Main Street Announces Third Quarter 2020 Results
Main Street Capital Corporation (NYSE: MAIN) reported its Q3 2020 financial results, showcasing a net investment income of $30.5 million ($0.46 per share) and distributable net investment income of $33.0 million ($0.50 per share). The total investment income for the quarter was $52.0 million, which marked a 14% decline from the previous year. The company's net increase in net assets from operations reached $78.2 million, significantly up from $33.9 million in Q3 2019. Main Street also declared monthly dividends of $0.615 per share for Q4 2020, maintaining its previous distribution levels.
- Net increase in net assets from operations: $78.2 million, up 131% YoY.
- Declared regular monthly dividends of $0.615 per share for Q4 2020.
- Total investment income decreased by $8.1 million (14%) compared to Q3 2019.
- Net investment income dropped to $30.5 million, a 22% decline YoY.
HOUSTON, Nov. 5, 2020 /PRNewswire/ -- Main Street Capital Corporation (NYSE: MAIN) ("Main Street") is pleased to announce its financial results for the third quarter of 2020.
Third Quarter 2020 Highlights
- Net investment income of
$30.5 million (or$0.46 per share) - Distributable net investment income(1) of
$33.0 million (or$0.50 per share) - Total investment income of
$52.0 million - Industry leading ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of
1.4% on an annualized basis for the quarter and1.3% for the trailing twelve-month ("TTM") period ended September 30, 2020 - Net increase in net assets resulting from operations of
$78.2 million (or$1.18 per share) - Net asset value of
$21.52 per share at September 30, 2020, representing an increase of$0.67 per share, or3.2% , compared to$20.85 per share at June 30, 2020 - Declared regular monthly dividends totaling
$0.61 5 per share for the fourth quarter of 2020, or$0.20 5 per share for each of October, November, and December 2020, equal to the regular monthly dividends paid for the fourth quarter of 2019 and the third quarter of 2020 - Completed
$46.1 million in total lower middle market ("LMM") portfolio investments, including investments totaling$26.0 million in a new LMM portfolio company, which after aggregate repayments of debt principal and return of invested equity capital from several LMM portfolio investments resulted in a net increase of$32.0 million in total LMM portfolio investments - Net increase of
$69.4 million in private loan portfolio investments - Net decrease of
$2.4 million in middle market portfolio investments - Further diversified capital structure by issuing an additional
$125.0 million of5.20% Notes due 2024 ("5.20% Notes") at a premium to par of approximately102.67% , resulting in a yield-to-maturity of approximately4.42%
In commenting on Main Street's results, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "While we continue to prioritize the health and well-being of our employees and the employees of our portfolio companies during the COVID-19 pandemic and proactively work through the ongoing impacts of the pandemic on our investment portfolio, we are pleased to have continued our success with both our lower middle market and private loan investment activities during the third quarter with the two portfolios combining for over
Mr. Hyzak added, "We are also very pleased with our recent announcement of the completion of the transaction under which we became the sole investment adviser to HMS Income Fund, which is now known as MSC Income Fund. We are excited about positioning the fund for the future, while also continuing to execute our overall strategy to grow our asset management business within our internally managed BDC structure and continuing to provide this unique benefit to our Main Street stakeholders."
Third Quarter 2020 Operating Results
The following table provides a summary of our operating results for the third quarter of 2020:
Three Months Ended September 30, | |||||||
2020 | 2019 | Change ($) | Change (%) | ||||
Interest income | ( | ||||||
Dividend income | 8,106 | 12,492 | (4,386) | ( | |||
Fee income | 1,710 | 1,384 | 326 | ||||
Total investment income | ( | ||||||
Net investment income | ( | ||||||
Net investment income per share | ( | ||||||
Distributable net investment income (1) | ( | ||||||
Distributable net investment income per share (1) | ( | ||||||
Net increase (decrease) in net assets resulting from operations | |||||||
Net increase (decrease) in net assets resulting from operations per share | |||||||
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 for the third 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. The decrease in both net investment income and distributable net investment income on a per share basis includes (i) a decrease of
The
The following table provides a summary of the total net unrealized appreciation of
Three Months Ended September 30, 2020 | |||||||||||||||
Middle | Private | ||||||||||||||
LMM(a) | Market | Loan | Other | Total | |||||||||||
(dollars in millions) | |||||||||||||||
Accounting reversals of net unrealized (appreciation) depreciation | $ | (5.1) | $ | 18.8 | $ | 0.7 | $ | 0.0 | $ | 14.4 | |||||
Net unrealized appreciation relating to portfolio investments | 13.9 | 13.0 | 16.9 | 4.9 | (b) | 48.7 | |||||||||
Total net unrealized appreciation relating to portfolio investments | $ | 8.8 | $ | 31.8 | $ | 17.6 | $ | 4.9 | $ | 63.1 | |||||
(a) | LMM includes unrealized appreciation on 28 LMM portfolio investments and unrealized depreciation on 17 LMM portfolio investments. |
(b) | Other includes (i) |
Liquidity and Capital Resources
As of September 30, 2020, we had
Several details regarding our capital structure as of September 30, 2020 are as follows:
- Our Credit Facility included
$740.0 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$800.0 million . $253.0 million in outstanding borrowings under our Credit Facility, with an interest rate of2.0% based on LIBOR effective for the contractual reset date of October 1, 2020.$304.8 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 5.5 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
$1,423.2 million , or$21.52 per share.
