Release Date: May 09, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fidus Investment Corp (FDUS, Financial) reported a 6% increase in assets under management, reaching approximately $1.2 billion on a fair value basis compared to December 31, 2024.
- Adjusted net investment income for the quarter was $18.5 million, showing an increase from $18.1 million in Q1 2024.
- The company declared a total dividend of $0.54 per share for the second quarter of 2025, maintaining the same level as the first quarter.
- Fidus Investment Corp (FDUS) successfully originated $115.6 million in the first quarter, with $102.1 million invested in seven new portfolio companies.
- The portfolio remains healthy with companies on nonaccrual accounting for less than 1% of the total portfolio on a fair value basis, indicating strong credit quality.
Negative Points
- Deal activity in the lower middle market remained modest, reflecting lackluster M&A trends.
- Total investment income decreased by $1 million from Q4 2024, primarily due to a decline in interest income and fee income.
- Net investment income per share decreased to $0.53 from $0.55 in Q4 2024.
- The weighted average yield on debt investments slightly decreased to 13.2% from 13.3% at the end of Q4 2024.
- The company faces uncertainty in the M&A market due to macroeconomic challenges and trade policy uncertainties, impacting future deal flow.
Q & A Highlights
Q: Can you provide insights on the potential impact of tariffs on your portfolio companies?
A: Ed Ross, CEO, explained that Fidus's direct exposure to tariffs is limited, with just over 5% of the portfolio having direct material exposure. The company has assessed the plans of high and medium-risk companies and believes the situations are manageable with prudent plans in place.
Q: What needs to change for the M&A market to rebound?
A: Ed Ross, CEO, stated that the current uncertainty is the main issue affecting the M&A market. Stability, rather than the removal of tariffs, is needed for the market to rebound. Despite the current environment, there is still activity in the lower middle market, albeit at reduced levels.
Q: How do you view the current competitive landscape in private credit, and what are your expectations for spreads?
A: Ed Ross, CEO, noted that while the market is competitive, it is less so in the lower middle market. Spreads for high-quality credits are stable, but there may be opportunities for spread widening in more complex situations. Overall, he does not expect significant changes in spreads.
Q: What is the prepayment risk among your top-performing portfolio companies?
A: Ed Ross, CEO, acknowledged that prepayment risk is a constant factor. The company had one mezzanine security prepaid last quarter and expects a couple of companies to be refinanced out. This is typical and part of the business.
Q: Can you provide an update on the distressed investment in Quest Software?
A: Ed Ross, CEO, described Quest Software as a provider of cybersecurity solutions. The company is over-levered and affected by higher interest rates. Despite market concerns, Fidus believes in the long-term outlook of the business, and the risk profile is reflected in its valuation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
