Main Street Announces 2020 Fourth Quarter And Annual Results
Main Street Capital Corporation (NYSE: MAIN) announced robust financial results for Q4 and full year 2020. Highlights include net investment income of $39.6 million ($0.59/share) in Q4 and $137.9 million ($2.10/share) for the year. Distributable net investment income also rose, totaling $42.3 million in Q4 and $148.8 million for the year. The net asset value increased to $22.35/share, up 3.9% from Q3 2020. The company declared monthly dividends of $0.615/share for Q1 2021, maintaining consistency with prior periods. Total investments amounted to $294.4 million in lower middle market portfolios in 2020.
- Net investment income increased by $0.396 million (1%) from Q4 2019.
- Total investment income rose by $1.855 million (3%) year-over-year in Q4 2020.
- Net asset value increased by $0.83 per share (3.9%) to $22.35 from Q3 2020.
- Monthly dividends totaled $2.460 per share for the full year 2020, up 1.9% from 2019.
- Successful completion of $294.4 million in lower middle market portfolio investments in 2020.
- Net investment income per share declined by $0.03 (5%) from Q4 2019.
- Net realized loss from investments was $71.6 million in Q4 2020, impacting overall profitability.
- Cash operating expenses rose to $20.2 million in Q4 2020, up from $18.6 million in Q4 2019.
HOUSTON, Feb. 25, 2021 /PRNewswire/ -- Main Street Capital Corporation (NYSE: MAIN) ("Main Street") is pleased to announce its financial results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter 2020 Highlights
- Net investment income of
$39.6 million (or$0.59 per share) - Distributable net investment income(1) of
$42.3 million (or$0.63 per share) - Total investment income of
$62.5 million - Industry leading ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of
1.5% on an annualized basis - Net increase in net assets resulting from operations of
$79.3 million (or$1.19 per share) - Net asset value of
$22.35 per share at December 31, 2020, representing an increase of$0.83 per share, or3.9% , compared to$21.52 per share at September 30, 2020 - Declared monthly dividends totaling
$0.61 5 per share for the first quarter of 2021, or$0.20 5 per share for each of January, February and March 2021, consistent with the monthly dividends paid for the first quarter of 2020 and the fourth quarter of 2020 - Completed
$97.8 million in total lower middle market ("LMM") portfolio investments, including investments totaling$68.7 million in two new LMM portfolio companies, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net increase of$40.3 million in total LMM portfolio investments - Completed
$98.5 million in total private loan portfolio investments, which after aggregate repayments of debt principal and exits of equity investments from several private loan portfolio investments resulted in a net decrease of$58.3 million in total private loan portfolio investments - Net decrease of
$29.3 million in middle market portfolio investments - The External Investment Manager (as defined below) became the sole investment adviser to MSC Income Fund, LLC ("MSC Income"), formerly known as HMS Income Fund, Inc., a non-listed business development company
- The External Investment Manager successfully launched and closed its first private fund, MS Private Loan Fund I, LP
Full Year 2020 Highlights
- Net investment income of
$137.9 million (or$2.10 per share) - Distributable net investment income(1) of
$148.8 million (or$2.26 per share) - Total investment income of
$222.6 million - Industry leading Operating Expenses to Assets Ratio of
1.3% - Paid monthly dividends totaling
$2.46 0 per share, representing a1.9% increase compared to$2.41 5 for 2019 - Completed
$294.4 million in total LMM portfolio investments, including investments totaling$199.6 million in six new LMM portfolio companies, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net increase of$102.5 million in total LMM portfolio investments - Completed
$269.4 million in total private loan portfolio investments, which after aggregate repayments of debt principal and exits of equity investments from several private loan portfolio investments resulted in a net increase of$24.4 million in private loan portfolio investments - Net decrease of
$88.7 million in middle market portfolio investments - Amended our revolving credit facility ("Credit Facility") in March and November 2020 to increase the total commitments from
$705.0 million to$780.0 million and add two new lender relationships - Further diversified capital structure by issuing an additional
