Investment Strategy and Restrictions - The company may invest up to 100% of its assets in privately negotiated transactions, potentially being deemed an "underwriter" for public resale purposes[107]. - The company must ensure that qualifying assets represent at least 70% of its total assets to comply with the 1940 Act[108]. - The company may not invest more than 30% of its regulatory capital in any one portfolio company without prior SBA approval[127]. - The company must ensure that at least 50% of its assets consist of cash, U.S. Government securities, and other qualifying securities to meet diversification requirements[140]. Risk Management - The company faces competition from larger funds and financial institutions with greater resources and fewer regulatory restrictions[76]. - The company’s risk management systems are designed to monitor market risks, including interest rate volatility and economic instability[426]. - Changes in interest rates may materially affect the company's net investment income and overall financial performance[429]. - A hypothetical 200 basis point increase in interest rates could lead to a net decrease in net investment income of $10.1 million[431]. Financial Obligations - The company has $45.0 million of borrowings outstanding under its Credit Facility as of December 31, 2024[432]. - The Credit Facility bears interest at a rate of 2.675% on SOFR loans prior to satisfying certain conditions, reducing to 2.50% after[428]. - The company pays a commitment fee on the unused portion of the Credit Facility, ranging from 0.50% to 2.675% per annum[428]. - The company is subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless it distributes at least 98% of its net ordinary income for each calendar year[138]. Portfolio Management - The investment advisor is responsible for portfolio composition and investment execution, ensuring alignment with the company's strategic goals[84]. - The investment advisor's expertise is leveraged to assess risks and determine pricing for portfolio investments[77]. - The investment advisor is responsible for providing managerial assistance to portfolio companies, with fees reimbursed for such services[109]. - As of December 31, 2024, 50 portfolio companies' debt investments bore interest at a variable rate, representing $704.0 million of the portfolio on a fair value basis[428]. - As of December 31, 2023, 46 portfolio companies' debt investments bore interest at a variable rate, representing $629.3 million of the portfolio[428]. Regulatory Considerations - The company has adopted written compliance policies and procedures to prevent violations of U.S. federal securities laws[118]. - The company may face challenges in meeting the Annual Distribution Requirement due to the illiquid nature of its portfolio[148]. - If the company fails to qualify as a RIC for more than two taxable years, it may be subject to corporate tax on net built-in gains upon requalification[158]. - The company may be required to recognize taxable income without receiving corresponding cash, impacting its ability to meet the Annual Distribution Requirement[143].

Investment Income - Total investment income for Q4 2024 was $37.5 million, a 3.2% increase from Q4 2023[5] - Net investment income for Q4 2024 was $18.6 million, or $0.55 per share, representing a 10.1% increase year-over-year[9] - Full year 2024 total investment income reached $146.1 million, a 12.3% increase compared to 2023[11] - Net investment income for the full year 2024 was $74.6 million, or $2.29 per share, a 14.6% increase from the previous year[13] Investment Activities - The company invested $120.3 million in debt and equity securities during Q4 2024, including five new portfolio companies[5] - As of December 31, 2024, the fair value of the investment portfolio totaled $1.1 billion, consisting of 87 active portfolio companies[15] - The weighted average yield on debt investments was 13.3% as of December 31, 2024[16] - Subsequent to the reporting period, the company invested $15.0 million in Customer Expressions Corp. and $19.0 million in Onsight Industries, LLC[18][19] - The company exited its preferred equity investment in Healthfuse, LLC, realizing a gain of approximately $3.2 million[20] - A net realized gain of approximately $8.2 million was achieved from equity investments in Medsurant Holdings, LLC[21] - The company invested a total of $14.0 million in Fraser Steel LLC, including $14.0 million in first lien debt and $0.5 million in common equity[21] - An additional $14.5 million in SBA debentures was issued, bearing a fixed interim interest rate of 5.217% until March 2025[22] Dividends - Total dividends paid in 2024 amounted to $2.42 per share, including regular and supplemental dividends[5] - The company declared a total dividend of $0.54 per share for the first quarter of 2025, consisting of a base dividend of $0.43 and a supplemental dividend of $0.11[25] - The company declared dividends of $0.61 per share in Q4 2024, down from $0.80 per share in Q4 2023[36] - The company has adopted a dividend reinvestment plan (DRIP) for stockholders to reinvest dividends into additional shares[27] Financial Position - The company had $57.2 million in cash and cash equivalents as of December 31, 2024[17] - Total assets increased to $1,164,112 thousand as of December 31, 2024, compared to $1,090,898 thousand in 2023[34] - Total net assets rose to $655,666 thousand as of December 31, 2024, up from $589,474 thousand in 2023[34] - The net asset value per common share was $19.33 as of December 31, 2024, slightly down from $19.37 in 2023[34] - The company repaid $12.5 million of SBA debentures with a weighted average interest rate of 5.755%[24] Performance Metrics - Total expenses for Q4 2024 were $17,051,000, a decrease of 2.0% from $18,408,000 in Q4 2023[36] - Net realized losses on investments for Q4 2024 were $576,000, compared to net realized gains of $19,804,000 in Q4 2023[36] - Net increase in net assets resulting from operations for the year ended December 31, 2024, was $78,292,000, compared to $77,133,000 for the year ended December 31, 2023[36] - The capital gains incentive fee expense for Q4 2024 was $(211,000), compared to $1,898,000 in Q4 2023[40] - The company reported a net change in unrealized appreciation (depreciation) on investments of $(522,000) for Q4 2024, compared to $(10,220,000) in Q4 2023[36]

