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]

Group 1 - Morgan Stanley Direct Lending Fund (MSDL) is considered a high-quality Business Development Company (BDC) with strong fundamentals capable of withstanding potential market challenges [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] - Berzins 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]

Financial Data and Key Metrics Changes - Nonaccruals decreased to 3.7% of the portfolio's fair market value, down from 4.4% last quarter and 5.6% at the end of 2024 [6] - NAV declined during the quarter primarily due to markdowns on previously restructured portfolio companies [6] - Adjusted net investment income was $0.31 per share, down from $0.36 in the first quarter, while gross investment income was $0.61 per share compared to $0.66 in the prior quarter [23] Business Line Data and Key Metrics Changes - The portfolio had a fair market value of approximately $1.8 billion invested across 153 companies in over 20 industry sectors [21] - The average investment size was $11.7 million, with 89% of the portfolio invested in senior secured debt, all in floating rate instruments [21] - The weighted average annual effective yield of the portfolio was 12% in the second quarter, compared to 12.2% in the prior quarter [21] Market Data and Key Metrics Changes - New investments had a weighted average yield of 10.8%, while exited investments carried an average yield of 10.5% [21] - Total liquidity at quarter end was $566 million, including $455 million of available leverage and $107 million in cash [27] Company Strategy and Development Direction - The acquisition of HPS is expected to enhance TCPC's capabilities in private credit, creating a new platform called Private Financing Solutions (PFS) [31] - PFS aims to centralize private investment sourcing and origination teams to maximize collaboration and effectiveness [32] - TCPC will continue to directly source investments while leveraging PFS's extensive deal sourcing capabilities [32] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over additional markdowns but noted progress in reducing nonaccruals and sourcing attractive investments [34] - The company is focused on diligently working through portfolio challenges to deliver the best possible outcomes for shareholders [34] - Management acknowledged that the high rate environment and macroeconomic conditions could impact demand and performance of portfolio companies [56] Other Important Information - The Board declared a second quarter dividend of $0.25 and a special dividend of $0.04 per share, payable on September 30 [13] - The company repurchased 40,830 shares of TCPC stock during the quarter [13] Q&A Session Summary Question: Changes in the investment process with new committee members - Management indicated that the investment process will benefit from centralized origination and sourcing, leveraging resources from both BlackRock and HPS [36][38] Question: Ensuring TCPC receives proper access and resources during growth - Management assured that TCPC remains a strategic priority for the PFS platform and will continue to receive deep engagement across investment processes [42][44] Question: Markdown on Auto Alert and its performance - The markdown was primarily driven by market comps rather than performance issues, although the company has shown improvements since restructuring [45]

Financial Highlights - Q1 2026 Pre-Tax Net Investment Income ("NII") was $32.7 million, or $0.61 per share[16] - Net realized gains of $27.2 million were generated from the exit of two equity investments[16] - Undistributed Taxable Income ("UTI") increased to $1.00 per share as of June 30, 2025, from $0.79 per share as of March 31, 2025[16] - The investment portfolio at fair value was approximately $1.8 billion[16] - Net Asset Value per share was $16.59[16] Investment Activity - CSWC originated $115.2 million in total new committed investments during the quarter, with $63.9 million funded at close[17] - New committed investments consisted of $113.4 million in first lien debt and $1.8 million in equity[17] - Total proceeds of $80.6 million were generated from the exit of three debt investments and two equity investments, including net realized gains of $27.1 million[17] - Cumulative weighted average IRR of 13.6% on 101 portfolio company exits, generating $1.2 billion in proceeds since launch of credit strategy in January 2015[17] Portfolio Composition - First lien investments accounted for 89.6% of the portfolio at fair value as of June 30, 2025[20, 32] - Equity investments accounted for 9.3% of the portfolio at fair value as of June 30, 2025[20, 32] - Approximately 92% of all debt investments are currently rated a "1" or "2"[22]

