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].
Fidus Investment (FDUS) - 2025 Q1 - Quarterly Report