Core Points - Fidus Investment Corporation declared a total dividend of $0.54 per share for the first quarter of 2025, consisting of a base dividend of $0.43 and a supplemental dividend of $0.11 [25] - The company reported a 13.8% increase in assets under management on a fair value basis for the year 2024, with a total investment income of $146.1 million, up 12.3% from the previous year [5][12] - Net investment income for the fourth quarter of 2024 was $18.6 million, or $0.55 per share, representing a 10.1% increase compared to the same period in 2023 [10][7] Financial Highlights - For the fourth quarter of 2024, total investment income was $37.5 million, with net investment income of $18.6 million, and adjusted net investment income of $18.4 million [7][8] - The full year 2024 saw total investment income of $146.1 million, net investment income of $74.6 million, and adjusted net investment income of $75.4 million [12][14] - The company paid total dividends of $2.42 per share for the year 2024, which included regular quarterly dividends totaling $1.72 and supplemental dividends of $0.70 [7][12] Portfolio and Investment Activities - As of December 31, 2024, the fair value of Fidus's investment portfolio was $1.1 billion, consisting of 87 active portfolio companies [16] - The company invested $120.3 million in debt and equity securities during the fourth quarter of 2024, including five new portfolio companies [7] - The weighted average yield on debt investments was 13.3% as of December 31, 2024 [17] Subsequent Events - On January 6, 2025, Fidus invested $15.0 million in first lien debt and $0.8 million in common equity of Customer Expressions Corp [19] - On January 7, 2025, the company invested $19.0 million in first lien debt and $0.4 million in common equity in Onsight Industries, LLC [20] - On January 14, 2025, Fidus exited its preferred equity investment in Healthfuse, LLC, realizing a gain of approximately $3.2 million [21]

Group 1 - Mr. Mavroudis is a professional portfolio manager specializing in institutional and private portfolios, focusing on risk management and in-depth financial market analysis [1] - He invests in various financial instruments globally, including stocks, bonds, foreign exchange, and commodities, while restructuring investment portfolios based on prevailing conditions and client needs [1] - Mr. Mavroudis has successfully navigated major crises, including the COVID-19 pandemic and the PSI, demonstrating his expertise in risk management [1] Group 2 - He is the CEO of FAST FINANCE Investment Services, a registered Greek company by the Hellenic Capital Market Commission [1] - Mr. Mavroudis holds multiple degrees, including an MSc in Financial and Banking Management, an LLM in Law, and a BSc in Economics, graduating as valedictorian [1] - He is certified in various financial disciplines, including portfolio management, financial instruments analysis, derivatives, and securities market-making [1] Group 3 - By writing on Seeking Alpha, the company aims to engage with a vibrant community of investors and market enthusiasts, contributing meaningful perspectives while fostering mutual growth and knowledge sharing [1]

Core Viewpoint - Fidus Investment Corporation will report its fourth quarter 2024 financial results on March 6, 2025, and will host a conference call to discuss these results on March 7, 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 partnerships 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, 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].

Group 1 - Fidus Investment Corporation declared a base dividend of $0.43 per share and a supplemental dividend of $0.11 per share for Q1 2025, payable on March 27, 2025, to stockholders of record as of March 20, 2025 [1] - The Board of Directors reviews estimates of taxable income available for distribution, which may differ from consolidated income due to various factors including unrealized appreciation and depreciation [2] - Fidus has a dividend reinvestment plan (DRIP) allowing stockholders to reinvest dividends in additional shares unless they opt to receive cash [3] Group 2 - Fidus 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 investments [4] - Fidus is an externally managed, closed-end, non-diversified management investment company, treated as a business development company under the Investment Company Act of 1940 [5]

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 top ideas across exclusive income-focused portfolios [1] Group 2 - The article emphasizes that stock investing does not need to be a popularity contest, as less popular stocks are often at lower risk of being overbought [2] - This situation results in better pricing opportunities for value investors, particularly for stocks that are more defensive in nature [2]

Company Overview - Fidus Investment (NASDAQ: FDUS) is a Business Development Company (BDC) that specializes in providing financing solutions to lower middle-market businesses, with target investments ranging from $5 million to $35 million [1] - The company's portfolio consists of 85 geographically diversified companies, with a focus on first-lien debt (64.9%), second-lien debt (13.5%), equity (7.8%), and subordinated debt (13.8%) [1] Investment Strategy - Fidus Investment's strategy is centered around providing financing solutions to lower middle-market businesses, which are typically underserved by traditional banks and larger financial institutions [1] - The company's investment portfolio is diversified across various sectors, including tech, real estate, software, finance, and consumer staples, which are industries that the author has extensive experience in advising and investing in [1] Author's Perspective - The author, a finance professional with deep experience in M&A and business valuation, has built a strong foundation in dividend investing, which they believe is one of the most accessible paths to achieving financial freedom [1] - The author's motivation for writing on Seeking Alpha is to share their insights and experiences in dividend investing, with the goal of making the process more approachable for those looking to build long-term wealth [1] Disclosure - The author has a beneficial long position in Fidus Investment (FDUS) through stock ownership, options, or other derivatives, and wrote the article themselves, expressing their own opinions [2] - The article does not constitute an investment recommendation or any form of investment advice, and the views expressed may not reflect those of Seeking Alpha as a whole [3][4]