Financial Data and Key Metrics Changes - In Q2 2025, the company generated net investment income of $0.62 per share and adjusted net investment income of $0.60 per share, compared to public guidance of approximately $0.64 and $0.62 per share respectively [9] - The net asset value (NAV) per share declined by 6.2% from $23.37 to $21.93 during the quarter [9] - Total investment income was $398 million for the second quarter, a decrease of $2 million compared to the first quarter [25] - Total expenses increased to $225 million during the second quarter, up by $12 million compared to the first quarter [26] Business Line Data and Key Metrics Changes - The company originated $3.4 billion of investments in 2025, with $1.4 billion originated in Q2 [10] - Approximately 72% of new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships [21] - New investments consisted of approximately 83% in first lien loans, 5% in subordinated debt, and 12% in asset-based finance investments [21] Market Data and Key Metrics Changes - Global M&A volume is down close to 10% year over year, but the company evaluated more opportunities in Q2 than in any of the previous eight quarters [13] - The company estimates that direct tariff exposure has declined to the low to mid-single digit range [14] Company Strategy and Development Direction - The company continues to focus on upper middle market companies with EBITDA in the $50 million to $150 million range across diverse industries [21] - The distribution strategy for 2025 is designed to provide shareholders with additional distributions from accumulated spillover income, with a total expected distribution of $2.80 per share [11] - The company plans to provide additional details regarding its 2026 dividend strategy in the third quarter earnings call [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant work needed regarding four companies that were placed on non-accrual status [31] - There is cautious optimism for an increase in M&A activity later this year and into next year [13] - The company remains focused on maintaining strong liquidity to support funding needs, ending the quarter with $3.1 billion of availability [11] Other Important Information - Non-accruals represented 5.3% of the portfolio on a cost basis and 3% on a fair value basis as of the end of Q2 [22] - The weighted average yield on accruing debt investments was 10.6% as of June 30, a decrease of 20 basis points compared to the previous quarter [25] Q&A Session Summary Question: What are you seeing in terms of originations in the second half? - Management noted that there has been increased activity and deal count, with more deals evaluated in Q2 than in the prior eight quarters [34][35] Question: Are there any other companies on your watch list? - Management indicated that approximately 7% of the portfolio is in risk ratings that are concerning, with some names showing positive momentum [39] Question: Can you provide insight into the joint venture's earnings situation? - The anticipated dividend from the joint venture for Q3 is lower due to timing issues with certain dividends [44][45] Question: What is the company's view on buybacks? - Management stated that buybacks will be balanced with market opportunities and target leverage ratios [49] Question: How many troubled assets are currently being monitored? - Management confirmed that the workout team is actively engaged with companies on the watch list, with a focus on maximizing outcomes [56] Question: What is the outlook for the dividend policy? - Management indicated that the dividend policy will be tied to net investment income and will consider market conditions [76][95]

