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MidCap Financial Investment (MFIC) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and related disclosures for MidCap Financial Investment Corporation Item 1. Consolidated Financial Statements This section presents the unaudited consolidated financial statements of MidCap Financial Investment Corporation, including statements of assets and liabilities, operations, changes in net assets, cash flows, and schedules of investments for the periods ended June 30, 2024, and December 31, 2023. It also includes detailed notes to these financial statements and the report of the independent registered public accounting firm Consolidated Statements of Assets and Liabilities This statement details the company's financial position, presenting assets, liabilities, and net assets as of specific reporting dates Consolidated Statements of Assets and Liabilities | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :---------------------- | :--------------------------- | :------------------------------- | :-------------------- | | Total Assets | $2,551,126 | $2,501,331 | +$49,795 | | Total Liabilities | $1,547,367 | $1,496,021 | +$51,346 | | Net Assets | $1,003,759 | $1,005,310 | -$1,551 | | Net Asset Value Per Share | $15.38 | $15.41 | -$0.03 | Consolidated Statements of Operations This statement presents the company's revenues, expenses, and net increase or decrease in net assets from operations over specific periods Three Months Ended June 30 | Metric | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :-------------------- | | Total Investment Income | $69,156 | $68,616 | +$540 | | Net Expenses | $39,615 | $39,766 | -$151 | | Net Investment Income | $29,541 | $28,850 | +$691 | | Net Realized and Change in Unrealized Gains (Losses) | $(6,986) | $(3,445) | -$3,541 | | Net Increase (Decrease) in Net Assets Resulting from Operations | $22,555 | $25,405 | -$2,850 | | Earnings Per Share — Basic | $0.35 | $0.39 | -$0.04 | Six Months Ended June 30 | Metric | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :-------------------- | | Total Investment Income | $137,486 | $136,395 | +$1,091 | | Net Expenses | $79,402 | $78,062 | +$1,340 | | Net Investment Income | $58,084 | $58,333 | -$249 | | Net Realized and Change in Unrealized Gains (Losses) | $(10,040) | $(2,797) | -$7,243 | | Net Increase (Decrease) in Net Assets Resulting from Operations | $48,044 | $55,536 | -$7,492 | | Earnings Per Share — Basic | $0.74 | $0.85 | -$0.11 | Consolidated Statements of Changes in Net Assets This statement outlines the changes in the company's net assets, including operational results and distributions to shareholders Six Months Ended June 30 | Metric | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :-------------------- | | Net Increase (Decrease) in Net Assets Resulting from Operations | $48,044 | $55,536 | -$7,492 | | Net Decrease in Net Assets Resulting from Distributions to Shareholders | $(49,595) | $(49,668) | +$73 | | Net Increase (Decrease) in Net Assets during the period | $(1,551) | $3,571 | -$5,122 | | Net Assets at End of Period | $1,003,759 | $991,677 | +$12,082 | - The company did not repurchase common stock in the six months ended June 30, 2024, compared to $2,297 thousand in the same period of 20236 Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Six Months Ended June 30 | Metric | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :-------------------- | | Net Cash Used in/Provided by Operating Activities | $(54,172) | $54,193 | -$108,365 | | Net Cash Used in/Provided by Financing Activities | $(894) | $(91,099) | +$90,205 | | Net increase (decrease) in cash, cash equivalents and foreign currencies during the period | $(55,066) | $(36,906) | -$18,160 | | Cash, Cash Equivalents and Foreign Currencies at the End of Period | $67,037 | $50,197 | +$16,840 | - Purchases of investments increased to $395,485 thousand in H1 2024 from $252,325 thousand in H1 2023, contributing to the shift in operating cash flow7 - Issuances of debt increased to $213,322 thousand in H1 2024 from $106,194 thousand in H1 20237 Consolidated Schedule of Investments (June 30, 2024) This schedule provides a detailed breakdown of the company's investment portfolio, categorized by type and fair value as of June 30, 2024 Investment Composition at Fair Value - June 30, 2024 | Investment Type | Fair Value (in thousands) | % of Total Investments | | :------------------------ | :------------------------ | :--------------------- | | First Lien Secured Debt | $2,202,813 | 90.19% | | Second Lien Secured Debt | $13,401 | 0.55% | | Unsecured Debt | $325 | 0.01% | | Structured Products and Other | $34,705 | 1.42% | | Preferred Equity | $32,610 | 1.33% | | Common Equity/Interests | $160,328 | 6.56% | | Warrants | $170 | 0.01% | | Total Investments | $2,444,352 | 100.00% | Top 5 Industry Classifications at Fair Value - June 30, 2024 | Industry Classification | Percentage of Total Investments (at Fair Value) | | :--------------------------------------- | :---------------------------------------------- | | High Tech Industries | 19.6% | | Healthcare & Pharmaceuticals | 16.5% | | Consumer Services | 10.2% | | Business Services | 10.0% | | Aviation and Consumer Transport | 8.8% | - As of June 30, 2024, non-qualifying assets under the 1940 Act represented approximately 5.2% of the total assets of the Company40 Consolidated Schedule of Investments (December 31, 2023) This schedule provides a detailed breakdown of the company's investment portfolio, categorized by type and fair value as of December 31, 2023 Investment Composition at Fair Value - December 31, 2023 | Investment Type | Fair Value (in thousands) | % of Total Investments | | :------------------------ | :------------------------ | :--------------------- | | First Lien Secured Debt | $2,075,031 | 88.90% | | Second Lien Secured Debt | $31,887 | 1.37% | | Unsecured Debt | $0 | 0.00% | | Structured Products and Other | $41,333 | 1.77% | | Preferred Equity | $32,405 | 1.39% | | Common Equity/Interests | $153,344 | 6.57% | | Warrants | $199 | 0.01% | | Total Investments | $2,334,199 | 100.00% | Top 5 Industry Classifications at Fair Value - December 31, 2023 | Industry Classification | Percentage of Total Investments (at Fair Value) | | :--------------------------------------- | :---------------------------------------------- | | High Tech Industries | 19.3% | | Healthcare & Pharmaceuticals | 17.6% | | Business Services | 11.9% | | Aviation and Consumer Transport | 8.4% | | Consumer Services | 8.1% | - As of December 31, 2023, non-qualifying assets under the 1940 Act represented approximately 5.5% of the total assets of the Company78 Notes to Consolidated Financial Statements This section provides detailed explanatory notes supporting the consolidated financial statements, clarifying accounting policies, and significant transactions Note 1. Organization This note describes the company's legal structure, investment objective, and key corporate developments - MidCap Financial Investment Corporation (MFIC) is a Maryland corporation, a closed-end, externally managed BDC, and has elected RIC status for tax purposes919293 - MFIC's common stock began trading under the ticker "MFIC" on NASDAQ on August 12, 202292 - The company's investment objective is to generate current income and, to a lesser extent, long-term capital appreciation, primarily investing in directly originated first lien senior secured loans to privately held U.S. middle-market companies96 Note 2. Significant Accounting Policies This note outlines the critical accounting principles and methods used in preparing the financial statements, including fair value measurements - The company does not consolidate entities other than investment company subsidiaries or controlled operating companies providing services to it98 - Fair value measurements are categorized into a three-tier hierarchy (Level 1, 2, 3) based on the observability of inputs, with Level 3 relying on unobservable inputs107 - The Board has designated the Investment Adviser as its "valuation designee" responsible for fair value determinations, with Board oversight109 - Investments are valued using market or income approaches, considering factors like market data, yields, multiples, covenants, collateral, and company performance114 - PIK income is accrued and capitalized, becoming due at maturity or upon call, and is placed on non-accrual status if not expected to be realized121 - The company operates as a Regulated Investment Company (RIC) for tax purposes, requiring distribution of at least 90% of its investment company taxable income to avoid corporate-level taxes132 Note 3. Related Party Agreements and Transactions This note details agreements and transactions with related parties, including management and incentive fees and co-investment activities - Base management fee is 1.75% annually (0.4375% quarterly) of net asset value, with a cap of 1.50% of the lesser of average gross assets139 - Performance-based incentive fee has two components: one based on pre-incentive fee net investment income (17.50% or 20.00% based on Legacy/Current Fee Quarters) and another on cumulative net realized capital gains (17.50%)141151 Management and Incentive Fees (Three Months Ended June 30) | Metric | 2024 (in thousands) | 2023 (in thousands) | | :-------------- | :------------------ | :------------------ | | Management fees | $4,389 | $4,334 | | Incentive fees | $5,572 | $6,120 | - The fee offset agreement with Merx Aviation was terminated effective February 21, 2023, in exchange for a $7.5 million termination fee158166 - As of June 30, 2024, co-investment holdings with affiliates represented 80% of the portfolio at fair value ($1,948,804 thousand)163 Note 4. Earnings Per Share This note presents the calculation of basic earnings per share for the reported periods Basic Earnings Per Share - Three Months Ended June 30 | Metric | 2024 | 2023 | Change | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net increase (decrease) in net assets resulting from operations | $22,555 | $25,405 | -$2,850 | | Weighted average shares outstanding | 65,253,275 | 65,366,516 | -113,241 | | Basic earnings (loss) per share | $0.35 | $0.39 | -$0.04 | Basic Earnings Per Share - Six Months Ended June 30 | Metric | 2024 | 2023 | Change | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net increase (decrease) in net assets resulting from operations | $48,044 | $55,536 | -$7,492 | | Weighted average shares outstanding | 65,253,275 | 65,408,703 | -155,428 | | Basic earnings (loss) per share | $0.74 | $0.85 | -$0.11 | Note 5. Investments This note provides detailed information on the company's investment portfolio, including fair value hierarchy and investment activity Fair Value Measurement Hierarchy - June 30, 2024 | Asset Category | Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :------------------------ | :------------------------ | :--------------------- | :--------------------- | :--------------------- | | First Lien Secured Debt | $2,202,813 | $0 | $0 | $2,202,813 | | Second Lien Secured Debt | $13,401 | $0 | $7,955 | $5,446 | | Unsecured Debt | $325 | $0 | $0 | $325 | | Structured Products and Other | $34,705 | $0 | $0 | $34,705 | | Preferred Equity | $32,610 | $0 | $0 | $32,610 | | Common Equity/Interests | $160,328 | $1,745 | $0 | $158,583 | | Warrants | $170 | $0 | $0 | $170 | | Total Investments | $2,444,352 | $1,745 | $7,955 | $2,434,652 | - As of June 30, 2024, 99.6% of the company's investments were classified as Level 3, indicating reliance on unobservable inputs for valuation265 Investment Activity - Six Months Ended June 30 | Metric | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :-------------------- | | Purchases of investments | $398,153 | $252,659 | +$145,494 | | Sales and repayments of investments | $291,746 | $250,764 | +$40,982 | | PIK income earned | $4,502 | $1,597 | +$2,905 | - As of June 30, 2024, 2.1% of total investments at amortized cost (1.5% at fair value) were on non-accrual status, an increase from 1.2% (0.2% at fair value) as of December 31, 2023185 Note 6. Debt and Foreign Currency Transactions and Translations This note details the company's debt obligations, including terms, maturities, and compliance with covenants - The asset coverage requirement for senior securities was reduced from 200% to 150% effective April 4, 2019186 Outstanding Debt Obligations - June 30, 2024 | Debt Instrument | Principal Amount Outstanding (in thousands) | Fair Value (in thousands) | Final Maturity Date | | :------------------------------ | :------------------------------------------ | :------------------------ | :------------------ | | Senior Secured Facility | $731,176 | $731,176 | 4/19/2028 | | MFIC Bethesda CLO 1 LLC Class A-1 Notes | $232,000 | $232,909 | 10/23/2035 | | 2025 Notes | $350,000 | $346,555 | 3/3/2025 | | 2026 Notes | $125,000 | $117,907 | 7/16/2026 | | 2028 Notes | $80,000 | $80,512 | 12/15/2028 | | Total Debt Obligations | $1,518,176 | $1,509,059 | | - The Senior Secured Facility's total lender commitments will decrease from $1,705,000 thousand to $1,550,000 thousand after December 22, 2024191 Annualized Interest Cost - Six Months Ended June 30 | Metric | 2024 | 2023 | | :------------------------------ | :------ | :------ | | Weighted average annualized interest cost | 7.05% | 6.54% | | Annualized amortized debt issuance cost | 0.50% | 0.40% | | Total annualized interest cost | 7.55% | 6.94% | - The company was in compliance with all debt covenants as of June 30, 2024, and December 31, 2023201 Note 7. Stockholders' Equity This note provides information on the company's equity, including share repurchase plans and activity Share Repurchase Plans - as of June 30, 2024 | Plan Date | Maximum Cost of Shares That May Be Repurchased (in thousands) | Cost of Shares Repurchased (in thousands) | Remaining Cost of Shares That May Be Repurchased (in thousands) | | :------------------ | :------------------------------------------------------------ | :---------------------------------------- | :-------------------------------------------------------------- | | August 5, 2015 | $50,000 | $50,000 | $0 | | December 14, 2015 | $50,000 | $50,000 | $0 | | September 14, 2016 | $50,000 | $50,000 | $0 | | October 30, 2018 | $50,000 | $50,000 | $0 | | February 6, 2019 | $50,000 | $48,107 | $1,893 | | February 3, 2022 | $25,000 | $0 | $25,000 | | Total | $275,000 | $248,107 | $26,893 | - The company did not repurchase any shares during the three and six months ended June 30, 2024204 - During the three and six months ended June 30, 2023, the company repurchased 198,084 shares for a total cost of $2,297 thousand, at a weighted average price of $11.60 per share205 - Since inception through June 30, 2024, the company repurchased 15,593,150 shares for a total cost of $248,107 thousand206 Note 8. Commitments and Contingencies This note discloses the company's unfunded commitments and potential contingent liabilities Total Unfunded Commitments - as of June 30, 2024 | Commitment Type | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------------------- | :--------------------------- | :------------------------------- | :-------------------- | | Unfunded revolver obligations and bridge loan commitments | $137,200 | $139,979 | -$2,779 | | Standby letters of credit issued and outstanding | $64,322 | $42,921 | +$21,401 | | Unfunded delayed draw loan commitments | $187,475 | $167,756 | +$19,719 | | Total Unfunded Commitments | $388,997 | $350,656 | +$38,341 | - The company also had an unfunded revolver commitment to its fully controlled affiliate Merx Aviation Finance, LLC of $32,925 thousand as of June 30, 2024212 Note 9. Financial Highlights This note presents key financial ratios and per-share data, offering a summary of the company's financial performance Per Share Data - Six Months Ended June 30 | Metric | 2024 | 2023 | Change | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net asset value at beginning of period | $15.41 | $15.10 | +$0.31 | | Net investment income | $0.89 | $0.89 | $0.00 | | Net increase in net assets resulting from operations | $0.74 | $0.85 | -$0.11 | | Net asset value at end of period | $15.38 | $15.20 | +$0.18 | | Per share market value at end of period | $15.14 | $12.56 | +$2.58 | | Total return | 16.28% | 17.31% | -1.03% | Ratio/Supplemental Data - Six Months Ended June 30 | Metric | 2024 | 2023 | Change | | :-------------------------------------- | :---------- | :---------- | :---------- | | Annualized ratio of operating expenses to average net assets | 5.31% | 5.66% | -0.35% | | Annualized ratio of interest and other debt expenses to average net assets | 10.58% | 10.22% | +0.36% | | Annualized ratio of total expenses to average net assets | 15.89% | 15.88% | +0.01% | | Annualized ratio of net investment income to average net assets | 11.62% | 11.87% | -0.25% | | Annualized portfolio turnover rate | 24.68% | 21.09% | +3.59% | | Asset coverage per unit | $1,661 | $1,642 | +$19 | - As of June 30, 2024, the company's asset coverage ratio was 166%217 Note 10. Subsequent Events This note describes significant events that occurred after the reporting period but before the financial statements were issued - On July 22, 2024, the company completed the acquisition of AFT and AIF, issuing approximately 14,868,092 and 13,658,992 shares of common stock to former AFT and AIF stockholders, respectively219223 - The mergers were accounted for as asset acquisitions, resulting in a purchase discount allocated to the cost basis of acquired investments, leading to immediate recognition of net unrealized appreciation221225 - The Board declared a special distribution of $0.20 per