$125.0 million of our existing5.20% investment grade notes due 2024 at a premium resulting in an estimated yield-to-maturity of4.42%
In commenting on Main Street's results, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "We are pleased with our fourth quarter results, which we believe represented a strong finish to a difficult and unusual year and which continue to illustrate the strength of our portfolio companies and evidence of their ongoing recovery from the impacts of the COVID-19 pandemic. We also continued our investment origination success in both our lower middle market and private loan investment strategies with the two portfolios combining for almost
Fourth Quarter 2020 Operating Results
The following table provides a summary of our operating results for the fourth quarter of 2020:
Three months ended December 31, | ||||||||
2020 | 2019 | Change ($) | Change (%) | |||||
Interest income | $ 45,088 | $ 46,649 | $ (1,561) | ( | ||||
Dividend income | 12,431 | 12,031 | 400 | |||||
Fee income | 4,985 | 1,969 | 3,016 | |||||
Total investment income | $ 62,504 | $ 60,649 | $ 1,855 | |||||
Net investment income | $ 39,643 | $ 39,247 | $ 396 | |||||
Net investment income per share | $ 0.59 | $ 0.62 | $ (0.03) | ( | ||||
Distributable net investment income (1) | $ 42,255 | $ 42,050 | $ 205 | |||||
Distributable net investment income per share (1) | $ 0.63 | $ 0.66 | $ (0.03) | ( | ||||
Net increase (decrease) in net assets resulting from operations | $ 79,256 | $ 16,014 | $ 63,242 | |||||
Net increase (decrease) in net assets resulting from operations per share | $ 1.19 | $ 0.25 | $ 0.94 | |||||
The
Cash operating expenses (total operating expenses excluding non-cash, share-based compensation expense) increased to
The
Net investment income and distributable net investment income on a per share basis(1) for the fourth quarter of 2020 both include the impact of a greater number of average shares outstanding compared to the corresponding period in 2019 primarily due to (i) shares issued through our at-the-market, or ATM, program, (ii) shares issued pursuant to our equity incentive plans and (iii) shares issued pursuant to our dividend reinvestment plan. Net investment income and distributable net investment income in the fourth quarter on a per share basis also both include an increase of
The
The following table provides a summary of the total net unrealized appreciation of
Three Months Ended December 31, 2020 | |||||||||
LMM (a) | Middle | Private | Other | Total | |||||
(dollars in millions) | |||||||||
Accounting reversals of net unrealized (appreciation) depreciation | $ 3.2 | $ 23.0 | $ 45.1 | $ - | $ 71.3 | ||||
Net unrealized appreciation relating to portfolio investments | 13.3 | 8.0 | 5.1 | 14.4 | (b) | 40.8 | |||
Total net unrealized appreciation relating to portfolio investments | $ 16.5 | $ 31.0 | $ 50.2 | $ 14.4 | $ 112.0 | ||||
(a) | LMM includes unrealized appreciation on 38 LMM portfolio investments and unrealized depreciation on 19 LMM portfolio investments. |
(b) | Other includes (i) |
Liquidity and Capital Resources
As of December 31, 2020, we had
Several details regarding our capital structure as of December 31, 2020 are as follows:
- Our Credit Facility included
$780.0 million in total commitments from a diversified group of 19 participating lenders, plus an accordion feature that allows us to increase the total commitments under the facility to up to$800.0 million . $269.0 million in outstanding borrowings under our Credit Facility, with an interest rate of2.0% based on LIBOR effective for the contractual reset date of January 1, 2021.$309.8 million of outstanding SBIC debentures through our wholly owned SBIC subsidiaries. These debentures, which are guaranteed by the U.S. Small Business Administration, had a weighted-average annual fixed interest rate of approximately3.4% and mature ten years from original issuance. The first maturity related to our SBIC debentures occurs in the first quarter of 2021, and the weighted-average remaining duration was approximately 5.4 years.$450.0 million of notes outstanding that bear interest at a rate of5.20% per year (the "5.20% Notes"). The5.20% Notes mature on May 1, 2024 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions.$185.0 million of notes outstanding that bear interest at a rate of4.50% per year (the "4.50% Notes"). The4.50% Notes mature on December 1, 2022 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions.- Our net asset value totaled
$1,514.8 million , or$22.35 per share.
