Fidus Investment (US:FDUS)2025-11-06 21:09Investment 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].