Financial Data and Key Metrics Changes - FSK generated net investment income of $0.62 per share and adjusted net investment income of $0.60 per share, compared to public guidance of approximately $0.64 and $0.62 per share respectively [8] - Net asset value per share declined 6.2% from $23.37 to $21.93 during the quarter [8] - Total investment income was $398 million for the second quarter, a decrease of $2 million compared to the first quarter [25] - Total expenses were $225 million during the second quarter, an increase of $12 million compared to the first quarter [26] Business Line Data and Key Metrics Changes - New investment activity remained strong with $3.4 billion of investments originated in 2025, of which $1.4 billion were originated during the second quarter [9] - Approximately 72% of new investments were focused on add-on financings to existing portfolio companies and long-term KKR relationships [21] - Non-accruals represented 5.3% of the portfolio on a cost basis and 3% on a fair value basis as of the end of the second quarter [22] Market Data and Key Metrics Changes - Global M&A volume is down close to 10% year over year, but the team evaluated more opportunities in Q2 than in any of the previous eight quarters [12] - Direct tariff exposure has declined and now falls within the low to mid single-digit range [13] Company Strategy and Development Direction - The company continues to focus on senior secured investments, with approximately 59% of the portfolio in first lien loans and 64% in senior secured debt as of June 30 [24] - The 2025 distribution strategy aims to provide shareholders with additional distributions from accumulated spillover income, with a total expected distribution of $2.80 per share [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for an increase in M&A activity later this year and into next year, despite current market volatility [12] - The company is focused on stabilizing operations and realizing meaningful cost efficiencies in response to headwinds from tariffs and softer consumer demand [19] Other Important Information - The weighted average yield on accruing debt investments was 10.6% as of June 30, a decrease of 20 basis points compared to the previous quarter [25] - The company plans to provide additional details regarding its 2026 dividend strategy on the third quarter earnings call [11] Q&A Session Summary Question: What are you seeing in terms of originations in the second half? - Management noted increased activity and deal count, with more deals evaluated in Q2 than in the previous eight quarters, indicating a busier environment [36] Question: Do you have any other companies on a watch list beyond the four mentioned? - Management indicated that approximately 7% of the portfolio is in risk ratings QAR bucket three and four, with some names showing positive momentum [39] Question: Can you explain the anticipated dividend from the joint venture for Q3? - The anticipated dividend for Q3 is lower due to the timing of certain ABF dividends, which tend to be lumpy [45] Question: What is the company's view on buybacks given the current portfolio conditions? - Management stated that they have historically been active in buybacks but will balance that with market opportunities and target leverage ratios [50] Question: Are there any themes leading to re-defaults in the portfolio? - Management clarified that each situation is unique, and while some companies are facing challenges, proactive restructuring efforts are ongoing [60] Question: How does the company plan to manage inflow and outflow of investments? - Management emphasized the correlation between new deal flow and repayments, indicating that they have levers to manage growth within their target leverage band [78] Question: What is the current status of spillover income? - Spillover income has been reduced to the mid-400 million range, with a target of aligning it to approximately two quarters' worth of dividends [100]

Financial Data and Key Metrics Changes - The company reported net investment income of $34.8 million, a 30% increase compared to Q2 of the previous year [4] - Total investment income reached $69.5 million, reflecting a 27% increase year-over-year [14] - Net asset value (NAV) grew 11% quarter-over-quarter to a record $924 million, with NAV per share increasing to $13.27 [5][15] - The effective yield on the portfolio for Q2 was 15.7% [14] - The company maintained a strong return on average equity of 15.9%, among the top in the BDC space [15] Business Line Data and Key Metrics Changes - The portfolio composition included approximately 76% secured loans, 17% equipment financings, 4% equity, and 2% warrants [20] - The equipment finance business saw a significant uptick in requests, with over 20% growth year-to-date [67] - The company funded $585 million in the first half of the year, exceeding last year's record by more than 20% [11] Market Data and Key Metrics Changes - The company has a strong investment pipeline with $849 million in unfunded commitments as of the end of Q2 [11] - Approximately 99.1% of the portfolio was performing on a fair value basis, indicating strong credit quality [21] - The average internal credit rating for the portfolio stood at 2.9 on a scale of 1 to 5, consistent with prior quarters [21] Company Strategy and Development Direction - The company aims to be the top-performing BDC, leveraging its differentiated structure and disciplined underwriting [7] - Plans to launch an SBIC fund with potential investable capital of $275 million, which will generate new management and incentive fees [5][39] - The company is focused on late-stage venture-backed companies in the lower middle market, positioning itself well in the private credit market [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future rate cuts benefiting the company, as most deals are at full rates [13] - The company is experiencing strong momentum heading into 2025, with expectations for continued portfolio growth [11] - Management emphasized the importance of credit quality and disciplined portfolio management as top priorities [23] Other Important Information - The company raised $82 million of equity through the ATM program at an average premium to NAV of 11% [10] - The net leverage ratio decreased to 1.12 times, indicating improved financial stability [19] - The company has no debt maturities until August 2026, enhancing its liquidity position [18] Q&A Session Summary Question: Equipment finance interest due to tariffs - Management indicated that the increase in equipment finance is more of a timing issue and expects continued growth in that area [25][26] Question: Increase in watch list at fair value - Management noted that the watch list includes companies needing additional capital and those underperforming, with ongoing negotiations for support [28][30] Question: Expected pacing of raising third-party capital - Management discussed the groundwork laid for managed accounts and the anticipated growth of that capital pool [33][35] Question: Characteristics of SBIC fund assets - The SBIC fund will have a low cost of capital and will co-invest alongside the BDC, enhancing returns for shareholders [42][47] Question: Impact of interest rates on prepayments - Management stated that lower rates could lead to refinancing opportunities, generating additional fee income [49][51] Question: Seasonality in originations or repayments - Management expects strong deployment in Q3, driven by signed term sheets and manufacturing lines needing additional capital [53][54] Question: NexCAR and space perspective - Management confirmed ongoing discussions regarding loan modifications for NexCAR and expects to finalize transactions in Q3 [59][60] Question: Tax changes and equipment financing - Management noted a significant uptick in equipment financing requests, attributed partly to tax changes allowing accelerated depreciation [67][68]