During January 2021, we issued
Investment Portfolio Information as of December 31, 2020 (2)
The following table provides a summary of the investments in our LMM portfolio, middle market portfolio and private loan portfolio as of December 31, 2020:
As of December 31, 2020 | |||||
LMM (a) | Middle Market | Private Loan | |||
(dollars in millions) | |||||
Number of portfolio companies | 70 | 42 | 63 | ||
Fair value | $ 1,285.5 | $ 445.6 | $ 740.4 | ||
Cost | $ 1,104.6 | $ 488.9 | $ 769.0 | ||
% of portfolio at cost - debt | |||||
% of portfolio at cost - equity | |||||
% of debt investments at cost secured by first priority lien | |||||
Weighted-average annual effective yield (b) | |||||
Average EBITDA (c) | $ 5.3 | $ 76.5 | $ 58.1 | ||
(a) | We had equity ownership in |
(b) | The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. |
(c) | The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the middle market and private loan portfolios. These calculations exclude certain portfolio companies, including three LMM portfolio companies, one middle market portfolio company and four private loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies and those portfolio companies whose primary purpose is to own real estate. |
The fair value of our LMM portfolio company equity investments was approximately
As of December 31, 2020, we had other portfolio investments in twelve companies, collectively totaling
As of December 31, 2020, our investment in the External Investment Manager (as defined below) had a fair value of
As of December 31, 2020, we had seven investments on non-accrual status, which comprised approximately
External Investment Manager
MSC Adviser I, LLC is a wholly owned portfolio company and registered investment adviser that provides investment management services to external parties (the "External Investment Manager"). Effective on October 30, 2020, the External Investment Manager transitioned from the role of investment sub-adviser to the role of sole investment adviser and administrator to MSC Income, formerly known as HMS Income Fund, Inc. The new advisory agreement includes a
Fourth Quarter 2020 Financial Results Conference Call / Webcast
Main Street has scheduled a conference call for Friday, February 26, 2021 at 10:00 a.m. Eastern Time to discuss the fourth quarter and full year 2020 financial results.
You may access the conference call by dialing 412-902-0030 at least 10 minutes prior to the start time. The conference call can also be accessed via a simultaneous webcast by logging into the investor relations section of the Main Street web site at http://www.mainstcapital.com.
A telephonic replay of the conference call will be available through Friday, March 5, 2021 and may be accessed by dialing 201-612-7415 and using the passcode 13715220#. An audio archive of the conference call will also be available on the investor relations section of the company's website at http://www.mainstcapital.com shortly after the call and will be accessible for approximately 90 days.
For a more detailed discussion of the financial and other information included in this press release, please refer to the Main Street Annual Report on Form 10-K for the year ended December 31, 2020 to be filed with the Securities and Exchange Commission (www.sec.gov) and Main Street's Fourth Quarter 2020 Investor Presentation to be posted on the investor relations section of the Main Street website at http://www.mainstcapital.com.
ABOUT MAIN STREET CAPITAL CORPORATION
Main Street (www.mainstcapital.com) is a principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. Main Street's portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. Main Street seeks to partner with entrepreneurs, business owners and management teams and generally provides "one stop" financing alternatives within its lower middle market portfolio. Main Street's lower middle market companies generally have annual revenues between
Main Street, through its wholly owned portfolio company MSC Adviser I, LLC ("MSC Adviser"), also maintains an asset management business through which it manages investments for external parties. MSC Adviser is registered as an investment adviser under the Investment Advisers Act of 1940.
