Fidus Investment (NASDAQ:FDUS) reported a fourth quarter marked by its highest quarterly originations to date, as management pointed to a stronger M&A environment and the release of deal activity that had been delayed earlier in the year. On the company’s earnings call, Chairman and CEO Ed Ross said fourth quarter originations totaled $213.7 million, which he attributed in part to “pent-up demand” that followed what he described as “Liberation Day” last April, a period that “essentially froze decision-making across wide swaths of the economy and activity in the M&A market for a period of time.”
For full-year 2025, Ross said Fidus invested $498.2 million in new and existing portfolio companies, with net originations of $210.2 million. As a result, the company grew its portfolio to $1.3 billion at fair value, continuing what management described as a steady growth trajectory since its 2011 IPO.
Record originations and portfolio mix
Repayments and realizations in the quarter totaled $84.7 million, which management said reflected a mix of M&A and refinancing activity. After quarter end, the company invested an additional $7 million in one new portfolio company, completed “numerous small add-on investments,” and realized a $3.4 million gain on the exit of equity investments in CIH Intermediate, LLC.
At year-end, Fidus reported a $1.3 billion portfolio at fair value, equal to 102% of cost. First lien investments comprised 86% of the debt portfolio, reflecting what Ross described as an ongoing shift toward first lien positioning. The equity portfolio stood at $142.3 million, or 10.7% of the total portfolio at fair value.
Earnings, dividends, and net asset value
Ross said adjusted net investment income (NII) rose 5.1% year over year to $19.4 million, helped by higher average income-producing assets and a 60% increase in fee income versus the fourth quarter of 2024. On a per-share basis, adjusted NII was $0.52, compared with $0.54 in the prior-year quarter.
Fidus continued to pay dividends above its base distribution. Ross said the company’s base dividend is $0.43 per share and that total dividends paid in the fourth quarter were $0.50 per share. The company ended the year with estimated spillover income of $1.01 per share.
For the first quarter of 2026, the board declared a total dividend of $0.52 per share, consisting of a $0.43 base dividend and a $0.09 supplemental dividend. Management said the supplemental amount equals 100% of the surplus in adjusted NII over the base dividend from the prior quarter. The dividend is payable March 30, 2026, to stockholders of record as of March 20, 2026.
Net asset value increased to $741.9 million at year-end from $655.7 million at December 31, 2024, according to Ross. NAV per share was $19.55 at December 31, 2025, compared to $19.33 at the end of 2024.
Credit quality and software/AI exposure
Ross highlighted continued credit performance, noting that non-accruals were less than 1% of the total portfolio at fair value and 2% at cost at year-end. He also emphasized underwriting discipline, including structuring debt investments with “significant loan-to-value cushions.”
Management devoted a portion of the call to discussing its software and tech-enabled services exposure, including what Ross called “AI opportunities and risks.” As of the fourth quarter, the company’s software and tech-enabled services portfolio totaled $464 million and was composed of 92% first lien debt, 4% junior debt, and 4% equity. Ross said the exposure is diversified across 28 names, with an average exposure per company of $17 million, and that the weighted average loan-to-value for this segment was 37%, compared with a 44% weighted average loan-to-value for the total portfolio.
In response to analyst questions, Ross described key attributes the firm looks for in software businesses, including “data moats,” vertical market specialization, regulated-sector functionality, contractual revenue and high switching costs, and management teams that “embrace change.” He added that nearly all software portfolio companies are adding AI features and using AI tools to reduce operating costs. Ross also said the average contractual duration (maturity) for the software and tech-enabled services portfolio is approximately 2.5 years and that, as of December 31, debt investments in that portfolio were marked at 100% of cost.
Asked about annual recurring revenue (ARR) loans, Ross said ARR loans represent about 22% of the software portfolio, or 7.5% of the total portfolio, and that some investments that were previously ARR loans have transitioned to EBITDA-based loans. He said Fidus structures ARR loans with covenants requiring growth and “force[s] a transition to cash flow,” including becoming EBITDA-positive and having EBITDA support for interest expense.
Balance sheet and liquidity
Chief Financial Officer Shelby Sherard said total investment income was $42.2 million in the quarter, up $4.9 million from the third quarter, driven by a $2.0 million increase in interest income tied to higher average debt investments outstanding, as well as a $3.5 million increase in fee income due to greater investment activity. That was partially offset by a $0.8 million decline in dividend income from equity investments.
Total expenses, including tax provision, were $22.5 million, up $2.6 million from the third quarter. Sherard attributed the increase primarily to higher income tax provision related to annual excise tax accrual, increased interest expense due to higher average debt balances (including a $100 million add-on to 6.75% notes due in March 2030), and higher base management and income incentive fees. She said the company also saw lower capital gains fee accrual and reduced G&A expenses, noting third quarter G&A included one-time items tied to the exit of a former debt investment in US Green Fiber.
Net investment income was $0.53 per share for the quarter versus $0.49 in the third quarter. Adjusted NII was $0.52 per share versus $0.50 in the prior quarter. Sherard also said the company recognized about $1.5 million of net realized losses, stemming from a realized loss on the exit of debt investments in US Green Fiber, partially offset by realized gains from the sale of equity investments in Aldinger Company and Garlock Printing and Converting.
At December 31, Fidus had $658.3 million of debt outstanding, including SBA debentures, unsecured notes, a revolving credit facility balance, and secured borrowings. Net debt-to-equity was 0.8x, while statutory leverage excluding exempt SBA debentures was 0.6x. The weighted average interest rate on outstanding debt was 5.2%.
On liquidity, Sherard said the company used proceeds from the $100 million debt add-on to redeem the remaining $100 million of unsecured notes due in January. Fidus also increased credit facility capacity from $175 million to $225 million through an accordion feature and raised $31.5 million in net proceeds via accretive share issuance under its ATM program. As of December 31, the company reported total liquidity of approximately $304.8 million, consisting of $79.6 million in cash, $141.2 million of revolver availability, and $84 million of available SBA debentures.
2026 outlook: modest start, expectations for pickup later
Looking ahead, Ross said Fidus entered 2026 with a “decent level of deal flow” and expects activity to increase throughout the year as private equity owners bring more portfolio companies to market. In the Q&A, he added that deal flow in the first quarter is “a little more modest,” which he attributed partly to seasonality, and said he does not expect the first quarter to resemble the fourth quarter’s pace. Ross said he expects some portfolio growth in the quarter, with repayments likely lower than originations.
Responding to questions on M&A drivers, Ross said the primary catalyst appears to be pent-up demand and longer private equity holding periods, with LPs seeking returned capital. He also said the company expects potential opportunities from market dislocations in software, though he noted such dislocations had not yet meaningfully shown up in Fidus’s lower middle market focus.
About Fidus Investment (NASDAQ:FDUS)
Fidus Investment Corporation (NASDAQ: FDUS) is a closed-end, externally managed business development company (BDC) that provides specialized financing solutions to U.S. middle-market companies. Operated by Fidus Investment Advisors, LLC, a registered investment adviser, the company is regulated under the Investment Company Act of 1940 and trades on the Nasdaq Capital Market.
The firm focuses on structuring senior secured and unitranche loans, mezzanine debt and equity investments for established businesses across a range of industries.