share payable on August 15, 2024, and a base distribution of $0.38 per share payable on September 26, 2024227 Report of Independent Registered Public Accounting Firm This report provides the independent auditor's opinion on the fairness of the consolidated financial statements - Deloitte & Touche LLP expressed an unqualified opinion on the consolidated financial statements as of December 31, 2023230 - The firm is not aware of any material modifications that should be made to the interim financial information for the periods ended June 30, 2024 and 2023229 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of its business, investment strategy, revenue and expense drivers, portfolio activity, recent developments, critical accounting estimates, and liquidity. It also analyzes the results of operations for the three and six months ended June 30, 2024, compared to the prior year Overview This section provides a general introduction to the company's business, regulatory status, and investment advisory structure - MFIC operates as a Business Development Company (BDC) under the 1940 Act and a Regulated Investment Company (RIC) for federal income tax purposes236 - The company's investment adviser is Apollo Investment Management, L.P. (AIM), an affiliate of Apollo Global Management, Inc. (AGM)238 - Co-investments with affiliates are conducted under an SEC exemptive order, requiring independent director approval238 Investments This section describes the company's primary investment focus and portfolio composition - Primary investments are in directly originated and privately negotiated first lien senior secured loans to privately held U.S. middle-market companies (generally less than $75 million in EBITDA)241 - As of June 30, 2024, non-qualifying assets represented approximately 5.2% of the company's total assets, well within the 70% qualifying asset requirement243 Revenue This section outlines the various sources of the company's investment income - Revenue sources include interest and dividend income, PIK interest/dividends, and various fees (commitment, origination, structuring, managerial assistance)244 - Debt investments generally have terms of five to ten years and bear floating interest rates, often SOFR-based244 Expenses This section details the company's operating expenses, including management fees and interest costs - Key expenses include management and performance-based incentive fees, interest and other debt expenses, administrative services expense, and other general and administrative expenses245247 - General and administrative operating expenses are expected to increase moderately in dollar terms but may decrease as a percentage of total assets during growth periods248 Portfolio and Investment Activity This section summarizes the company's investment transactions, portfolio growth, and composition Portfolio and Investment Activity - Six Months Ended June 30 | Metric | 2024 (in millions) | 2023 (in millions) | Change (in millions) | | :-------------------------------------- | :----------------- | :----------------- | :------------------- | | Investments made in portfolio companies | $398.2 | $252.7 | +$145.5 | | Investments repaid | $(291.7) | $(250.8) | -$40.9 | | Net investment activity | $106.4 | $1.9 | +$104.5 | | Number of investments in new portfolio companies | 25 | 20 | +5 | | Number of exited companies | 12 | 5 | +7 | | Portfolio companies at end of period | 165 | 150 | +15 | Portfolio Composition and Weighted Average Yields - June 30, 2024 | Metric | Value | | :-------------------------------------- | :--------- | | First lien secured debt (at fair value) | 90% | | Total secured debt (at fair value) | 91% | | First lien secured debt (at amortized cost) | 11.9% | | Secured debt portfolio (at amortized cost) | 11.9% | | Total portfolio (at amortized cost) | 9.9% | | Floating rate, as percentage of total (at fair value) | 100% | - Since April 2004 through June 30, 2024, invested capital totaled $24.3 billion in 652 portfolio companies251 Recent Developments This section highlights significant events and transactions that have recently impacted the company - The company completed the acquisition of AFT and AIF on July 22, 2024, issuing common stock to former shareholders of both entities252255 - The mergers were treated as asset acquisitions, resulting in a purchase discount allocated to acquired investments, leading to immediate recognition of net unrealized