MAIN STREET ANNOUNCES SECOND QUARTER 2023 RESULTS
- Net investment income of $85.7 million
- Distributable net investment income of $90.3 million
- Return on equity of 19.2%
- Net asset value of $27.69 per share at June 30, 2023, representing an increase of $0.46 per share, or 1.7%, compared to March 31, 2023
- Declared regular monthly dividends totaling $0.69 per share for the third quarter of 2023, representing a 7.0% increase from the regular monthly dividends paid in the third quarter of 2022
- Net decrease of $39.4 million in the cost basis of the middle market portfolio
- Total cash expenses increased 32.7%
Second Quarter 2023 Net Investment Income of
Second Quarter 2023 Distributable Net Investment Income(1) of
Net Asset Value of
Second Quarter 2023 Highlights
- Net investment income of
(or$85.7 million per share)$1.06 - Distributable net investment income(1) of
(or$90.3 million per share)$1.12 - Total investment income of
$127.6 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, 2023 - Net increase in net assets resulting from operations of
, or$106.5 million per share$1.32 - Return on equity(2) of
19.2% on an annualized basis for the quarter - Net asset value of
per share at June 30, 2023, representing an increase of$27.69 per share, or$0.46 1.7% , compared to per share at March 31, 2023, and$27.23 per share, or$0.83 3.1% , compared to per share at December 31, 2022$26.86 - Declared regular monthly dividends totaling
per share for the third quarter of 2023, or$0.69 per share for each of July, August and September 2023, representing a$0.23 7.0% increase from the regular monthly dividends paid in the third quarter of 2022 - Declared and paid a supplemental dividend of
per share, resulting in total dividends paid in the second quarter of 2023 of$0.22 5 per share and representing a$0.90 25.0% increase from the total dividends paid in the second quarter of 2022 and a5.9% increase from the total dividends paid in the first quarter of 2023 - Completed
in total lower middle market ("LMM") portfolio investments, including investments totaling$130.7 million in three new LMM portfolio companies, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments and a decrease in cost basis due to the realized loss on a LMM portfolio investment resulted in a net decrease of$106.2 million in the total cost basis of our LMM portfolio$6.9 million - Completed
in total private loan portfolio investments, which after aggregate repayments of debt principal and return of invested equity capital from several private loan portfolio investments and a decrease in cost basis due to the realized loss on a private loan portfolio investment resulted in a net decrease of$168.1 million in the total cost basis of our private loan portfolio$11.3 million - Net decrease of
in the cost basis of our middle market portfolio, which resulted from the net investment activity and a decrease in cost basis due to the realized losses on several middle market portfolio investments$39.4 million
In commenting on Main Street's operating results for the second quarter of 2023, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "We are very pleased with our quarterly results, which included continued positive results from our lower middle market and private loan investment strategies and significant contributions from our asset management business. Our performance was highlighted by a return on equity of
Mr. Hyzak continued, "Our distributable net investment income in the second quarter exceeded the monthly dividends paid to our shareholders by
Second Quarter 2023 Operating Results
The following table provides a summary of our operating results for the second quarter of 2023:
Three Months Ended June 30, | |||||||
2023 | 2022 | Change ($) | Change (%) | ||||
Interest income | $ 97,273 | $ 63,984 | $ 33,289 | 52 % | |||
Dividend income | 25,599 | 17,913 | 7,686 | 43 % | |||
Fee income | 4,711 | 3,303 | 1,408 | 43 % | |||
Total investment income | $ 127,583 | $ 85,200 | $ 42,383 | 50 % | |||
Net investment income | $ 85,728 | $ 54,726 | $ 31,002 | 57 % | |||
Net investment income per share | $ 1.06 | $ 0.75 | $ 0.31 | 41 % | |||
Distributable net investment income(1) | $ 90,328 | $ 57,097 | $ 33,231 | 58 % | |||
Distributable net investment income per share(1) | $ 1.12 | $ 0.78 | $ 0.34 | 44 % | |||
Net increase in net assets resulting from operations | $ 106,516 | $ 14,749 | $ 91,767 | 622 % | |||
Net increase in net assets resulting from operations per share | $ 1.32 | $ 0.20 | $ 1.12 | 560 % | |||
The
Total cash expenses(3) increased
Non-cash compensation expenses(3) increased
Our Operating Expenses to Assets Ratio (which includes non-cash compensation expenses(3)) was
The
Net investment income and distributable net investment income(1) on a per share basis for the second quarter of 2023 increased by
The
The following table provides a summary of the total net unrealized appreciation of
Three Months Ended June 30, 2023 | |||||||||
LMM | Private | Middle | Other | Total | |||||
