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FIDUS INVESTMENT Corp (FDUS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered a clean beat on revenue and adjusted EPS: Total investment income was $40.0M vs S&P Global consensus $37.4M*, and adjusted NII/share was $0.57 vs $0.522*; drivers were stronger fee income (prepayment/origination) and higher interest income on larger balances .*
  • NAV rose to $19.57 per share ($692.3M), up from $19.39 in Q1, as unrealized gains offset net realized losses; board declared Q3 total dividends of $0.57 (base $0.43 + supplemental $0.14) .
  • Management flagged Q2 prepayment fee tailwinds (~$1.3M) as episodic; absent similar repayments in Q3, expects those fees to decline, tempering the sequential revenue tailwind .
  • Credit remained sound: non‑accruals under 1% of portfolio fair value (2.9% cost); debt portfolio yield edged down to 13.1% amid a competitive market; first‑lien exposure ~81% .

What Went Well and What Went Wrong

What Went Well

  • Fee income strength: Prepayment/origination boosted fee income by $2.4M YoY and $1.8M QoQ; CEO: “Adjusted net investment income grew to $20.0 million on higher levels of interest income, coupled with healthy fee and dividend income” .
  • Portfolio quality & diversification: Non‑accruals <1% FV, 92 active portfolio companies, fair value ≈101.8% of cost; “portfolio continues to perform well and remains healthy with sound credit quality” .
  • Liquidity and dividend support: Cash $91.2M; unused revolver $140.0M; spillover income $1.39/share supports supplemental dividend; Q3 dividend lifted to $0.57 .

What Went Wrong

  • Realized losses: Q2 net realized loss of $(7.6)M (notably Quantum IR exit loss of ~$14.4M); NII margin compressed sequentially as expenses rose (interest/pro fees/cap gains accrual) .
  • Episodic tailwinds: ~$1.9M of incremental income (prepayment fees and accelerated amortization) unlikely to repeat in Q3; potential sequential normalization in total investment income .
  • Yield pressure: Weighted average debt yield declined to 13.1% (from 13.2% in Q1), reflecting competitive dynamics and rate backdrop; management noted competitive intensity while maintaining discipline .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total investment income ($USD Millions)$35.664 $37.457 $36.496 $39.970
Net investment income ($USD Millions)$16.950 $18.648 $18.222 $18.628
NII per share ($)$0.53 $0.55 $0.53 $0.53
Adjusted NII ($USD Millions)$18.380 $18.437 $18.509 $19.959
Adjusted NII per share ($)$0.57 $0.54 $0.54 $0.57
NII Margin % (NII / Total investment income)47.5% 49.8% 49.9% 46.6%
NAV per share ($)—$19.33 $19.39 $19.57
Weighted avg. shares (Millions)32.246 33.380 34.078 35.157

Consensus vs Actual (S&P Global):

MetricQ4 2024Q1 2025Q2 2025
Consensus Revenue ($USD Millions)*$36.660$35.696$37.417
Actual Revenue ($USD Millions)$37.457 $36.496 $39.970
Consensus Primary EPS ($)*$0.518$0.538$0.522
Actual Adjusted NII per share ($)$0.54 $0.54 $0.57

Segment/Portfolio Mix and Credit KPIs:

KPIQ4 2024Q1 2025Q2 2025
First‑lien share of debt portfolio (%)76% 79% 81%
Weighted avg. debt yield (%)13.3% 13.2% 13.1%
Non‑accruals (% of FV / cost)<1% / 4.1% <1% / 3.9% <1% / 2.9%
Equity as % of total portfolio (FV)13.4% 11.9% ~12%

Operating and Balance Sheet KPIs:

KPIQ4 2024Q1 2025Q2 2025
Gross originations ($000s)120,336 115,555 94,451
Repayments ($000s)(122,752) (57,343) (109,253)
Net investment activity ($000s)(2,416) 58,212 (14,802)
Investments at fair value ($000s)1,090,506 1,154,408 1,149,304
Cash & cash equivalents ($000s)57,159 67,478 91,207
Total debt outstanding ($000s)483,674 545,601 540,255
Net debt-to-equity (x)0.7x 0.7x 0.7x

Note: *Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total dividend per shareQ3 2025$0.54 (Q2: base $0.43 + supplemental $0.11) $0.57 (base $0.43 + supplemental $0.14) Raised
Supplemental dividend methodologyOngoing100% of surplus adjusted NII over base dividend Reaffirmed methodology; declared $0.14 for Q3 Maintained
Prepayment fee outlookQ3 2025N/AExpect lower vs Q2 (Q2 had ~$1.3M prepayment fees; episodic) Lowered (episodic)
Liability management2025–26Plan to redeem $25M of Jan’26 notes; evaluate additional debt capital in H2’25 Redeemed $25M Jan’26 notes in Q2; $100M March 2030 notes outstanding Executed/ongoing

