Main Street Announces Second Quarter 2021 Results
Main Street Capital Corporation (NYSE: MAIN) reported strong second quarter 2021 results, achieving net investment income of $42.4 million ($0.62 per share) and distributable net investment income of $45.2 million ($0.66 per share). Total investment income grew by 29% year-over-year to $67.3 million. The net increase in net assets from operations was $95.1 million, reflecting a record return on equity of 24.2%. Monthly dividends remained steady at $0.615 per share for Q3 2021. Despite increased operating expenses of $22.1 million, the firm maintains a strong liquidity position of $772.8 million, including significant unused credit capacity.
- Achieved net investment income of $42.4 million, a 35% increase year-over-year.
- Total investment income rose 29% from last year to $67.3 million.
- Net increase in net assets from operations was $95.1 million, a 119% rise from 2020.
- Return on equity reached 24.2%, the highest in the company's history.
- Net asset value per share increased to $23.42, up 3.4% from Q1 2021.
- Operating expenses increased to $22.1 million, up from $17.9 million a year ago.
HOUSTON, Aug. 5, 2021 /PRNewswire/ -- Main Street Capital Corporation (NYSE: MAIN) ("Main Street") is pleased to announce its financial results for the second quarter of 2021.
Second Quarter 2021 Highlights
- Net investment income of
$42.4 million (or$0.62 per share) - Distributable net investment income(1) of
$45.2 million (or$0.66 per share) - Total investment income of
$67.3 million - An industry leading position in cost efficiency, with a ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of
1.4% on an annualized basis for the quarter and1.4% for the trailing twelve month ("TTM") period ended June 30, 2021 - Net increase in net assets resulting from operations of
$95.1 million (or$1.39 per share) - Return on equity(2) of
24.2% on an annualized basis for the quarter and20.8% for the trailing twelve month period ended June 30, 2021 - Net asset value of
$23.42 per share at June 30, 2021, representing an increase of$0.77 per share, or3.4% , compared to$22.65 per share at March 31, 2021 and$1.07 per share, or4.8% , compared to$22.35 per share at December 31, 2020 - Declared monthly dividends totaling
$0.61 5 per share for the third quarter of 2021, or$0.20 5 per share for each of July, August and September 2021, consistent with the monthly dividends paid for the third quarter of 2020 and the second quarter of 2021 - Completed
$26.0 million in total lower middle market ("LMM") portfolio investments, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net decrease of$36.9 million in total LMM portfolio investments - Completed
$198.0 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$104.7 million in total private loan portfolio investments - Net increase of
$17.3 million in middle market portfolio investments - Fully exited portfolio company equity investment in American Trailer Rental Group, LLC, realizing a gain of
$17.0 million and resulting in a total internal rate of return of28.1% and 1.7 times money invested on a cumulative basis including debt and equity investments
In commenting on Main Street's results, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "We are pleased with our second quarter results, which we believe demonstrate the strength and momentum of our Main Street platform and the quality and strong performance of our diversified group of portfolio companies. The second quarter represented our third consecutive quarter of sequential growth in total investment income, with the total investment income for the quarter representing a significant increase from our pre-pandemic levels and with all components of income at or above pre-pandemic levels. Our second quarter performance resulted in distributable net investment income well in excess of our monthly dividends paid during the quarter and significantly higher than last year, and continued improvement in our net asset value per share. Our results also included a net increase in net assets from operations of
Second Quarter 2021 Operating Results
The following table provides a summary of our operating results for the second quarter of 2021:
Three Months Ended June 30, | ||||||||||
2021 | 2020 | Change ($) | Change (%) | |||||||
Interest income | $ | 45,944 | $ | 41,574 | $ | 4,370 | ||||
Dividend income | 18,619 | 7,795 | 10,824 | |||||||
Fee income | 2,731 | 2,638 | 93 | |||||||
Total investment income | $ | 67,294 | $ | 52,007 | $ | 15,287 | ||||
Net investment income | $ | 42,395 | $ | 31,294 | $ | 11,101 | ||||
Net investment income per share | $ | 0.62 | $ | 0.48 | $ | 0.14 | ||||
Distributable net investment income (1) | $ | 45,154 | $ | 34,111 | $ | 11,043 | ||||
Distributable net investment income per share (1) | $ | 0.66 | $ | 0.52 | $ | 0.14 | ||||
Net increase in net assets resulting from operations | $ | 95,110 | $ | 43,369 | $ | 51,741 | ||||
Net increase in net assets resulting from operations per share | $ | 1.39 | $ | 0.66 | $ | 0.73 | ||||
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 second quarter of 2021 both increased
The
The following table provides a summary of the total net unrealized appreciation of
Three Months Ended June 30, 2021 | |||||||||
LMM (a) | Middle Market | Private Loan | Other | Total | |||||
(dollars in millions) | |||||||||
Accounting reversals of net unrealized (appreciation) depreciation recognized in prior periods due to net realized (gains / income) losses recognized during the current period | |||||||||
$ (5.3) | $ 0.6 | $ - | $ - | $ (4.7) | |||||
Net unrealized appreciation (depreciation) relating to portfolio investments | 36.4 | (2.2) | 5.2 | 9.7 | (b) | 49.1 | |||
Total net unrealized appreciation (depreciation) relating to portfolio investments | $ 31.1 | $ (1.6) | $ 5.2 | $ 9.7 | $ 44.4 | ||||
(a) | LMM includes unrealized appreciation on 33 LMM portfolio investments and unrealized depreciation on 14 LMM portfolio investments. |
(b) | Other includes (i) |
Liquidity and Capital Resources
As of June 30, 2021, we had aggregate liquidity of
Several details regarding our capital structure as of June 30, 2021 are as follows:
- Our Credit Facility included
$855.0 million in total commitments from a diversified group of 18 participating lenders, plus an accordion feature that allows us to increase the total commitments under the facility to up to$1.2 billion . $169.0 million in outstanding borrowings under our Credit Facility, with an interest rate of2.0% based on LIBOR effective for the contractual reset date of July 1, 2021.$322.0 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 approximately2.9% and mature ten years from original issuance. The first maturity related to our existing SBIC debentures occurs in the first quarter of 2023, and the weighted-average remaining duration was approximately 6.3 years.$300.0 million of notes outstanding that bear interest at a rate of3.00% per year (the "3.00% Notes"). The3.00% Notes mature on July 14, 2026 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions.$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
$1,604.8 million , or$23.42 per share.