During November 2020, we expanded the total commitments under the Credit Facility from
Investment Portfolio Information as of September 30, 2020 (2)
The following table provides a summary of the investments in our LMM portfolio, middle market portfolio and private loan portfolio as of September 30, 2020:
As of September 30, 2020 | ||||||||||
LMM(a) | Middle Market | Private Loan | ||||||||
(dollars in millions) | ||||||||||
Number of portfolio companies | 70 | 42 | 68 | |||||||
Fair value | $ | 1,228.1 | $ | 441.3 | $ | 743.7 | ||||
Cost | $ | 1,063.6 | $ | 515.5 | $ | 823.0 | ||||
% 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) | $ | 5.0 | $ | 110.5 | $ | 54.2 | ||||
(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 two 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 September 30, 2020, we had other portfolio investments in twelve companies, collectively totaling
As of September 30, 2020, there was no cost basis in our investment in the External Investment Manager (as defined below), and this investment had a fair value of
As of September 30, 2020, we had twelve investments on non-accrual status, which comprised approximately
External Investment Manager
MSC Adviser I, LLC is a wholly owned portfolio company and registered investment advisor that provides investment management services to third parties (the "External Investment Manager"). Through the end of the third quarter of 2020, the External Investment Manager maintained an investment sub-advisory relationship with HMS Income Fund, Inc. ("HMS Income"), and earned management fees for the services provided to HMS Income. During the third quarter of 2020, the External Investment Manager earned
After successfully receiving the required approval of HMS Income's stockholders, effective October 30, 2020, we, through the External Investment Manager, became the sole investment adviser and administrator to HMS Income, and HMS Income changed its name to MSC Income Fund, Inc. The new advisory agreement includes a
Third Quarter 2020 Financial Results Conference Call / Webcast
Main Street has scheduled a conference call for Friday, November 6, 2020 at 10:00 a.m. Eastern Time to discuss the third quarter 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, November 13, 2020 and may be accessed by dialing 201-612-7415 and using the passcode 13706730#. 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 quarter ended September 30, 2020 to be filed with the Securities and Exchange Commission (www.sec.gov) and Main Street's Third 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 approximately
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 | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
INVESTMENT INCOME: | |||||||||||||
Interest, fee and dividend income: | |||||||||||||
Control investments | $ | 18,558 | $ | 23,173 | $ | 57,357 | $ | 70,480 | |||||
Affiliate investments | 8,255 | 8,009 | 23,626 | 25,426 | |||||||||
Non–Control/Non–Affiliate investments | 25,141 | 28,886 | 79,126 | 86,818 | |||||||||
Total investment income | 51,954 | 60,068 | 160,109 | 182,724 | |||||||||
EXPENSES: | |||||||||||||
Interest | (12,489) | (12,893) | (36,827) | (37,138) | |||||||||
Compensation | (4,980) | (4,322) | (12,280) | (15,907) | |||||||||
General and administrative | (3,354) | (2,920) | (9,827) | (9,282) | |||||||||
Share–based compensation | (2,561) | (2,572) | (8,215) | (7,279) | |||||||||
Expenses allocated to the External Investment Manager | 1,892 | 1,651 | 5,340 | 5,001 | |||||||||
Total expenses | (21,492) | (21,056) | (61,809) | (64,605) | |||||||||
NET INVESTMENT INCOME | 30,462 | 39,012 | 98,300 | 118,119 | |||||||||