appreciation254258 - A special distribution of $0.20 per share and a base distribution of $0.38 per share were declared in connection with the mergers259 Critical Accounting Estimates This section discusses the key accounting estimates and judgments that significantly affect the financial statements - Management's estimates and assumptions are crucial for financial statements, and changes in economic conditions or creditworthiness can materially affect results260 - As of June 30, 2024, 99.6% of the company's investments were classified as Level 3, reflecting the nature of its private middle-market debt portfolio265 - The valuation of private debt is driven more by investment-specific credit factors than broader market movements due to structural advantages like capital seniority and covenant protection266 Investment Valuation Process This section describes the methodology and oversight involved in determining the fair value of the company's investments - The Investment Adviser performs fair value determinations for all investments, with Board oversight268 - For investments without readily available market quotations, independent third-party valuation firms assist, considering observable and unobservable inputs269 - Valuation approaches include market approach (comparable transactions, yields, multiples) and income approach (discounted cash flows), considering various factors like security covenants, collateral, and company performance273 Results of Operations This section analyzes the company's financial performance, including investment income, expenses, and net asset changes Total Investment Income - Three & Six Months Ended June 30 | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | H1 2024 (in millions) | H1 2023 (in millions) | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total Investment Income | $69.2 | $68.6 | $137.5 | $136.4 | - The increase in total investment income for Q2 2024 was driven by a $0.5 million increase in interest income (including PIK) and a rise in prepayment fees to $3.2 million from $0.6 million278 - Net expenses decreased by $0.1 million in Q2 2024 due to lower administrative services and incentive fees, partially offset by a $1.1 million increase in interest and other debt expenses280 - Net realized losses for Q2 2024 were $15.6 million, primarily due to the write-off of the investment in MSEA Tankers LLC282 - Net change in unrealized gains for Q2 2024 was $8.7 million, driven by the write-off of MSEA Tankers LLC and partially offset by underperformance of US Auto, Renovo, and PHS285 Liquidity and Capital Resources This section discusses the company's sources of funds, debt obligations, and ability to meet its financial commitments - Liquidity sources include equity/debt offerings, Senior Secured Facility, senior unsecured notes, special purpose entities, and cash flows from operations289 - Management anticipates adequate cash resources for daily operations for at least the next twelve months289 Contractual Maturities of Debt Obligations - June 30, 2024 | Debt Instrument | Total (in millions) | Less than 1 Year (in millions) | 1 to 3 Years (in millions) | 3 to 5 Years (in millions) | More than 5 Years (in millions) | | :------------------------------ | :------------------ | :----------------------------- | :------------------------- | :------------------------- | :------------------------------ | | Senior Secured Facility | $731.2 | $0 | $0 | $731.2 | $0 | | 2025 Notes | $350.0 | $350.0 | $0 | $0 | $0 | | 2026 Notes | $125.0 | $0 | $125.0 | $0 | $0 | | 2028 Notes | $80.0 | $0 | $0 | $80.0 | $0 | | Bethesda CLO 1 Class A-1 | $232.0 | $0 | $0 | $0 | $232.0 | | Total Debt Obligations | $1,518.2 | $350.0 | $125.0 | $811.2 | $232.0 | Distributions This section details the company's dividend policy and distributions to shareholders, particularly regarding RIC requirements - Distributions paid were $24.8 million ($0.38/share) for Q2 2024 and $49.6 million ($0.76/share) for H1 2024293 - To maintain RIC status, the company must distribute at least 90% of its ordinary income and realized net short-term capital gains, which may include non-cash PIK income294296298 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to financial market risks, specifically investment valuation risk and interest rate risk. It highlights the reliance on fair value measurements for illiquid investments and the impact of interest rate changes on net