Investment Portfolio Information as of June 30, 2021 (3)
The following table provides a summary of the investments in our LMM portfolio, middle market portfolio and private loan portfolio as of June 30, 2021:
As of June 30, 2021 | |||||
LMM (a) | Middle Market | Private Loan | |||
(dollars in millions) | |||||
Number of portfolio companies | 69 | 39 | 69 | ||
Fair value | $ 1,341.3 | $ 434.7 | $ 863.6 | ||
Cost | $ 1,110.9 | $ 473.2 | $ 884.0 | ||
Debt investments as a % of portfolio (at cost) | |||||
Equity investments as a % of portfolio (at cost) | |||||
% of debt investments at cost secured by first priority lien | |||||
Weighted-average annual effective yield (b) | |||||
Average EBITDA (c) | $ 5.4 | $ 74.3 | $ 51.7 | ||
(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 three 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 June 30, 2021, we had other portfolio investments in fourteen companies, collectively totaling
As of June 30, 2021, our investment in the External Investment Manager (as defined below) had a fair value of
As of June 30, 2021, we had nine 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"). We share employees with the External Investment Manager and allocate costs related to such shared employees and other operating expenses to the External Investment Manager. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses we allocate to the External Investment Manager and the dividend income we earn from the External Investment Manager. During the second quarter of 2021, the External Investment Manager earned
Second Quarter 2021 Financial Results Conference Call / Webcast
Main Street has scheduled a conference call for Friday, August 6, 2021 at 10:00 a.m. Eastern Time to discuss the second quarter 2021 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, August 13, 2021 and may be accessed by dialing 201-612-7415 and using the passcode 13721010#. 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 Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 to be filed with the Securities and Exchange Commission (www.sec.gov) and Main Street's Second Quarter 2021 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 ability to successfully source and execute on new portfolio investments, 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.
MAIN STREET CAPITAL CORPORATION | ||||||||||||
Consolidated Statements of Operations | ||||||||||||
(dollars in thousands, except shares and per share amounts) | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
INVESTMENT INCOME: | ||||||||||||
Interest, fee and dividend income: | ||||||||||||
Control investments | $ | 27,027 | $ | 19,327 | $ | 51,052 | $ | 38,800 | ||||
Affiliate investments | 11,005 | 7,207 | 22,511 | 15,371 | ||||||||
Non‑Control/Non‑Affiliate investments | 29,262 | 25,473 | 56,539 | 53,985 | ||||||||
Total investment income | 67,294 | 52,007 | 130,102 | 108,156 | ||||||||
EXPENSES: | ||||||||||||
Interest | (14,400) | (11,898) | (28,206) | (24,338) | ||||||||
Compensation | (6,895) | (4,802) | (13,216) | (7,300) | ||||||||
General and administrative | (3,417) | (3,000) | (6,392) | (6,473) | ||||||||
Share‑based compensation | (2,759) | (2,817) | (5,092) | (5,654) | ||||||||
Expenses allocated to the External Investment Manager | 2,572 | 1,804 | 4,952 | 3,448 | ||||||||
Total expenses | (24,899) | (20,713) | (47,954) | (40,317) | ||||||||
NET INVESTMENT INCOME | 42,395 | 31,294 | 82,148 | 67,839 | ||||||||
NET REALIZED GAIN (LOSS): | ||||||||||||
Control investments | (2,320) | 1,606 | (13,245) | (19,866) | ||||||||
Affiliate investments | 13,913 | - | 9,110 | (235) | ||||||||
Non‑Control/Non‑Affiliate investments | 6,407 | (10,190) | 6,405 | (10,348) | ||||||||
Realized loss on extinguishment of debt | - | - | - | (534) | ||||||||
Total net realized gain (loss) | 18,000 | (8,584) | 2,270 | (30,983) | ||||||||
NET UNREALIZED APPRECIATION (DEPRECIATION): | ||||||||||||
Control investments | 30,824 | (6,825) | 45,084 | (42,235) | ||||||||
Affiliate investments | 9,816 | (8,123) | 16,232 | (29,289) | ||||||||
Non‑Control/Non‑Affiliate investments | 3,801 | 28,112 | 17,124 | (109,620) | ||||||||
