Fidus Investment Corporation Q4 FY2025 earnings call

• Deal flow was strong in Q4 driven by pent-up demand after Liberation Day, with originations at $213.7 million, highest in a quarter. Total 2025 originations $498.2 million, net originations $210.2 million, growing portfolio to $1.3 billion fair value.
• Applied strict underwriting standards, structured debt with loan-to-value cushions. VITAS's debt portfolio performed well with adjusted NII growth. Paid dividends, ended year with spillover income, and declared first quarter 2026 dividend.
• In Q4, $84.7 million from repayments and realizations, subsequent to quarter end invested $7 million and realized $3.4 million gain. Portfolio diversified by industry, software portfolio well-positioned with strong sponsors and positive performance.

In the fourth quarter, originations were $213.7 million, with $121.5 million invested in eight new portfolio companies, $206.5 million in FIT first lien securities, and $3.2 million in equity securities. Adjusted NII for VITAS's debt portfolio grew 5.1% to $19.4 million in Q4 2025. Net asset value grew 13.2% to $741.9 million at quarter end. First lien investments comprised 86% of the debt portfolio, and the equity portfolio was $142.3 million. The software and tech-enabled services portfolio was $464 million, with 92% first lien debt, 4% junior debt, and 4% equity, weighted average loan-to-value 37%.

• Expect activity levels to pick up in 2026 as private equity owners bring portfolio companies to market.
• Intend to stay focused on generating attractive risk-adjusted returns and growing net asset value.

• Market dislocation in software has been a concern, but focus on companies with long-term barriers to entry, data moats, vertical markets, regulated sectors, deep relationships, and good management. Software portfolio has high-quality sponsors and positive performance. Portfolio's loan-to-value cushions provide protection.

Q: On activity levels, any spillover of deals from Q4 into Q1?

A: Q4 was busy with pent-up demand, Q1 deal flow more modest, but expect increase throughout the year.

Q: On software AI risk, types of businesses looked for?

A: Look for data moats, vertical markets, regulated sectors, deep relationships, good management, backed by high-quality sponsors.

Q: VITAS focus on ARR loans?

A: ~22% of software portfolio are ARR loans, structured with growth covenants.

Q: Comfort with Fansteel investment?

A: Extremely comfortable, long-term outlook positive.

Q: Average floors in floating rate debt portfolio?

A: Most floors in 2% range, if SOFR cut, some decline in yields.

Q: Deal flow driven by PE seeking exit or tax/regulatory?

A: Large preponderance from PE pent-up demand.

Q: Recovery rate in lower middle market first lien loans?

A: Generally 60-85% range, software portfolio has large cushion.

Q: Impact of software market dislocation on pricing and yield?

A: Expect unique opportunities, continue to look at best-in-class software names.