MSCC(US:MAIN)2022-11-04 17:36Financial Data and Key Metrics Changes - The total investment income for Q3 2022 increased by $21.6 million or 28% year-over-year and $13.2 million or 15.4% compared to Q2 2022, reaching $98.4 million [39] - Net investment income (NII) per share rose to $0.83, and distributable net investment income (DNII) per share increased to $0.88, both up by $0.12 from the same period last year [46] - The net asset value (NAV) increased by $114.3 million or $0.57 per share, ending the quarter at a record NAV of $25.94 per share [44] Business Line Data and Key Metrics Changes - The lower middle market portfolio included investments in 75 companies with a fair value of $1.9 billion, approximately 20% above the cost basis [35] - The private loan portfolio had investments in 87 companies representing $1.5 billion of fair value, while the middle-market portfolio had investments in 33 companies valued at $354 million [35] - Total investments in the lower middle market portfolio amounted to $112 million, resulting in a net increase of approximately $85 million after repayments [32] Market Data and Key Metrics Changes - The repayment rate in the private loan portfolio has slowed significantly, with a decrease of approximately 70% in Q3 2022 compared to the same quarter in the previous year [34] - The total investment portfolio grew by 6.9% during the third quarter to approximately $4 billion at fair value [35] Company Strategy and Development Direction - The company continues to focus on the underserved lower middle market, targeting a blended internal rate of return in the mid to high teens range through a disciplined mix of debt and equity investments [30] - The company is optimistic about future follow-on investments in existing portfolio companies, indicating strong relationships with management teams [55] - The company plans to recommend future supplemental dividends if DNII significantly exceeds monthly dividends in upcoming quarters [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the investment portfolio and the favorable investment environment, expecting another strong quarter in Q4 2022 with anticipated DNII per share exceeding $0.90 [49] - The company noted that the current market dynamics have created attractive opportunities for deploying capital, particularly in the lower middle market and private loan sectors [26][28] Other Important Information - The company declared a supplemental dividend of $0.10 per share payable in December and increased monthly dividends for Q1 2023 to $0.225 per share, representing a 4.7% increase from Q1 2022 [18] - The company raised $105 million through equity capital during the quarter, enhancing its capital structure [45] Q&A Session Summary Question: What drove the unrealized gains in the lower middle market portfolio? - Management indicated that several companies performed well and improved their capital structures, leading to positive valuations [53] Question: Are there opportunities for follow-on investments in the current macro environment? - Management expressed confidence in existing lower middle market companies and indicated that a significant portion of the current investment pipeline consists of follow-on investments in these companies [55]