MSCC(US:MAIN)2025-05-09 14:56Investment Strategy - Main Street Capital Corporation's investment strategy focuses on lower middle market companies with annual revenues between $10 million and $150 million and EBITDA between $3 million and $20 million[413]. - The company aims to maximize total return from its Investment Portfolio by generating current income from debt investments and capital appreciation from equity investments[413]. - The average size of LMM portfolio investments ranges from $5 million to $125 million, while Private Loan investments range from $10 million to $100 million[413]. - The company has generally stopped making new Middle Market investments and expects the size of its Middle Market investment portfolio to decline in future periods[404]. - The company’s Private Loan investments are typically secured by a first priority lien on the assets of the portfolio company[415]. Financial Performance - Total investment income for Q1 2025 was $137.0 million, a 4% increase from $131.6 million in Q1 2024[458]. - Net investment income for Q1 2025 was $89.8 million, or $1.01 per share, compared to $89.8 million, or $1.05 per share, in Q1 2024[463]. - Distributable net investment income for Q1 2025 increased 0.5% to $94.8 million, or $1.07 per share, compared to $94.4 million, or $1.11 per share, in Q1 2024[464]. - The company experienced a 58% increase in dividend income, rising to $36.0 million in Q1 2025 from $22.8 million in Q1 2024[459]. - The company achieved an annualized total return on investments of 16.0% for the three months ended March 31, 2025, slightly down from 16.7% in the same period of 2024[437]. Investment Income and Expenses - For the three months ended March 31, 2025, the External Investment Manager earned $5.8 million in base management fees and $2.7 million in incentive fees[426]. - Total expenses for Q1 2025 were $47.2 million, a 13% increase from $41.8 million in Q1 2024[460]. - The level of realized gains or losses and unrealized appreciation or depreciation on investments will fluctuate based on portfolio activity and economic conditions[421]. - For the three months ended March 31, 2025, 2.9% of total investment income was attributable to PIK interest income not paid currently in cash, compared to 3.2% in the same period of 2024[449]. Portfolio Valuation - As of March 31, 2025, the fair value of the LMM portfolio was $2,611.0 million, and the Private Loan portfolio was $1,942.2 million, representing increases from $2,502.9 million and $1,904.3 million, respectively, as of December 31, 2024[432][434]. - The average EBITDA for the LMM portfolio was $10.5 million as of March 31, 2025, compared to $10.2 million as of December 31, 2024, indicating a growth of approximately 2.9%[432][436]. - As of March 31, 2025, Middle Market portfolio investments totaled $128.3 million in fair value, a decrease from $155.3 million as of December 31, 2024[438]. - Other Portfolio investments had a fair value of $134.5 million as of March 31, 2025, up from $124.1 million as of December 31, 2024, reflecting an increase of approximately 10.8%[439]. - The investment in the External Investment Manager had a fair value of $238.2 million as of March 31, 2025, down from $246.0 million as of December 31, 2024[440]. Debt and Financing - The company issued $300.0 million in aggregate principal amount of 6.50% unsecured notes due June 4, 2027, with an outstanding amount of $400.0 million as of March 31, 2025[485]. - The company maintains the ability to issue SBIC debentures guaranteed by the SBA, with $350.0 million outstanding as of March 31, 2025[487]. - The BDC asset coverage ratio was 248% as of March 31, 2025, allowing the company to fund more investments with debt capital[496]. - The company anticipates continuing to fund its investment activities through existing cash, cash flows from operations, and future debt and equity capital issuances[492]. - As of March 31, 2025, the outstanding aggregate principal amount of the March 2029 Notes was $350.0 million[486]. Cash Flow and Assets - Cash flows for the three months ended March 31, 2025 showed a net increase in cash and cash equivalents of $30.9 million, with $20.4 million used in operating activities and $51.3 million provided by financing activities[476]. - As of March 31, 2025, the company had $109.2 million in cash and cash equivalents and $1.193 billion of unused capacity under its Credit Facilities[479]. - The company has $265.3 million in outstanding commitments, including 68 investments with revolving loans and nine investments with equity capital commitments[500]. - The total future fixed commitments for cash payments amount to $2,024.5 million, with significant obligations due in 2026 and 2027[501]. Dividends - The company declared a supplemental dividend of $0.30 per share in May 2025, in addition to regular monthly dividends of $0.25 per share for April, May, and June 2025, totaling $1.05 per share for Q2 2025[507]. - Regular monthly dividends for Q3 2025 were declared at $0.255 per share, representing a 4.1% increase from Q3 2024[508]. - The company has cumulative dividends of $45.79 per share since its IPO in October 2007[508]. Interest Rates and Hedging - The company reported a 16% increase in interest expenses, primarily due to higher average borrowings and increased interest rates on debt obligations[462]. - As of March 31, 2025, 67% of the debt investment portfolio bore interest at floating rates, with 95% subject to contractual minimum interest rates[512]. - The company has not entered into any interest rate hedging arrangements as of March 31, 2025, and operates as a "limited derivatives user"[512]. - The company expects changes in interest rates to affect both interest expense on debt and interest income from portfolio investments[511]. - The analysis indicates the impact of interest rate changes on net investment income as of March 31, 2025, but does not account for future credit market changes[516].