Earnings Call Themes & Trends

TopicQ4 2024 (Prior Two)Q1 2025 (Prior One)Q2 2025 (Current)Trend
M&A/deal flowReasonable but not robust; portfolio grew; originations balanced by repayments Lackluster M&A; building portfolio via sponsor relationships; outlook decent for Q2 Activity improved late Q2 and into Q3; expect growth with fewer repayments Improving from Q2 lows
Tariffs/macroMonitoring pockets of softness; companies have pricing power Direct tariff exposure ~5%; mitigants in place “Tariff policy uncertainty dampened M&A” but portfolio resilient Uncertainty persists; manageable
Prepayment/fee incomeNormal course; realized gains/losses mixed Lower prepayment/amendment fees vs Q4 ~$1.3M prepayment fees tailwind; expected to decline Q3 Episodic; normalizing
Credit quality/non‑accrualsAdded Quantum IR to non‑accrual; FV <1% Non‑accruals <1% FV; stable overall Non‑accruals <1% FV; 2.9% cost; overall healthy Stable/healthy
Competitive environmentSpreads stable; capital plentiful; focus on quality Competitive; spread stability with flight to quality Competitive dynamics continue; discipline maintained Stable competition
Liability mgmt/refinancingTarget leverage ~1:1; flexibility via ATM Issued $100M 2030 notes; plan partial 2026 redemption Redeemed $25M Jan’26 notes; weighted avg debt rate ~4.8% Proactive execution

Management Commentary

  • CEO: “Adjusted net investment income grew to $20.0 million on higher levels of interest income, coupled with healthy fee and dividend income… we have ample liquidity to continue to build the portfolio and remain committed to… attractive risk‑adjusted returns” .
  • CEO on portfolio mix/quality: “Our debt portfolio totaled $1.0 billion… 81% first lien… nonaccrual remaining under 1% of the total portfolio on a fair value basis and 2.9% on a cost basis” .
  • CFO on sequential drivers: “Total investment income was $40.0M… driven by a $2.1M increase in interest income… $1.8M increase in fee income… offset by a $0.6M decrease in dividend income” .
  • CFO on episodic items: “With the 1.3 in prepayment fees and about 600 in amortization, Q2 did have the benefit of about 1.9M in incremental income… not necessarily expect to repeat in Q3” .

Q&A Highlights

  • M&A/repayments: Management sees improving deal flow into Q3, with fewer expected repayments than Q2; poised for net growth though magnitude uncertain .
  • Competitive landscape: Still competitive, particularly for A+ credits, but lower middle market remains less impacted by large managers; discipline maintained .
  • Fee income sustainability: Prepayment fees (~$1.3M) viewed as episodic; expectation is for lower fee contribution in Q3 .
  • Credit specifics: Quest Software second‑lien risk improved post LME; sponsors aligned; valuation reflects risk, liquidity ample; positive tone on long‑term outlook .
  • Dividend & equity distributions: Elevated dividend income deemed episodic tied to refinancings and equity monetizations; not expected to recur each quarter .

Estimates Context

  • Beat on Q2: Revenue $39.97M vs $37.42M*; adjusted EPS $0.57 vs $0.522*; beats driven by prepayment fees, higher interest income on larger balances, and stable credit quality .*
  • Prior quarters: Q1 revenue beat ($36.50M vs $35.70M*); EPS in-line/slight miss ($0.54 vs $0.538*) on lower fee income; Q4 2024 revenue and EPS both beat .*
  • Implication: Absent episodic fees, forward estimates may temper sequentially; dividend capacity supported by spillover income ($1.39/share) and adjusted NII coverage of base dividend .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with caution on sustainability: Q2’s revenue/EPS beat benefited from ~$1.9M episodic items; expect a more normalized run‑rate in Q3 without similar prepayment fees .*
  • Dividends supported and raised: Q3 total dividend increased to $0.57 on healthy adjusted NII and spillover income; base dividend coverage remains strong .
  • Credit solid; yield modestly lower: Non‑accruals remain de minimis; weighted average yield drifted to 13.1% amid competition, but first‑lien mix and equity cushions support risk‑adjusted returns .
  • Liquidity and liability management proactive: $91.2M cash, $140.0M revolver availability; partial redemption of 2026 notes reduces near‑term maturity risk; debt cost ~4.8% .
  • Deal flow improving into Q3: Management sees better origination environment and fewer repayments, positioning for portfolio growth; watch M&A trajectory vs tariff/macro uncertainty .
  • Watchlist items: Quest Software second‑lien exposure monitored; valuation reflects risk, but recent liability management enhanced profile; tone constructive .
  • Estimate adjustments: Street may recalibrate for lower fee income in Q3 while acknowledging durable NII base; dividend path aided by spillover income .*

Note: *Values retrieved from S&P Global.