(dollars in millions) | |||||||||
Accounting reversals of net unrealized (appreciation) | $ 41.6 | $ 14.7 | $ 23.2 | $ (4.2) | $ 75.3 | ||||
Net unrealized appreciation (depreciation) relating to | 23.0 | 0.6 | 4.5 | 1.5 | (b) | $ 29.6 | |||
Total net unrealized appreciation (depreciation) relating | $ 64.6 | $ 15.3 | $ 27.7 | $ (2.7) | $ 104.9 |
(a) | LMM includes unrealized appreciation on 35 LMM portfolio investments and unrealized depreciation on 23 LMM portfolio investments. |
(b) | Other includes (i) |
Liquidity and Capital Resources
As of June 30, 2023, we had aggregate liquidity of
Several details regarding our capital structure as of June 30, 2023 are as follows:
- Our Corporate Facility included
in total commitments from a diversified group of 18 participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to$980.0 million .$1.4 billion in outstanding borrowings under our Corporate Facility, with an interest rate of$410.0 million 7.1% based on SOFR effective for the contractual reset date of July 1, 2023.- Our SPV Facility included
in total commitments from a diversified group of four participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to$255.0 million .$450.0 million in outstanding borrowings under our SPV Facility, with an interest rate of$170.0 million 7.8% based on SOFR effective for the contractual reset date of July 1, 2023. of notes outstanding that bear interest at a rate of$500.0 million 3.00% per year (the "July 2026 Notes"). The July 2026 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. of notes outstanding that bear interest at a rate of$450.0 million 5.20% per year (the "May 2024 Notes"). The May 2024 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. of outstanding Small Business Investment Company ("SBIC") debentures through our wholly owned SBIC subsidiaries. These debentures, which are guaranteed by the$350.0 million U.S. Small Business Administration, had a weighted-average annual fixed interest rate of3.0% and mature ten years from original issuance. The first maturity related to our existing SBIC debentures occurs in the first quarter of 2024, and the weighted-average remaining duration was 5.1 years. of notes outstanding that bear interest at a weighted average rate of$150.0 million 7.74% per year (the "December 2025 Notes"). The December 2025 Notes mature on December 23, 2025 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions.- We maintain two investment grade debt ratings, from Fitch Ratings and S&P Global Ratings, respectively, both of which affirmed their respective investment grade corporate and credit ratings of BBB- with a stable outlook during the second quarter of 2023.
- Our net asset value totaled
, or$2.3 billion per share.$27.69
In July 2023, we expanded our total commitments under the Corporate Facility from
Investment Portfolio Information as of June 30, 2023(4)
The following table provides a summary of the investments in our LMM portfolio, private loan portfolio and middle market portfolio as of June 30, 2023:
As of June 30, 2023 | ||||||
LMM (a) | Private Loan | Middle Market | ||||
(dollars in millions) | ||||||
Number of portfolio companies | 79 | 88 | 28 | |||
Fair value | $ 2,170.2 | $ 1,499.3 | $ 295.9 | |||
Cost | $ 1,720.9 | $ 1,519.9 | $ 352.9 | |||
Debt investments as a % of portfolio (at cost) | 72.0 % | 96.1 % | 92.9 % | |||
Equity investments as a % of portfolio (at cost) | 28.0 % | 3.9 % | 7.1 % | |||
% of debt investments at cost secured by first priority lien | 99.2 % | 99.5 % | 99.2 % | |||
Weighted-average annual effective yield (b) | 12.9 % | 12.6 % | 11.8 % | |||
Average EBITDA (c) | $ 8.0 | $ 30.5 | $ 67.6 |
(a) | We had equity ownership in all of our LMM portfolio companies, and our average fully diluted equity ownership in those portfolio companies was |
(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 private loan and middle market portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies and two 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
As of June 30, 2023, our investment portfolio also included:
- Other portfolio investments in 15 entities, collectively totaling
in fair value and$111.2 million in cost basis, which comprised$119.4 million 2.6% and3.2% of our investment portfolio at fair value and cost, respectively; and - Our investment in the External Investment Manager, with a fair value of
and a cost basis of$134.0 million , which comprised$29.5 million 3.2% and0.8% of our investment portfolio at fair value and cost, respectively.
As of June 30, 2023, we had nine investments on non-accrual status, which comprised
External Investment Manager
MSC Adviser I, LLC is our 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 2023, the External Investment Manager earned
Second Quarter 2023 Financial Results Conference Call / Webcast
Main Street has scheduled a conference call for Friday, August 4, 2023 at 10:00 a.m. Eastern Time to discuss the second quarter 2023 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 https://www.mainstcapital.com.
