Fidus Investment Corporation

For Q2 2026, Fidus reported total investment income of $43.5 million, down $4 million from Q1, and total expenses including income tax provision of $24.8 million, up $1.9 million from Q1. Net investment income was $0.49 per share versus $0.65 in Q1, and adjusted NII was $0.50 per share versus $0.62 in Q1. The company also recognized $6.4 million of net realized gains, or $0.17 per share, from equity investments in Medsurant Holdings, USG AS Holdings and Worldwide Express Operations. Net asset value was $738.5 million, or $19.46 per share. For Q3 2026, the board declared total dividends of $0.50 per share, consisting of a $0.43 base dividend and a $0.07 supplemental dividend payable September 29, 2026. Management said the portfolio was $1.4 billion fair value at quarter-end, debt outstanding was $739.8 million, net debt-to-equity was 1.0x, weighted average interest rate was 5.8%, and total liquidity was about $170.1 million. No full-year financial guidance was provided; management said adjusted NII should continue to cover the base dividend and deal flow likely improves in Q4.

Ed Ross framed the quarter as a period of disciplined portfolio building in a choppy M&A environment. He said geopolitical uncertainty and volatility weighed on activity, but Fidus still added diversified debt and equity investments, with a portfolio built around niche market leaders, defensible moats and realistic growth plans. His tone was constructive: he said deal flow is already better than 60 days ago and expects Q4 to be stronger, while emphasizing capital preservation, downside protection and recurring income.

Shelby Sherard focused on the quarter’s income, expense and balance sheet trends. She explained that the drop in total investment income versus Q1 was mainly due to lower fee income after the American AllWaste refinancing fee in Q1, while expenses rose because of higher interest expense, refinancing-related duplicative interest, higher base management fees, proxy costs and a higher capital gains fee accrual. She highlighted leverage of 1.0x net debt-to-equity, statutory leverage of 0.6x excluding SBA debentures, debt costs rising to 5.8% after refinancing 3.5% notes into 6.625% notes due June 2029, and liquidity of about $170.1 million including $39.3 million of cash.

Analysts pressed management on whether deal activity is likely to recover in the second half or slip into 2027; Ross said activity is already picking up and that Q4 looks the most promising, though timing still depends on macro uncertainties. They also asked about credit quality, with Ross saying there is no systemic issue, portfolio EBITDA growth was about 6%, and Virtex was exited after quarter-end with no current nonaccruals. On software and AI, management said it is largely business as usual, with no widespread AI-related performance issues, and that many borrowers are adopting AI to cut costs and improve products. In response to questions on terms, junior capital, and ATM issuance, Ross said covenants, pricing and loan-to-value remain attractive in the lower middle market, first-lien deals dominate originations, and the ATM could be used if growth and leverage targets justify it.