FORWARD-LOOKING STATEMENTS
Main Street cautions that statements in this press release which are forward-looking and provide other than historical information, including but not limited to our and our portfolio companies' ability to successfully navigate the current economic environment and the effects of the COVID-19 pandemic, are based on current conditions and information available to Main Street as of the date hereof and include statements regarding Main Street's goals, beliefs, strategies and future operating results and cash flows. Although its management believes that the expectations reflected in those forward-looking statements are reasonable, Main Street can give no assurance that those expectations will prove to be correct. Those forward-looking statements are made based on various underlying assumptions and are subject to numerous uncertainties and risks, including, without limitation: Main Street's continued effectiveness in raising, investing and managing capital; adverse changes in the economy generally or in the industries in which Main Street's portfolio companies operate; the potential impacts of the COVID-19 pandemic on the business and operations, liquidity and access to capital of Main Street and its portfolio companies, and on the U.S. and global economies, including public health requirements in response to the pandemic; changes in laws and regulations or business, political and/or regulatory conditions that may adversely impact Main Street's operations or the operations of its portfolio companies; the operating and financial performance of Main Street's portfolio companies and their access to capital; retention of key investment personnel; competitive factors; and such other factors described under the captions "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors" included in Main Street's filings with the Securities and Exchange Commission (www.sec.gov). Main Street undertakes no obligation to update the information contained herein to reflect subsequently occurring events or circumstances, except as required by applicable securities laws and regulations.
Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO, dhyzak@mainstcapital.com
Brent D. Smith, CFO, bsmith@mainstcapital.com
713-350-6000
Dennard Lascar Investor Relations
Ken Dennard / ken@dennardlascar.com
Zach Vaughan / zvaughan@dennardlascar.com
713-529-6600
MAIN STREET CAPITAL CORPORATION | |||||||
Consolidated Statements of Operations | |||||||
(dollars in thousands, except shares and per share amounts) | |||||||
(Unaudited) | |||||||
Three months ended December 31, | Twelve months ended December 31, | ||||||
2020 | 2019 | 2020 | 2019 | ||||
INVESTMENT INCOME: | |||||||
Interest, fee and dividend income: | |||||||
Control investments | $ 23,798 | $ 21,934 | $ 81,155 | $ 92,414 | |||
Affiliate investments | 8,808 | 9,306 | 32,435 | 34,732 | |||
Non-Control/Non-Affiliate investments | 29,898 | 29,409 | 109,024 | 116,227 | |||
Total investment income | 62,504 | 60,649 | 222,614 | 243,373 | |||
EXPENSES: | |||||||
Interest | (12,761) | (13,122) | (49,587) | (50,258) | |||
Compensation | (6,702) | (3,885) | (18,981) | (19,792) | |||
General and administrative | (2,875) | (3,263) | (12,702) | (12,546) | |||
Share-based compensation | (2,612) | (2,803) | (10,828) | (10,083) | |||
Expenses allocated to the External Investment Manager | 2,089 | 1,671 | 7,429 | 6,672 | |||
Total expenses | (22,861) | (21,402) | (84,669) | (86,007) | |||
NET INVESTMENT INCOME | 39,643 | 39,247 | 137,945 | 157,366 | |||
NET REALIZED GAIN (LOSS): | |||||||
Control investments | (43,768) | (129) | (59,594) | 4,797 | |||
Affiliate investments | 2,610 | 37 | 2,203 | (565) | |||
Non-Control/Non-Affiliate investments | (30,465) | (857) | (58,556) | (19,344) | |||
Realized loss on extinguishment of debt | - | - | (534) | (5,689) | |||
Total net realized loss | (71,623) | (949) | (116,481) | (20,801) | |||
NET UNREALIZED APPRECIATION (DEPRECIATION): | |||||||
Control investments | 73,020 | (7,266) | 37,924 | (980) | |||