Core Viewpoint - Ares Capital (ARCC) is highlighted as a compelling investment opportunity due to its high dividend yield, strong market position, and attractive valuation, especially while trading below $25 [1]. Group 1: Dividend Performance - Ares Capital offers a substantial dividend yield of 8.36%, with an average yield of 9.32% over the past decade [3][4]. - The company has maintained or increased its dividend for over 15 consecutive years, with a 20% increase in the dividend payout over the last five years [3][4]. Group 2: Market Growth - The business development company (BDC) sector, where Ares Capital operates, is experiencing rapid growth, particularly in direct lending to middle-market businesses with annual revenues between $10 million and $1 billion [5][6]. - The private credit market has nearly tripled to around $2 trillion over the last decade, with projections suggesting it could grow to $2.8 trillion by 2028 [6]. Group 3: Industry Leadership - Ares Capital is the largest publicly traded BDC in the U.S., with a market capitalization close to $16 billion [8]. - The company has delivered an average annual total return of 13% since its IPO in 2004, significantly outperforming the S&P 500 [8]. - Ares Capital's portfolio consists of 566 companies valued at $27.1 billion, with a focus on senior secured loans, which make up approximately 68% of the portfolio [9]. Group 4: Valuation - Ares Capital's forward price-to-earnings ratio is 11.3, about half that of the S&P 500, indicating a compelling valuation relative to its growth potential and dividend yield [12].

Core Insights - The article emphasizes the importance of dividend investing in quality blue-chip stocks, Business Development Companies (BDCs), and Real Estate Investment Trusts (REITs) as a strategy for building wealth and achieving financial independence [1]. Group 1 - The author identifies as a buy-and-hold investor who prioritizes quality investments over quantity, aiming to supplement retirement income through dividends within the next 5-7 years [1]. - The article aims to assist hard-working lower and middle-class individuals in constructing investment portfolios that focus on high-quality, dividend-paying companies [1]. - The author expresses a desire to provide a new perspective to investors, helping them reach financial independence through informed investment choices [1].

Group 1 - The analyst expresses a structural bullish outlook on the Business Development Company (BDC) sector but maintains a bearish stance on venture-capital related vehicles [1] Group 2 - Roberts Berzins has over a decade of experience in financial management, focusing on helping top-tier corporates with financial strategies and large-scale financings [2] - Berzins has contributed to institutionalizing the Real Estate Investment Trust (REIT) framework in Latvia to enhance liquidity in pan-Baltic capital markets [2] - His policy-level work includes developing national State-Owned Enterprise (SOE) financing guidelines and frameworks for channeling private capital into affordable housing [2] - Berzins holds a CFA Charter and an ESG investing certificate, and has experience with the Chicago Board of Trade [2]