NET REALIZED GAIN (LOSS): | |||||||||||||
Control investments | 4,041 | 5,869 | (15,825) | 4,926 | |||||||||
Affiliate investments | (172) | 1,850 | (407) | (602) | |||||||||
Non–Control/Non–Affiliate investments | (17,743) | (13,595) | (28,091) | (18,487) | |||||||||
Realized loss on extinguishment of debt | — | — | (534) | (5,689) | |||||||||
Total net realized loss | (13,874) | (5,876) | (44,857) | (19,852) | |||||||||
NET UNREALIZED APPRECIATION | |||||||||||||
Control investments | 7,139 | (8,797) | (35,096) | 6,286 | |||||||||
Affiliate investments | 2,406 | 1,323 | (26,883) | 3,131 | |||||||||
Non–Control/Non–Affiliate investments | 53,569 | 4,547 | (56,051) | 3,737 | |||||||||
SBIC debentures | — | (319) | 460 | 4,625 | |||||||||
Total net unrealized appreciation (depreciation) | 63,114 | (3,246) | (117,570) | 17,779 | |||||||||
INCOME TAXES: | |||||||||||||
Federal and state income, excise and other taxes | (1,165) | (1,079) | (1,420) | (2,745) | |||||||||
Deferred taxes | (342) | 5,091 | 15,673 | 254 | |||||||||
Income tax benefit (provision) | (1,507) | 4,012 | 14,253 | (2,491) | |||||||||
NET INCREASE (DECREASE) IN NET ASSETS | $ | 78,195 | $ | 33,902 | $ | (49,874) | $ | 113,555 | |||||
NET INVESTMENT INCOME PER SHARE—BASIC | $ | 0.46 | $ | 0.62 | $ | 1.50 | $ | 1.88 | |||||
NET INCREASE (DECREASE) IN NET ASSETS SHARE—BASIC AND DILUTED | $ | 1.18 | $ | 0.54 | $ | (0.76) | $ | 1.81 | |||||
WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED | 66,110,555 | 63,297,943 | 65,319,784 | 62,686,139 | |||||||||
MAIN STREET CAPITAL CORPORATION | ||||||
September 30, | December 31, | |||||
2020 | 2019 | |||||
(Unaudited) | ||||||
ASSETS | ||||||
Investments at fair value: | ||||||
Control investments | $ | 1,020,713 | $ | 1,032,721 | ||
Affiliate investments | 348,030 | 330,287 | ||||
Non–Control/Non–Affiliate investments | 1,215,902 | 1,239,316 | ||||
Total investments | 2,584,645 | 2,602,324 | ||||
Cash and cash equivalents | 27,121 | 55,246 | ||||
Interest receivable and other assets | 42,758 | 50,458 | ||||
Deferred financing costs, net | 2,944 | 3,521 | ||||
Total assets | $ | 2,657,468 | $ | 2,711,549 | ||
LIABILITIES | ||||||
Credit facility | $ | 253,000 | $ | 300,000 | ||
SBIC debentures (par: | 298,835 | 306,188 | ||||
| 451,953 | 324,595 | ||||
183,685 | 183,229 | |||||
Accounts payable and other liabilities | 19,136 | 24,532 | ||||
Interest payable | 13,392 | 7,292 | ||||
Dividend payable | 13,554 | 13,174 | ||||
Deferred tax liability, net | 731 | 16,149 | ||||
Total liabilities | 1,234,286 | 1,175,159 | ||||
NET ASSETS | ||||||
Common stock | 661 | 643 | ||||
Additional paid–in capital | 1,569,642 | 1,512,435 | ||||
Total undistributed (overdistributed) earnings | (147,121) | 23,312 | ||||
Total net assets | 1,423,182 | 1,536,390 | ||||
Total liabilities and net assets | $ | 2,657,468 | $ | 2,711,549 | ||
NET ASSET VALUE PER SHARE | $ | 21.52 | $ | 23.91 | ||
MAIN STREET CAPITAL CORPORATION | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Net investment income | $ | 30,462 | $ | 39,012 | $ | 98,300 | $ | 118,119 | |||
Share-based compensation expense | 2,561 | 2,572 | 8,215 | 7,279 | |||||||
Distributable net investment income (1) | $ | 33,023 | $ | 41,584 | $ | 106,515 | $ | 125,398 | |||
Per share amounts: | |||||||||||
Net investment income per share - | |||||||||||
Basic and diluted | $ | 0.46 | $ | 0.62 | $ | 1.50 | $ | 1.88 | |||
Distributable net investment income per share - | |||||||||||
Basic and diluted (1) | $ | 0.50 | $ | 0.66 | $ | 1.63 | $ | 2.00 | |||
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