A telephonic replay of the conference call will be available through Friday, August 11, 2023 and may be accessed by dialing 201-612-7415 and using the passcode 13739262#. An audio archive of the conference call will also be available on the investor relations section of the company's website at https://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, 2023 to be filed with the Securities and Exchange Commission (www.sec.gov) and Main Street's Second Quarter 2023 Investor Presentation to be posted on the investor relations section of the Main Street website at https://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 investment strategy. 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, as amended.
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 and delivery of future financial performance and results, 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 impacts of macroeconomic factors on Main Street and its portfolio companies' business and operations, liquidity and access to capital, and on the
MAIN STREET CAPITAL CORPORATION | |||||||
Consolidated Statements of Operations | |||||||
(in thousands, except shares and per share amounts) | |||||||
(Unaudited) | |||||||
Three Months Ended | Six Months Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
INVESTMENT INCOME: | |||||||
Interest, fee and dividend income: | |||||||
Control investments | $ 47,979 | $ 36,808 | $ 96,841 | $ 69,385 | |||
Affiliate investments | 20,999 | 11,893 | 38,455 | 25,810 | |||
Non–Control/Non–Affiliate investments | 58,605 | 36,499 | 112,542 | 69,401 | |||
Total investment income | 127,583 | 85,200 | 247,838 | 164,596 | |||
EXPENSES: | |||||||
Interest | (26,754) | (17,295) | (51,752) | (33,982) | |||
Compensation | (12,188) | (8,807) | (23,300) | (16,076) | |||
General and administrative | (4,514) | (4,238) | (8,591) | (7,464) | |||
Share–based compensation | (4,087) | (3,596) | (8,187) | (6,414) | |||
Expenses allocated to the External Investment Manager | 5,688 | 3,462 | 10,686 | 6,279 | |||
Total expenses | (41,855) | (30,474) | (81,144) | (57,657) | |||
NET INVESTMENT INCOME | 85,728 | 54,726 | 166,694 | 106,939 | |||
NET REALIZED GAIN (LOSS): | |||||||
Control investments | (48,111) | - | (51,077) | - | |||
Affiliate investments | 9,997 | 47 | (16,267) | 739 | |||
Non–Control/Non–Affiliate investments | (37,392) | (5,111) | (36,542) | (2,467) | |||
Total net realized loss | (75,506) | (5,064) | (103,886) | (1,728) | |||
NET UNREALIZED APPRECIATION (DEPRECIATION): | |||||||
Control investments | 75,779 | 4,822 | 92,940 | 13,101 | |||
Affiliate investments | (11,469) | 1,731 | 21,672 | 4,772 | |||
Non–Control/Non–Affiliate investments | 40,631 | (31,146) | 25,447 | (27,714) | |||
Total net unrealized appreciation (depreciation) | 104,941 | (24,593) | 140,059 | (9,841) | |||
INCOME TAXES: | |||||||
Federal and state income, excise and other taxes | (1,671) | (809) | (3,407) | (2,118) | |||
Deferred taxes | (6,976) | (9,511) | (13,353) | (13,299) | |||
Income tax provision | (8,647) | (10,320) | (16,760) | (15,417) | |||
NET INCREASE IN NET ASSETS RESULTING FROM | $ 106,516 | $ 14,749 | $ 186,107 | $ 79,953 | |||
NET INVESTMENT INCOME PER SHARE-BASIC AND | $ 1.06 | $ 0.75 | $ 2.08 | $ 1.47 | |||
NET INCREASE IN NET ASSETS RESULTING FROM | $ 1.32 | $ 0.20 | $ 2.32 | $ 1.10 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING-BASIC AND DILUTED | 80,807,861 | 73,304,619 | 80,190,630 | 72,512,793 |
MAIN STREET CAPITAL CORPORATION | ||||
Consolidated Balance Sheets | ||||
(in thousands, except per share amounts) | ||||
June 30, | December 31, | |||
2023 | 2022 | |||
(Unaudited) | ||||
ASSETS | ||||
Investments at fair value: | ||||
Control investments | $ 1,883,699 | $ 1,703,172 | ||
Affiliate investments | 563,125 | 618,359 | ||
Non–Control/Non–Affiliate investments | 1,763,719 | 1,780,646 | ||
Total investments | 4,210,543 | 4,102,177 | ||
Cash and cash equivalents | 70,886 | 49,121 | ||
Interest and dividend receivable and other assets | 117,749 | 82,731 | ||
Receivable for securities sold | 13,959 | 381 | ||
Deferred financing costs, net | 7,101 | 7,475 | ||
