Financial Data and Key Metrics Changes - The company reported total investment income of $144 million for the second quarter, an increase of $11.8 million or 8.9% year-over-year and $6.9 million or 5.1% from the previous quarter [25] - Annualized return on equity was 17.1%, and distributable net investment income (DNII) per share exceeded dividends paid to shareholders [9][30] - Net asset value (NAV) per share reached a record of $32.3, increasing by $0.27 from the previous quarter and by $2.5 or 8.4% year-over-year [30] Business Line Data and Key Metrics Changes - The lower middle market portfolio saw a net increase in investments of $108 million, while private loan investments decreased by $35 million due to lower overall private equity activity [11][24] - The company achieved significant realized gains of $109 million from equity investments in two lower middle market portfolio companies [20][21] - Dividend income increased by $11.2 million year-over-year, driven by the positive performance of lower middle market portfolio companies [26] Market Data and Key Metrics Changes - The private loan investment pipeline was characterized as slightly below average, attributed to a slowdown in overall private equity industry activity [16][18] - The company maintained a diversified portfolio with investments in 187 companies across various industries, with no single investment representing more than 3.9% of total investment income [24] Company Strategy and Development Direction - The company focuses on a differentiated investment strategy in the lower middle market, providing flexible financing solutions and maintaining a long-term investment horizon [16][19] - Plans to grow the asset management business and continue executing investment strategies in the lower middle market were highlighted [12][14] - The company remains optimistic about future investment opportunities, particularly in the lower middle market, despite current economic uncertainties [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability of portfolio companies to navigate economic uncertainties, with a focus on avoiding new investments in companies with significant consumer exposure [38][40] - The company anticipates continued favorable performance in the third quarter, with expectations for additional supplemental dividends if DNII significantly exceeds regular dividends [15][30] Other Important Information - The company declared a supplemental dividend of $0.30 per share, marking the sixteenth consecutive quarterly supplemental dividend [14] - The total investment portfolio at fair value was 17% above the related cost basis at quarter-end [24] Q&A Session Summary Question: Insights on the reduction in private loan investments - Management indicated that the reduction was due to a combination of lower investment activity and higher-than-expected repayments, with the overall private equity industry still slow [34][35] Question: Themes in underperformance within the portfolio - Management noted that underperformance was primarily in consumer businesses, particularly at the lower end of the market, and indicated a cautious approach to new investments in this sector [39][40] Question: Future exit opportunities and realized gains - Management believes there are potential exit opportunities in the near term, with a mature portfolio that could lead to additional realized gains [44][46] Question: Relationship between spread tightening and deal activity - Management explained that softer deal activity is linked to a decrease in M&A activity in the private equity sector, with expectations for improvement in the future [50][52] Question: Funding options for upcoming debt maturities - Management highlighted strong liquidity and a conservative capital structure, allowing flexibility in addressing upcoming debt maturities [53][55]

Disclaimers Main Street Capital Corporation (MAIN) cautions that statements in this presentation that are forward-looking, and provide other than historical information, involve risks and uncertainties that may impact our future results of operations. The forward-looking statements in this presentation are based on current conditions as of August 8, 2025, and include, but are not limited to, statements regarding our goals, beliefs, strategies, future operating results and cash flows, operating expenses, inv ...

Overview - Fidus Investment Corporation has a diversified investment portfolio totaling $1.1 billion as of June 30, 2025, invested in 92 companies[12] - The company targets firms with annual revenues between $10 million and $150 million[20] - Fidus' senior investment professionals have an average of over 25 years of relevant experience[31] Investment Strategy & Performance - Fidus targets investments between $5 million and $35 million per portfolio company[18] - The company's cumulative realized net capital gains from equity investments since IPO is $175.2 million[37] - The adjusted NAV per share at June 30, 2025, was $19.57, a 35.3% premium to the IPO level of $14.46[37] - Fidus has a historical annual median GAAP ROE of 12.5% since its initial IPO[41] Portfolio & Financial Review - The weighted average debt yield of the investment portfolio is 13.1%[47] - Secured debt investments constitute 82.5% of the portfolio[49] - Equity represents 12.0% of portfolio fair value versus cost of 8.0%[58] - The company maintains an attractive 11.2% dividend yield based on total LTM dividends of $2.26 per share as of June 30, 2025[68]