investment income Investment Valuation Risk This section addresses the risks associated with valuing illiquid investments at fair value using unobservable inputs - Most portfolio investments are valued at fair value using unobservable inputs, leading to potential fluctuations and differences from ultimate realized values300 - Investments are generally subject to legal and other restrictions on resale, making them less liquid than publicly traded securities300 Interest Rate Risk This section analyzes the potential impact of interest rate fluctuations on the company's net investment income - The majority of the debt portfolio investments bear variable interest rates (SOFR-based), while some debt obligations (2025, 2026, 2028 Notes) are fixed-rate302 Estimated Annual Impact on Net Investment Income from Interest Rate Changes - June 30, 2024 | Basis Point Change | Net Investment Income (in millions) | Investment Income Per Share | | :----------------- | :---------------------------------- | :-------------------------- | | Up 150 | $14.5 | $0.222 | | Up 100 | $9.6 | $0.148 | | Up 50 | $4.8 | $0.074 | | Down 50 | $(4.8) | $(0.074) | | Down 100 | $(9.6) | $(0.148) | | Down 150 | $(14.4) | $(0.221) | - The company may use hedging instruments like futures, options, and forward contracts to mitigate interest rate fluctuations304 Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's controls designed to ensure timely and accurate financial disclosures - Disclosure controls and procedures were evaluated as effective as of June 30, 2024306 Changes in Internal Control Over Financial Reporting This section discloses any material changes in the company's internal control over financial reporting during the period - No material changes in internal control over financial reporting were identified during Q2 2024307 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, debt defaults, other information, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings, nor are any material legal proceedings threatened against it. While routine investigations or claims may arise, they are not expected to materially affect the business - No material legal proceedings are currently active or threatened against the company309 Item 1A. Risk Factors This section directs readers to the comprehensive risk factors detailed in the company's Annual Report on Form 10-K for December 31, 2023, emphasizing that additional unforeseen risks could also impact the business - Readers should refer to the Form 10-K for a comprehensive discussion of risk factors310 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the absence of unregistered sales of equity securities and provides details on the company's ongoing share repurchase plans, including historical repurchase activity and remaining authorization Unregistered Sales of Equity Securities This section confirms whether the company engaged in any unregistered sales of its equity securities - No unregistered sales of equity securities occurred310 Issuer Purchases of Equity Securities This section provides details on the company's share repurchase programs and recent buyback activity Remaining Share Repurchase Capacity - as of June 30, 2024 | Metric | Amount (in millions) | | :-------------------------------------- | :------------------- | | Total Maximum Cost of Shares That May Be Repurchased | $275.0 | | Total Cost of Shares Repurchased | $248.1 | | Remaining Cost of Shares That May Be Repurchased | $26.9 | - No shares were repurchased during the three and six months ended June 30, 2024204 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities occurred315 Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable315 Item 5. Other Information No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2024 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers in Q2 2024316 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various certifications, unaudited financial statements of acquired entities, and XBRL interactive data files - Exhibits include certifications (CEO, CFO), unaudited financial statements for AFT and AIF, and Inline XBRL documents317 Signatures The report is officially signed by the Chief Executive Officer and Chief Financial Officer and Treasurer of MidCap Financial Investment Corporation, confirming its submission on August 7, 2024 - The report was signed by Tanner Powell (CEO) and Gregory W. Hunt (CFO and Treasurer) on August 7, 2024321