Total assets | $ 4,420,238 | $ 4,241,885 | ||
LIABILITIES | ||||
Credit Facilities | $ 580,000 | $ 607,000 | ||
July 2026 Notes (par: | 498,399 | 498,136 | ||
May 2024 Notes (par: | 450,454 | 450,727 | ||
SBIC debentures (par: | 343,943 | 343,914 | ||
December 2025 Notes (par: | 148,706 | 99,325 | ||
Accounts payable and other liabilities | 48,502 | 52,092 | ||
Interest payable | 15,355 | 16,580 | ||
Dividend payable | 18,729 | 17,676 | ||
Deferred tax liability, net | 61,202 | 47,849 | ||
Total liabilities | 2,165,290 | 2,133,299 | ||
NET ASSETS | ||||
Common stock | 814 | 784 | ||
Additional paid–in capital | 2,132,041 | 2,030,531 | ||
Total undistributed earnings | 122,093 | 77,271 | ||
Total net assets | 2,254,948 | 2,108,586 | ||
Total liabilities and net assets | $ 4,420,238 | $ 4,241,885 | ||
NET ASSET VALUE PER SHARE | $ 27.69 | $ 26.86 |
MAIN STREET CAPITAL CORPORATION | |||||||
Reconciliation of Distributable Net Investment Income, | |||||||
Total Cash Expenses, Non-Cash Compensation Expenses | |||||||
and Cash Compensation Expenses | |||||||
(in thousands, except per share amounts) | |||||||
(Unaudited) | |||||||
Three Months Ended | Six Months Ended | ||||||
June 30, | June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net investment income | $ 85,728 | $ 54,726 | $ 166,694 | $ 106,939 | |||
Non-cash compensation expenses(3) | 4,600 | 2,371 | 9,076 | 4,813 | |||
Distributable net investment income(1) | $ 90,328 | $ 57,097 | $ 175,770 | $ 111,752 | |||
Per share amounts: | |||||||
Net investment income per share - | |||||||
Basic and diluted | $ 1.06 | $ 0.75 | $ 2.08 | $ 1.47 | |||
Distributable net investment income per share - | |||||||
Basic and diluted(1) | $ 1.12 | $ 0.78 | $ 2.19 | $ 1.54 | |||
Three Months Ended | Six Months Ended | ||||||
June 30, | June 30, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Share–based compensation | $ (4,087) | $ (3,596) | $ (8,187) | $ (6,414) | |||
Deferred compensation (expense) benefit | (513) | 1,225 | (889) | 1,601 | |||
Total non-cash compensation expenses (3) | (4,600) | (2,371) | (9,076) | (4,813) | |||
Total expenses | (41,855) | (30,474) | (81,144) | (57,657) | |||
Less non-cash compensation expenses (3) | 4,600 | 2,371 | 9,076 | 4,813 | |||
Total cash expenses (3) | $ (37,255) | $ (28,103) | $ (72,068) | $ (52,844) | |||
Compensation | $ (12,188) | $ (8,807) | $ (23,300) | $ (16,076) | |||
Share-based compensation | (4,087) | (3,596) | (8,187) | (6,414) | |||
Total compensation expenses | (16,275) | (12,403) | (31,487) | (22,490) | |||
Non-cash compensation expenses (3) | 4,600 | 2,371 | 9,076 | 4,813 | |||
Total cash compensation expenses (3) | $ (11,675) | $ (10,032) | $ (22,411) | $ (17,677) | |||
MAIN STREET CAPITAL CORPORATION
Endnotes
(1) Distributable net investment income is net investment income as determined in accordance with
(2) Return on equity equals the net increase in net assets resulting from operations divided by the average quarterly total net assets.
(3) Non-cash compensation expenses consist of (i) share-based compensation and (ii) deferred compensation expense or benefit, both of which are non-cash in nature. Share-based compensation does not require settlement in cash. Deferred compensation expense or benefit does not result in a net cash impact to Main Street upon settlement. The appreciation (depreciation) in the fair value of deferred compensation plan assets is reflected in Main Street's Consolidated Statements of Operations as unrealized appreciation (depreciation) and an increase (decrease) in compensation expenses, respectively. Cash compensation expenses are total compensation expenses as determined in accordance with
(4) Portfolio company financial information has not been independently verified by Main Street.
(5) These credit statistics exclude portfolio companies on non-accrual or for which EBITDA is not a meaningful metric.
Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO, dhyzak@mainstcapital.com
Jesse E. Morris, CFO and 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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