Core Insights - Main Street Capital Corporation reported strong financial results for the second quarter of 2025, with a net investment income of $0.99 per share and a distributable net investment income of $1.06 per share, reflecting a 2% and 3% increase respectively compared to the same period in 2024 [1][5][10] - The company achieved an annualized return on equity of 17.1% and a net asset value of $32.30 per share, marking a 0.8% increase from the previous quarter [3][5][11] - The company declared a supplemental dividend of $0.30 per share, continuing a trend of increasing dividends over the past few years [3][5] Financial Performance - Total investment income for the second quarter of 2025 was $144.0 million, an increase of 9% from $132.2 million in the same quarter of 2024, driven primarily by a $11.2 million increase in dividend income [4][6][10] - Net investment income increased by $4.3 million, or 5%, to $88.2 million, while distributable net investment income rose by $5.5 million, or 6%, to $94.3 million [5][10] - The company reported a net increase in net assets resulting from operations of $122.5 million, a 19% increase from the prior year [11][29] Investment Portfolio - As of June 30, 2025, Main Street's investment portfolio included 88 lower middle market (LMM) companies with a fair value of $2.67 billion and 87 private loan companies with a fair value of $1.92 billion [15][30] - The weighted-average annual effective yield for the LMM portfolio was 12.8%, while the private loan portfolio had a yield of 11.4% [15][16] - The company completed $209.3 million in total LMM portfolio investments and $188.6 million in private loan portfolio investments during the quarter [5][11] Capital Structure and Liquidity - Main Street had aggregate liquidity of $1.351 billion as of June 30, 2025, including $87.0 million in cash and cash equivalents [14][17] - The company maintains a diversified capital structure with total liabilities of $2.40 billion and total net assets of $2.88 billion [30][31] - Main Street has investment grade credit ratings of BBB- from both Fitch Ratings and S&P Global Ratings, reaffirmed in 2025 [17][18] Dividend Policy - The company declared regular monthly dividends totaling $0.765 per share for the third quarter of 2025, representing a 4.1% increase from the previous year [5][10] - Total dividends paid in the second quarter of 2025 amounted to $1.05 per share, a 2.9% increase from the same quarter in 2024 [5][10]

Financial Data and Key Metrics Changes - The investment portfolio grew by approximately $300 million or 21% from $1.5 billion to $1.8 billion [4] - Weighted average leverage in the investment portfolio decreased to 3.5 times, with non-accruals at fair value reduced from 2.3% to 1.7% [4] - Pre-tax net investment income was $28.5 million or $0.56 per share, with adjusted pre-tax net investment income at $31.3 million or $0.61 per share [27] - Total investment income increased to $52.4 million from $52 million in the prior quarter [28] - NAV per share increased to $16.70 from $16.59 in the prior quarter [31] Business Line Data and Key Metrics Changes - The equity portfolio saw unrealized appreciation grow from $38.5 million or $0.85 per share to $53.2 million or $1 per share [4] - The credit portfolio ended the quarter at $1.6 billion, representing year-over-year growth of 19% from $1.3 billion [17] - 100% of new portfolio company debt originations were first lien senior secured [17] - The credit portfolio had a weighted average yield of 11.7% and a weighted average leverage of 3.5 times EBITDA [22] Market Data and Key Metrics Changes - The lower middle market remains competitive, with a significant number of private equity firms represented across the investment portfolio [20] - Approximately 93% of the credit portfolio is backed by private equity firms, providing guidance and potential junior capital support [18] - The company identified 7% of the debt portfolio as moderate risk due to tariff exposure, with only 1% having both moderate risk and a loan-to-value above 50% [14] Company Strategy and Development Direction - The company aims to maintain dividend sustainability, strong credit performance, and continued access to capital from multiple sources [8] - The recent approval for a second FDIC license allows for an additional $175 million in debt capital to support the direct lower middle market platform [7] - The company plans to methodically raise secured and unsecured debt capital while maintaining a conservative balance sheet [33] Management Comments on Operating Environment and Future Outlook - Management noted that geopolitical uncertainties and trade policy changes have created short-term impacts on the lower middle market [11] - The company remains vigilant in underwriting standards due to ongoing economic uncertainties [12] - Management expressed confidence in the balance sheet's ability to endure market volatility, with no maturities until October 2026 [15] Other Important Information - The company raised over $300 million in new debt capital commitments during the year [5] - The regular dividend increased from $2.24 per share to $2.31 per share, with supplemental dividends totaling $0.23 per share [8] - The company has a robust liquidity position with approximately $384 million in cash and undrawn leverage commitments [32] Q&A Session Summary Question: How attractive is the current vintage of investments in the lower middle market? - Management indicated that current deals are in sectors of interest, with a focus on service industries, while cyclical deals are being delayed or pulled from the market [37][38] Question: What were the main drivers of the net realized loss and markdown in the credit portfolio? - The realized and unrealized losses were primarily driven by restructurings of two companies on non-accrual [40][41] Question: When will the company start injecting capital into the new SBIC subsidiary? - Capital injection into the new SBIC subsidiary is expected to begin in the next three months [42][43] Question: What is the outlook for the pipeline and potential funding from SBIC? - The pipeline includes 3 to 5 new platform companies with expected capital of $75 to $100 million and around $50 million in add-on activity [61][62] Question: How is the company managing potential spread compression in the current market? - Management does not expect material spread compression but acknowledges that competition for non-tariff impacted industries may lead to tighter spreads [72][75] Question: What is the comfort level regarding the UTI balance and potential special dividends? - The company aims to maintain a UTI balance to support regular and supplemental dividends, with no specific target for maximum balance before considering special dividends [78][80]

