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    FDUS
    Earnings call· Jun 2026(Q2 FY26)

    FIDUS INVESTMENT Q2 FY26 earnings call FDUS

    Aug 7, 2026 Source

    Executive summary

    Fidus Q2 FY26 — Strong Adjusted NII and Equity Monetizations

    Fidus delivered a solid second quarter, marked by strong adjusted net investment income covering its base dividend and significant realized gains from equity monetizations. Despite geopolitical uncertainties impacting overall deal activity, the company's diversified portfolio remains healthy, with a focus on first-lien investments and low loan-to-value ratios. Management anticipates a pickup in deal flow in the second half of 2026, particularly Q4, while maintaining strict underwriting standards and a focus on capital preservation.

    Highlights

    5

    • Adjusted NII of $0.50 per share covered the base dividend.

    • Realized net gains of $6.4 million ($0.17 per share) from three equity monetizations.

    • Portfolio remains healthy with 88% first-lien debt and a weighted average loan-to-value of 41%.

    • Exited Virtex Enterprises LP, resulting in zero non-accrual investments as of the call date.

    • EBITDA growth in the portfolio was approximately 6% this quarter.

    Concerns

    4

    • Total investment income decreased by $4 million QoQ, primarily due to a $6.8 million decrease in fee income.

    • Net investment income (NII) decreased to $0.49 per share from $0.65 per share in Q1.

    • Weighted average interest rate on outstanding debt increased to 5.8% from 5.2% QoQ due to refinancing.

    • One portfolio company was added to the internal watchlist (grade 3+ names).

    Guidance & targets

    1
    CategoryTargetConfidence
    Net debt-to-equity ratio
    0.9x to 1.1x (target 1.0x)
    high materiality
    High

    Operational metrics

    41
    Adjusted NII per share
    $0.50vs $0.62 in Q1
    Q2 FY26

    Covered base dividend.

    Net realized gains
    $6.4 million$0.17 per share
    Q2 FY26

    From monetization of 3 equity investments (Medsurant Holdings, USG AS Holdings, Worldwide Express Operations).

    Total dividend declared
    $0.50
    Q3 FY26

    Payable September 29, 2026, to stockholders of record as of September 15, 2026.

    Originations
    $98 million
    Q2 FY26

    Vast majority were M&A-driven first lien investments.

    New portfolio company investments
    $48.1 million
    Q2 FY26
    Proceeds from repayments and realizations
    $39.2 million
    Q2 FY26
    Total investment portfolio fair value
    $1.4 billion102% of cost
    Q2 FY26
    Debt investments fair value
    $1.3 billion
    Q2 FY26
    Equity investments fair value
    $147.2 million
    Q2 FY26
    Nonaccrual investments
    10 as of call date
    Q2 FY26

    Virtex exited subsequent to quarter end, resulting in zero non-accruals.

    Total investment income
    $43.5 million$4 million decrease from Q1
    Q2 FY26
    Interest income
    $2.6 million increase
    Q2 FY26

    Driven by increased average debt investments outstanding.

    Dividend income from equity investments
    $0.6 million increase
    Q2 FY26
    Fee income
    $6.8 million decrease
    Q2 FY26

    Primarily related to fees from American AllWaste debt refinancing recognized in Q1.

    Total expenses
    $24.8 million$1.9 million higher than Q1
    Q2 FY26
    Interest expense
    $1.2 million increase
    Q2 FY26

    Related to higher average debt balances and refinancing of unsecured notes (including $0.4 million duplicative interest).

    Base management fees
    $0.3 million increase
    Q2 FY26

    Given increase in assets under management.

    Income incentive fees
    $1.2 million decrease
    Q2 FY26

    Given lower fee income in Q2.

    G&A expenses
    $0.4 million increase
    Q2 FY26

    Primarily related to proxy solicitation costs for Annual Shareholder Meeting.

    Capital gains fee accrual
    $1.2 million increase
    Q2 FY26
    Net investment income per share
    $0.49vs $0.65 in Q1
    Q2 FY26
    Total debt outstanding
    $739.8 million
    Q2 FY26
    Net debt-to-equity ratio
    1.0x
    Q2 FY26
    Statutory leverage (ex-SBA debentures)
    0.6x
    Q2 FY26
    Weighted average interest rate on outstanding debt
    5.8%vs 5.2% in Q1
    Q2 FY26

    Increase driven by refinancing 3.5% unsecured notes with new 6.625% notes due June 2029.

    Earliest debt maturity
    June 2029
    null

    Result of refinancing unsecured notes.

    Average portfolio investment (cost basis)
    $14 million
    Q2 FY26

    Excludes investments in 8 portfolio companies that sold their operations during winding down.

    Portfolio companies with equity investments
    82.4%
    Q2 FY26
    Average fully diluted equity ownership
    2.1%
    Q2 FY26
    Weighted average effective yield on debt investments
    12.5%in line with Q1
    Q2 FY26

    Computed using effective interest rates for debt investments at cost, including accretion of OID and loan origination fees, excluding nonaccruals.

    Cash balance
    $39.3 million
    Q2 FY26
    Availability on line of credit
    $112.3 million
    Q2 FY26
    Available SBA debentures
    $18.5 million
    Q2 FY26
    Total liquidity
    $170.1 million
    Q2 FY26
    Realized loss from Virtex exit
    $11 million
    Q3 FY26

    Received $0.2 million payment from exit of second lien and subordinated debt investments in Virtex Enterprises LP.