SBIC debentures | - | - | - | 460 | ||||||||
Total net unrealized appreciation (depreciation) | 44,441 | 13,164 | 78,440 | (180,684) | ||||||||
INCOME TAXES: | ||||||||||||
Federal and state income, excise and other taxes | (656) | (550) | (1,289) | (255) | ||||||||
Deferred taxes | (9,070) | 8,045 | (9,118) | 16,015 | ||||||||
Income tax benefit (provision) | (9,726) | 7,495 | (10,407) | 15,760 | ||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 95,110 | $ | 43,369 | $ | 152,451 | $ | (128,068) | ||||
NET INVESTMENT INCOME PER SHARE-BASIC AND DILUTED | $ | 0.62 | $ | 0.48 | $ | 1.20 | $ | 1.04 | ||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER | $ | 1.39 | $ | 0.66 | $ | 2.23 | $ | (1.97) | ||||
WEIGHTED AVERAGE SHARES | 68,514,683 | 65,303,580 | 68,321,701 | 64,920,025 | ||||||||
MAIN STREET CAPITAL CORPORATION | ||||||
Consolidated Balance Sheets | ||||||
(dollars in thousands, except per share amounts) | ||||||
June 30, | December 31, | |||||
2021 | 2020 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Investments at fair value: | ||||||
Control investments | $ | 1,209,793 | $ | 1,113,725 | ||
Affiliate investments | 387,476 | 366,301 | ||||
Non‑Control/Non‑Affiliate investments | 1,375,001 | 1,204,840 | ||||
Total investments | 2,972,270 | 2,684,866 | ||||
Cash and cash equivalents | 58,796 | 31,919 | ||||
Interest receivable and other assets | 54,386 | 49,761 | ||||
Deferred financing costs, net | 4,703 | 2,818 | ||||
Total assets | $ | 3,090,155 | $ | 2,769,364 | ||
LIABILITIES | ||||||
Credit facility | $ | 169,000 | $ | 269,000 | ||
SBIC debentures (par: | 314,828 | 303,972 | ||||
451,544 | 451,817 | |||||
184,140 | 183,836 | |||||
295,230 | - | |||||
Accounts payable and other liabilities | 21,709 | 20,833 | ||||
Payable for securities purchased | 11,226 | - | ||||
Interest payable | 11,878 | 8,658 | ||||
Dividend payable | 14,049 | 13,889 | ||||
Deferred tax liability, net | 11,710 | 2,592 | ||||
Total liabilities | 1,485,314 | 1,254,597 | ||||
NET ASSETS | ||||||
Common stock | 685 | 677 | ||||
Additional paid‑in capital | 1,637,583 | 1,615,940 | ||||
Total undistributed (overdistributed) earnings | (33,427) | (101,850) | ||||
Total net assets | 1,604,841 | 1,514,767 | ||||
Total liabilities and net assets | $ | 3,090,155 | $ | 2,769,364 | ||
NET ASSET VALUE PER SHARE | $ | 23.42 | $ | 22.35 | ||
MAIN STREET CAPITAL CORPORATION | |||||||||||
Reconciliation of Distributable Net Investment Income | |||||||||||
(dollars in thousands, except per share amounts) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | ||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||
Net investment income | $ | 42,395 | $ | 31,294 | $ | 82,148 | $ | 67,839 | |||
Share-based compensation expense | 2,759 | 2,817 | 5,092 | 5,654 | |||||||
Distributable net investment income (1) | $ | 45,154 | $ | 34,111 | $ | 87,240 | $ | 73,493 | |||
Per share amounts: | |||||||||||
Net investment income per share - | |||||||||||
Basic and diluted | $ | 0.62 | $ | 0.48 | $ | 1.20 | $ | 1.04 | |||
Distributable net investment income per share - | |||||||||||
Basic and diluted (1) | $ | 0.66 | $ | 0.52 | $ | 1.28 | $ | 1.13 | |||
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) Return on equity equals the net increase in net assets resulting from operations divided by the average quarterly total net assets for the three month and trailing twelve-month periods ended June 30, 2021. |
(3) Portfolio company financial information has not been independently verified by Main Street. |
(4) These credit statistics exclude certain portfolio companies for which EBITDA is not a meaningful metric for the statistic. |
Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO, dhyzak@mainstcapital.com
Jesse E. Morris, COO, jmorris@mainstcapital.com
713-350-6000
Dennard Lascar Investor Relations
Ken Dennard / ken@dennardlascar.com
Zach Vaughan / zvaughan@dennardlascar.com
713-529-6600
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SOURCE Main Street Capital Corporation
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