Financial Data and Key Metrics Changes - The company reported a record annualized return on equity of 25.4% for the fourth quarter and a return on equity of 19.4% for the full year [10] - Total investment income for the fourth quarter was $140.4 million, an increase of $11.1 million or 8.6% year-over-year [28] - Net asset value (NAV) per share increased by $1.08 over the third quarter and by $2.45 or 8.4% year-over-year, reaching a record NAV per share of $31.65 [34] Business Line Data and Key Metrics Changes - The lower middle market portfolio included investments in 84 companies with a fair value of $2.5 billion, representing a 29% increase over the related cost basis [26] - The private loan portfolio had investments in 91 companies with a fair value of $1.9 billion, with the total investment portfolio at fair value being 16% above the related cost basis [27] - The company made total investments of $168 million in the lower middle market portfolio and $108 million in private loans during the fourth quarter [26][14] Market Data and Key Metrics Changes - The company experienced a net fair value appreciation of $80.8 million in the fourth quarter, driven by the lower middle market portfolio [33] - The private loan portfolio represented 46% of total investments at cost at year-end, while the middle market portfolio declined to less than 5% [25] Company Strategy and Development Direction - The company focuses on making both debt and equity investments in the underserved lower middle market, which is expected to continue providing attractive new investment opportunities [20] - The company plans to grow its asset management business, highlighted by the successful listing of the Embassy Income Fund on the New York Stock Exchange [16] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability of portfolio companies to navigate economic uncertainties, including potential tariff impacts [41][44] - The company anticipates continued favorable performance in the first quarter of 2025, with expected distributable net investment income (DNII) of at least $1.05 per share [37] Other Important Information - The company declared a supplemental dividend of $0.30 per share payable in March, marking the fourteenth consecutive quarterly supplemental dividend [16] - The company expects to recommend future supplemental dividends if DNII significantly exceeds regular monthly dividends [17] Q&A Session Summary Question: Exposure to potential tariff issues - Management acknowledged that certain portfolio companies may be impacted by tariffs but emphasized the diversity of the portfolio as a mitigating factor [41][42] Question: Impact of potential capital gains tax changes on acquisition activity - Management noted that while M&A activity has been slower than expected, it is not primarily related to potential changes in capital gains tax rates [51][52] Question: Leverage and origination activity - Management indicated that the current under-levered position is due to less than expected investment activity and plans to increase leverage through net investment activity [56][58] Question: Competition from other BDCs moving down market - Management expressed confidence in the uniqueness of their lower middle market strategy and the strong performance of their portfolio, suggesting that competition may not significantly impact their position [82]

Financial Performance - Net Investment Income (NII) per share was $0.50[7] - Net Asset Value (NAV) per share increased to $21.51, a rise of $0.33 from the previous quarter[7] - The company declared monthly dividends of $0.165 per share, resulting in an annualized dividend yield on NAV of 9.21%[7] - The portfolio's weighted average yield decreased to 13.1% from 14% due to lower SOFR rates[7, 20] - Net investment income for the quarter increased by $0.3 million, or 2.5%, to $11.2 million[20] Portfolio Composition and Activity - Total investments at fair value amounted to $799.5 million, spread across 51 companies[7] - 73% of the portfolio is in first-lien loans, and 89% is in secured loans[7] - The average investment per obligor is $16.0 million, representing 2% of the investment portfolio at fair value[7] - New investments during the quarter totaled $151.6 million, while exits and prepayments reached $165.2 million, resulting in net originations of ($13.7) million[20] - Four obligors are on non-accrual, representing $28.5 million or 4.0% of debt investments at fair value[7, 20] Leverage and Liquidity - Outstanding debt balance was $316 million, with a quarter-end debt-to-equity ratio of 0.68x[7] - Current investment capacity stands at $207 million under undrawn committed bank lines[7]