    Portfolio EBITDA growth
    ~6%
    Q2 FY26
    Weighted average leverage (cash flow portfolio)
    4.1x
    Q2 FY26

    Materially lower than broader market.

    Weighted average loan-to-value (portfolio)
    41%
    Q2 FY26
    Target loan-to-value
    50% or less
    Ongoing

    For almost every deal.

    Debt portfolio first lien percentage
    88%
    Q2 FY26

    Expected to stay or increase over time.

    Net asset value
    $738.5 million$19.46 per share
    Q2 FY26

    At quarter end.

    Industry KPIs

    2
    MetricValueDetails
    Performance revenue$6.4 millionUSD
    Deployment realizations$98 millionUSD

    Deals & partnerships

    2
    nullRefinancing of unsecured notes due November 2026 with new unsecured notes due June 2029.$320 millionnew notes due June 2029

    Included approximately $0.4 million of duplicative interest due to timing of redemption. Earliest debt maturity is now June 2029.

    Virtex Enterprises LPExited second lien and subordinated debt investments in Virtex Enterprises LP.$0.2 million received

    Virtex had previously been written down and was on nonaccrual. As of the call date, Fidus has no investments on nonaccrual.

    Risks & headwinds

    3
    Geopolitical uncertainties and market volatilityQ1 and Q2 FY26

    Weighed on deal activity levels in the fragmented lower middle market in Q1 and Q2.

    Mitigation: Expect deal flow to pick up as uncertainties abate; maintaining strict underwriting standards.

    Lower end consumer strugglesCurrent

    Directional, "struggling a little bit more than maybe others."

    Mitigation: Not seeing anything systemic; portfolio shows healthy growth.

    Increase in internal credit watchlist (Grade 3+ names)Q2 FY26

    One addition to the list this quarter.

    Mitigation: Idiosyncratic issue; expect several names to be exited/sold in next 6-9 months.

    What to watch in Q3 FY26

    4

    Deal flow and investment activity

    Q3/Q4 FY26
    CurrentNot robust in Q1/Q2, but picking up now.
    TargetIncreased activity, particularly in Q4.

    Why it matters

    Indicates future portfolio growth and originations.

    What I would say, and I did allude to it and you caught it, is that we are seeing a higher level of deal flow today than we were 60 days ago, for sure. And I think that bodes well for Q4 in particular, maybe Q3 for some, but I think it bodes well for Q4.

    Q&A highlights

    6

    When does management expect deal activity to pick up significantly (Q4 2026 vs. 2027)?

    Management sees a higher level of deal flow now compared to 60 days ago, boding well for Q4, possibly Q3. They acknowledge global uncertainties but are seeing quality improve. Portfolio companies are also active with new investments.

    “What I would say, and I did allude to it and you caught it, is that we are seeing a higher level of deal flow today than we were 60 days ago, for sure. And I think that bodes well for Q4 in particular, maybe Q3 for some, but I think it bodes well for Q4.”

    asked by Robert Dodd · answered by Edward Ross

    2 min read5 chapters

    Detailed Narrative

    01

    Portfolio Strategy and Health

    Fidus continues to build a diversified portfolio of debt and equity investments, primarily M&A-driven first-lien investments, by leveraging long-standing sponsor relationships and disciplined selection. The portfolio emphasizes niche market leaders with defensible moats and resilient business models, structured to generate high current income and potential capital gains. As of quarter-end, the portfolio was valued at $1.4 billion, 102% of cost, with $1.3 billion in debt and $147.2 million in equity investments.

    02

    Credit Quality and Non-Accruals

    The debt portfolio is performing well with sound credit quality. As of June 30, only one company, Virtex, was on non-accrual, representing less than 1% of the portfolio. Subsequent to quarter-end, Fidus exited its Virtex investments for $0.2 million, realizing an $11 million loss, and now has no investments on non-accrual status. Management noted an increase of one company to the internal watchlist (Grade 3+), but views it as idiosyncratic.

    03

    Market Outlook and Deal Flow

    While geopolitical uncertainties and market volatility🌐 weighed on deal activity in Q1 and Q2, management observes a pickup in deal flow currently, expecting increased investment activity in the second half of 2026, particularly Q4. This is driven by pent-up demand in the M&A market and private equity exits. Fidus will maintain strict underwriting standards, focusing on companies with healthy EBITDA growth (approx. 6% this quarter) and low leverage.

    04

    Software Portfolio Performance

    The software and tech-enabled services portfolio is performing well, marked at 99% of cost for debt investments. Management sees no widespread performance issues related to AI risk, noting that most borrowers are adopting AI to reduce costs and improve products, positioning them to capitalize on advancing AI capabilities.

    05

    Leverage and Capital Management

    Fidus's net debt-to-equity ratio was 1.0x at quarter-end, with a statutory leverage of 0.6x (excluding SBA debentures). The company's target leverage range is 0.9x to 1.1x, with a midpoint target of 1.0x. Management indicated a willingness to utilize the ATM program for equity capital raises if growth opportunities and repayments pick up, aligning with their target leverage.

    AI-generated summary of the company’s earnings call. Not investment advice.