Fidus Investment (US:FDUS)2025-05-09 14:02Financial Data and Key Metrics Changes - Total investment income for Q1 2025 was $36.5 million, a decrease of $1 million from Q4 2024, primarily due to a decline in interest income [13] - Adjusted net investment income (NII) for Q1 2025 was $18.5 million, compared to $18.1 million in Q1 2024, with adjusted NII per share at $0.54, down from $0.59 year-over-year [9] - Net asset value at quarter end was $677.9 million, or $19.39 per share, compared to $655.7 million, or $19.33 per share as of 12/31/2024 [9] Business Line Data and Key Metrics Changes - Originations totaled $115.6 million for Q1 2025, with $102.1 million invested in seven new portfolio companies [10] - Debt investments amounted to $111.6 million, with first lien securities accounting for approximately 94% of the total [10] - The debt portfolio was valued at approximately $1 billion, with 79% consisting of first lien investments [11] Market Data and Key Metrics Changes - Deal activity in the lower middle market was described as modest, continuing the trend of lackluster M&A activity [7] - The company expects continued activity in the lower middle market, albeit at lower levels than before [30] Company Strategy and Development Direction - The company focuses on investing in high-quality companies with resilient business models and strong cash flow generation [7] - The management believes the current economic environment may present interesting investment opportunities, particularly in periods of high volatility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's resilience against macroeconomic challenges, noting that most portfolio companies are domestic with limited tariff exposure [11] - The outlook for originations in Q2 2025 is positive, supported by a strong investment pipeline [12] Other Important Information - The company declared a total dividend of $0.54 per share for Q2 2025, consistent with the previous quarter [9] - The company ended Q1 2025 with $545.6 million of debt outstanding, with a net debt to equity ratio of 0.7 times [15] Q&A Session Summary Question: Impact of tariffs on portfolio companies - Management indicated that direct exposure to tariffs is limited to just over 5% of the portfolio, and plans are in place to manage risks effectively [24][25] Question: Conditions for M&A market rebound - Management believes that uncertainty is the primary factor affecting the M&A market, and stability rather than the removal of tariffs is needed for a rebound [28][29] Question: Prepayment risk among top-performing companies - Management acknowledged prepayment risk but noted that it is a common aspect of the business, with some companies expected to be refinanced [47][49] Question: Update on distressed investment in Quest software - Management expressed confidence in the long-term outlook for Quest, despite current challenges, and noted that the risk profile is reflected in the investment's valuation [51][52]