MidCap Financial Investment (MFIC) - 2026 Q1 - Quarterly Report

Investment Activity - For the three months ended June 30, 2025, the company made investments totaling $288.7 million, compared to $245.4 million in the same period of 2024, representing a 17.5% increase[502] - The net investment activity for the six months ended June 30, 2025, was $314.4 million, significantly higher than $106.4 million in the same period of 2024[502] - The company has invested a total of $26.2 billion in 828 portfolio companies since its initial public offering in April 2004[507] Portfolio Composition - As of June 30, 2025, the portfolio composition included 93% in first lien secured debt, consistent with the 93% reported at the end of 2024[504] - The weighted average yield on first lien secured debt was 10.4% as of June 30, 2025, down from 10.8% at the end of 2024[504] - The total portfolio yield was 9.2% as of June 30, 2025, compared to 9.5% at the end of 2024[504] - As of June 30, 2025, $3.25 billion or 97.7% of the Company's investments were classified as Level 3, indicating a high proportion of private investments relative to total investments[517] Financial Performance - Total investment income for the three months ended June 30, 2025, was $81.2 million, an increase of $12.0 million compared to $69.2 million for the same period in 2024, primarily driven by higher interest income[528][530] - Net investment income for the three months ended June 30, 2025, was $36.4 million, compared to $29.5 million for the same period in 2024, reflecting a year-over-year increase[528] - Total investment income increased by $22.4 million for the six months ended June 30, 2025, primarily due to higher interest income from a larger income-bearing investment portfolio[531] Losses and Expenses - The Company reported net realized losses of $17.2 million for the three months ended June 30, 2025, compared to net realized losses of $15.6 million for the same period in 2024[528] - Interest and other debt expenses for the three months ended June 30, 2025, were $32.3 million, an increase from $26.8 million for the same period in 2024[528] - Net realized losses for the three months ended June 30, 2025, were $17.0 million, primarily due to the restructure of Renovo and Mitel Network, with significant losses of $9.8 million from Renovo[535] - For the six months ended June 30, 2025, net realized losses totaled $13.5 million, driven by restructures and partial write-offs, offset by gains from Orgain, Inc. and Heubach[536] Debt and Obligations - Total debt obligations as of June 30, 2025, amounted to $2,057.9 million, with $1,221.9 million due in more than 5 years[547] - The total annualized cost of debt decreased from 7.6% for the six months ended June 30, 2024, to 6.8% for the same period in 2025[534] - Average debt outstanding rose from $1.4 billion for the three months ended June 30, 2024, to $1.9 billion for the same period in 2025, contributing to a $5.3 million increase in net expenses[533] Management and Governance - The Company appointed Kenneth Seifert as Chief Financial Officer and Treasurer, effective June 30, 2025, following the resignation of Gregory Hunt[510] - Howard Widra announced his intention to retire as Executive Chairman of the Board, effective December 31, 2026, prompting a search for his successor[511] Cash Flow and Distributions - The company expects current cash and cash equivalents, along with anticipated cash flows, to meet operational cash needs for at least the next twelve months[544] - Distributions paid to stockholders for the three months ended June 30, 2025, totaled $35.5 million ($0.38 per share), compared to $24.8 million ($0.38 per share) for the same period in 2024, reflecting a year-over-year increase of 43.1%[550] - The company must distribute at least 90% of its ordinary income and realized net short-term capital gains to maintain its RIC status, which may limit future distributions[552] - The company maintains an "opt out" dividend reinvestment plan, allowing stockholders to reinvest cash dividends into additional shares unless they choose to receive cash[553] Unrealized Gains and Losses - The company recognized gross unrealized gains of $35.2 million and losses of $43.2 million for the six months ended June 30, 2025, resulting in a net change in unrealized losses[540] - The net change in unrealized losses for the six months ended June 30, 2025, was $8 million, with significant unrealized gains from Merx Aviation Finance, LLC of $9.9 million[540] Interest Rate Sensitivity - A 150 basis point increase in interest rates is estimated to result in a $14.2 million increase in net investment income, equating to $0.148 per share[565] - As of June 30, 2025, the majority of the debt portfolio investments bore interest at variable rates, primarily SOFR-based, with durations of one to six months before resetting to current market rates[562] Asset Coverage and Limitations - The company may face limitations on distributions due to asset coverage tests applicable to BDCs and conditions of its revolving credit facility[554] - The fair value of investments may fluctuate significantly due to the lack of readily available market values, impacting the company's financial reporting[560] - The company has substantial net capital loss carryforwards and does not expect to generate cumulative net capital gains in the foreseeable future[552]