Affiliate investments | (2,155) | (2,141) | (29,038) | 990 | |||
Non-Control/Non-Affiliate investments | 41,083 | (13,951) | (14,968) | (10,214) | |||
SBIC debentures | - | (175) | 460 | 4,450 | |||
Total net unrealized appreciation (depreciation) | 111,948 | (23,533) | (5,622) | (5,754) | |||
INCOME TAXES: | |||||||
Federal and state income, excise and other taxes | 830 | (801) | (590) | (3,546) | |||
Deferred taxes | (1,542) | 2,050 | 14,131 | 2,304 | |||
Income tax benefit (provision) | (712) | 1,249 | 13,541 | (1,242) | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ 79,256 | $ 16,014 | $ 29,383 | $ 129,569 | |||
NET INVESTMENT INCOME PER SHARE - BASIC AND DILUTED | $ 0.59 | $ 0.62 | $ 2.10 | $ 2.50 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC AND DILUTED | $ 1.19 | $ 0.25 | $ 0.45 | $ 2.06 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED | 66,856,103 | 63,775,000 | 65,705,963 | 62,960,591 | |||
MAIN STREET CAPITAL CORPORATION | |||
Consolidated Balance Sheets | |||
(dollars in thousands, except per share amounts) | |||
December 31, 2020 | December 31, 2019 | ||
ASSETS | |||
Investments at fair value: | |||
Control investments | $ 1,113,725 | $ 1,032,721 | |
Affiliate investments | 366,301 | 330,287 | |
Non-Control/Non-Affiliate investments | 1,204,840 | 1,239,316 | |
Total investments | 2,684,866 | 2,602,324 | |
Cash and cash equivalents | 31,919 | 55,246 | |
Interest receivable and other assets | 49,761 | 50,458 | |
Deferred financing costs, net | 2,818 | 3,521 | |
Total assets | $ 2,769,364 | $ 2,711,549 | |
LIABILITIES | |||
Credit facility | $ 269,000 | $ 300,000 | |
SBIC debentures (par: | 303,972 | 306,188 | |
| 451,817 | 324,595 | |
| 183,836 | 183,229 | |
Accounts payable and other liabilities | 20,833 | 24,532 | |
Interest payable | 8,658 | 7,292 | |
Dividend payable | 13,889 | 13,174 | |
Deferred tax liability, net | 2,592 | 16,149 | |
Total liabilities | 1,254,597 | 1,175,159 | |
NET ASSETS | |||
Common stock | 677 | 643 | |
Additional paid-in capital | 1,615,940 | 1,512,435 | |
Total undistributed (overdistributed) earnings | (101,850) | 23,312 | |
Total net assets | 1,514,767 | 1,536,390 | |
Total liabilities and net assets | $ 2,769,364 | $ 2,711,549 | |
NET ASSET VALUE PER SHARE | $ 22.35 | $ 23.91 | |
MAIN STREET CAPITAL CORPORATION | |||||||
Reconciliation of Distributable Net Investment Income | |||||||
(dollars in thousands, except per share amounts) | |||||||
(Unaudited) | |||||||
Three months ended | Twelve months ended | ||||||
2020 | 2019 | 2020 | 2019 | ||||
Net investment income | $ 39,643 | $ 39,247 | $ 137,945 | $ 157,366 | |||
Share-based compensation expense | 2,612 | 2,803 | 10,828 | 10,083 | |||
Distributable net investment income (1) | $ 42,255 | $ 42,050 | $ 148,773 | $ 167,449 | |||
Per share amounts: | |||||||
Net investment income per share - | |||||||
Basic and diluted | $ 0.59 | $ 0.62 | $ 2.10 | $ 2.50 | |||
Distributable net investment income per share - | |||||||
Basic and diluted (1) | $ 0.63 | $ 0.66 | $ 2.26 | $ 2.66 | |||
MAIN STREET CAPITAL CORPORATION | |
Endnotes | |
(1) | Distributable net investment income is net investment income as determined in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. Main Street believes presenting distributable net investment income and the related per share amount is useful and appropriate supplemental disclosure for analyzing its financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing Main Street's financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is detailed in the financial tables included with this press release. |
(2) | Portfolio company financial information has not been independently verified by Main Street. |
(3) | These credit statistics exclude certain portfolio companies for which EBITDA is not a meaningful metric for the statistic. |
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SOURCE Main Street Capital Corporation
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