Financial Data and Key Metrics Changes - Net investment income (NII) per share was $0.39 for the quarter, corresponding to an annualized return on equity (ROE) of 10.5% [11] - GAAP net income per share was $0.19, corresponding to an annualized ROE of 5.2% [11] - Net asset value (NAV) per share was $14.75, down 1.2% compared to the prior quarter [11] Business Line Data and Key Metrics Changes - MFIC made $262 million of new commitments across 29 transactions during the quarter [12] - The weighted average spread on new commitments was 538 basis points, with a slight increase compared to the prior quarter [12][23] - The weighted average net leverage on new commitments was 4.0 times, down from 4.2 times in the prior quarter [23] Market Data and Key Metrics Changes - The quarter began with heightened volatility due to U.S. tariffs, but market sentiment improved as tariffs were paused and trade deals were struck [20] - The labor market showed resilience with steady unemployment, and the Federal Reserve kept its policy rate unchanged [20] - The weighted average yield at cost of the direct origination portfolio was 10.5%, down from 10.7% in the prior quarter [35] Company Strategy and Development Direction - The company is focused on lending to the core middle market on a first lien senior secured basis, which offers attractive risk-adjusted returns [22] - The reduction in exposure to Merx is expected to provide capital for deployment into first lien middle market loans, which are believed to deliver higher returns [17] - The company intends to redeploy capital repaid from Merx to enhance earnings power and strengthen dividend coverage [18] Management's Comments on Operating Environment and Future Outlook - Management noted that the M&A pipeline is building, with sponsors remaining active despite previous uncertainties [55] - The company expects a busy second half of the year with plenty of opportunities to deploy capital [55] - Management expressed confidence in covering the declared dividend of $0.38 per share through net investment income, despite potential base rate pressures [90] Other Important Information - The company reported total investment income of approximately $81.3 million, up 3.2% compared to the prior quarter [33] - Total principal debt outstanding was $2.05 billion, with total net assets standing at $1.3 billion [38] - The company received an $8.5 million pay down from Merx during the quarter [24] Q&A Session Summary Question: Can you clarify the structure of the remaining investment in Merx? - The remaining investment consists of four aircraft and a servicing platform, with 40% of the remaining exposure related to servicing contracts [43][44] Question: What are the expectations for investment activity in the second half of the year? - The company anticipates a busy second half with a growing M&A pipeline and active sponsors, which should provide ample opportunities for deployment [55] Question: How does the company view the current leverage levels? - The company is comfortable with the current leverage levels and expects them to remain within target ranges, especially with anticipated M&A activity [56][58] Question: What is the expected impact of the Merx transactions on NAV? - The Merx transactions are expected to result in a positive impact to NAV in the high single-digit per share range, specifically between $0.06 to $0.09 [94]

Financial Data and Key Metrics Changes - For Q2 2025, adjusted net investment income (NII) was $20 million, an increase from $18.4 million in Q2 2024, with fee income accounting for about half of the $1.6 million increase [6] - Adjusted NII per share was $0.57 for both periods, reflecting an increase in average shares outstanding due to the equity ATM program [7] - Total investment income for Q2 was $40 million, a $3.5 million increase from Q1 2025, driven by higher interest income and fee income [12] - Total expenses for Q2 were $21.3 million, a $3.1 million increase over Q1, primarily due to higher capital gains incentive fees and interest expenses [12] Business Line Data and Key Metrics Changes - The debt portfolio totaled $1 billion on a fair value basis, with 81% consisting of first lien investments, while the equity portfolio stood at $138.8 million, or 12% of the total portfolio [10] - The weighted average effective yield on debt investments was 13.1% as of June 30, slightly down from 13.2% at the end of Q1 [15] Market Data and Key Metrics Changes - The company noted that M&A activity was dampened in Q2 due to economic and tariff policy uncertainty but showed signs of improvement in late Q2 and into Q3 [6][20] - The company’s portfolio remains diversified by industry, with non-accrual companies under 1% of the total portfolio on a fair value basis [10] Company Strategy and Development Direction - The company aims to grow net asset value over time by carefully selecting high-quality companies with defensive characteristics and positive growth outlooks [11] - The investment strategy focuses on generating attractive risk-adjusted returns while preserving capital in the fragmented lower middle market [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the increase in deal flow, indicating a better environment for investment activity in the latter half of Q3 and into Q4 [20][23] - The company is well-positioned to grow its portfolio, although repayment activity is expected to be episodic and not as high as in the previous quarter [22][23] Other Important Information - The net asset value grew slightly to $692.3 million at quarter end compared to $677.9 million as of March 31, 2025 [8] - The board declared a total dividend of $0.57 per share for 2025, which includes a supplemental dividend of $0.14 per share [7] Q&A Session Summary Question: What is the outlook for M&A activity in the second half of the year? - Management noted that while Q1 had decent deal flow, Q2 saw a drop due to uncertainty, but activity has improved in late Q2 and continues into Q3, with expectations for a decent market in the latter half of the year [20][23] Question: Are there any changes in the competitive environment? - Management indicated that while the market remains competitive, there has been an increase in competition over the past few years, particularly in the lower middle market [25][26] Question: Can we expect the prepayment fees to decrease in Q3? - Management agreed that the prepayment fees and accelerated amortization seen in Q2 are not expected to repeat at the same levels in Q3 [28] Question: Can you provide insights on Quest Software's performance? - Management described Quest as a cybersecurity solutions provider with a solid long-term outlook, although it has faced challenges due to being over-leveraged and higher interest rates [34] Question: What is the priority for financial sponsors regarding capital structure? - Management noted that financial sponsors are looking for ways to return capital to LPs, but the level of dividend income may not be recurring and is often episodic [38]

Financial Data and Key Metrics Changes - The fourth quarter net investment income (NII) was $0.47 per share, with a full year NII totaling $1.89 per share [6][24] - The return on equity (ROE) for the quarter was 12.4%, marking the eighth consecutive quarter of double-digit ROE, while the full year ROE was 12.2% [7] - The net asset value (NAV) per share at quarter end was $15.26, approximately in line with the prior quarter [7][24] - Record dividends paid out in 2024 totaled $1.72 per share, reflecting a nearly 10% year-over-year increase [8] Business Line Data and Key Metrics Changes - In 2024, the company originated a record $27 billion in direct investments, doubling from 2023 [16] - In the fourth quarter, approximately $1.2 billion in new investment commitments were deployed, with over 97% consisting of first lien investments [17][18] - First lien investments increased from 68% to 76% of the portfolio, and combined with OBDE's portfolio, first lien investments rose to 78% [18] Market Data and Key Metrics Changes - The average hold size on new direct lending deals grew from $200 million in 2021 to roughly $350 million in 2024, while total deal sizes nearly doubled from $600 million to over $1 billion [13] - The non-accrual rate remained low at 40 basis points of the portfolio at fair value, decreasing to 30 basis points when combined with OBDE's portfolio [21] Company Strategy and Development Direction - The merger with OBDE positioned the company as the second largest publicly traded BDC by total assets, enhancing trading liquidity and operational synergies [14] - The company aims to optimize its portfolio and asset mix for improved yield, potentially increasing investments in strategic equity and joint ventures [33] - The strategic focus includes expanding into alternative and investment-grade credit, as well as data centers, to augment the origination funnel [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the portfolio despite economic pressures, noting solid underlying financial performance from borrowers [20][78] - The expectation for 2025 includes potential synergies from the merger and a focus on optimizing the combined portfolio for better returns [31][33] - Management indicated that while headwinds from lower rates and spreads may persist, the company is well-positioned to capitalize on opportunities regardless of M&A activity [31] Other Important Information - The company reported total portfolio investments exceeding $17 billion and total net assets nearing $8 billion following the merger [24] - The company established a joint venture across all BDCs to create a more efficient investment structure [29] Q&A Session Summary Question: What can OBDC deliver in terms of ROEs in 2025 and beyond? - Management indicated that ROE could be in the low 10s due to headwinds from lower rates and spreads, but potential synergies from the merger could add 50 to 75 basis points to ROE [36][39][40] Question: Where is the portfolio in terms of recognizing Fed rate cuts? - The portfolio is about 70% through recognizing the resets from Fed rate cuts [54] Question: What proportion of the portfolio is still above legacy assets with higher spreads? - Approximately 10% to 15% of the portfolio could still be at risk of opportunistic refinancing at lower spreads [63][64] Question: Will there be significant new portfolio company creations in 2025? - No immediate plans for new portfolio company creations, but the company remains open to opportunities that align with its investment strategy [69] Question: How is the ATM program expected to be utilized? - The ATM program will be used to issue above book value, ensuring it is accretive and not dilutive [99] Question: What was the nature of the multi-billion dollar deals closed during the quarter? - The deals included public-to-private transactions and were new borrowers, not refinancings [100][101]