MAIN - Earnings call transcript Q2 2024 | Main Street Capital Corporation

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Operator

Greetings, and welcome to the Main Street Capital Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, to Zach Vaughan. Thank you. Zach, you may begin.

Zach Vaughan

Thank you, operator, and good morning, everyone. us Conference Street Call. joining Quarter Corporation's for Earnings XXXX you for Capital Main Second Thank

the press Chief Street Jesse second Information Joining and and document Managing Dwayne an Chief portion Officer; beginning website Private and call of Investor Hyzak, Street's remain today will how Operating of details Head company's Chief operating today's Officer; on quarter results. issued August me with that access the call to available for company's is Investment release is Credit Relations included Executive of hour available David prepared Officer. Also the financial until This yesterday replay after the @mainstcapital.com. and of Magdol, Main the be Officer call was the Chief A the replay afternoon available Director Financial Morris, comments completion a in release. participating are Investment Group. Main XX. on and will and Q&A the President Meserve, section yesterday's Nick of

by similar call identified longer should, of may be materially be company's Main will, forward-looking contain will statements. a at anticipates, expressions. filings as uncertainties management's on reading. Today's X, any use and replay you information call also advised of the page. Please any statements the statements based believes, is These Many in through as such transcript live note with broadcasted the company's can conference this can differ information as can results no are obligation and to, may performance. on time-sensitive these intends, or or or on accurate update at may Exchange Internet no Commission, of unless this XXXX, and that guarantees set and reported We of Actual result the assumes therefore, being the which be estimates, or only home listening found expects, of forward-looking as August call speaks accessed that the not of but be no from by that these advise today, words time the of this sec.gov. you're including, projections in and Street statements factors these required other website assumptions and on factors law. future Securities the of of call, forth expressed implied are results there to limited company's statements date risks, the the

compensation the was portfolio Dwayne defines Street's call per will Main in to ROE. that as performance sources as Please or verified. And average refer from yesterday's on noncash the will call, that discussed share of to assets distributable income and divided the related now, reconciliation Street's and disclosures for operations or has measures, noncash expenses excluding information measures derived for Management total be appropriate ROE discuss amount in on return net total and assets NII, over increase accordance impact NAV related been the call, a call are During including I'll net useful a to GAAP is indicators financial note to as NAV, net analyzing or the basis. companies, comparable to impact performance information by minus discussing Street press quarterly most these did also share Main management Hyzak. value, of since Main principles not cash with CEO, key DNII presenting the result non-GAAP generally Main supplemental or and investment as U.S. investment not financial financial directly today's this is determined measures. Two additional third-party asset including upon the net settlement. DNII. release from equity, on net GAAP, believes assets. Please immediately resulting this reported per that total certain compensation defined net turn expenses. are on or liabilities non-GAAP Street accounting in DNII management and income, accepted

Dwayne Hyzak

several thank our call, investment activities, Thanks, dividend updates. us. forward, for our today's other expectations participation also your morning, activities call, We and hope performance Zach. pipeline while dividends joining usual in and provide going declarations, On updates on our the current everyone's we my this on and our you I regarding well. will appreciate updates providing everyone, for Good doing management that quarter, asset recent investment our and noteworthy morning's

our strategy, take Jesse your provide the capital XXXX comments results, will quarter be questions. structure financial portfolio, third our Following additional leverage we'll to and for of investment after my and investment happy David which, regarding comments, expectations

the the management results, quality these our We demonstrate on by eighth strength were are the record share platform, for the return companies. with of continued highlighted second continue quarter. our an diversified the portfolio for NAV quarter results of and new differentiated and paid to of shareholders share pleased contributions unique XX.X%, DNII of our business to equity per consecutive per strength sustainable overall our that believe to which dividends annualized our underlying strong asset We strategies, a benefits that continued and our of investment and exceed

in and future. shareholders generated expect asset structure, in will lower results quarter future. both the deliver of private investment the in diversified ended attractive strategies our encouraged We the our loan significant for in middle and which management private to the are continued be we with We and superior performance our investment business will of remain loan the both pipelines strategies, favorable remain lower us investment continue also by these to operating allow market beneficial and cost-efficient and that benefits investment pleased confident strategies, portfolios with our that market growth middle our together we

second year liquidity market economic we and benefits to in conservative debt Board strategies. These opportunities continued support for lender later. our recent June, and in I'll discuss is current our and in our which investment-grade the lower second environment, quarter, investment maintain of Additionally, middle we about the excited of dividend of as facility relationships, leverage by the strong quarter, our the of both our the outlook to recommendations expansion favorable a Directors extension for loan remain detail the long-term corporate continue our third evidenced in with of profile, we which our announcements, and believe offering positive results our most the resulted private important in current with combined and more in our recent

share companies accretive of increased more market debt in of will per high-performing in in fair of also were the middle lower of majority by our the our value million dividend issuances, impact we increases middle due the another fair these $XX portfolio to follow-on which the of favorable each lower funded acquisitions portfolio by net in strong quarter incremental portfolio. investments excited Jesse of We're companies, middle investments strategic of in follow-on equity NAV investments The companies. contributions net made of over investments Our in continued of equity investment for market a in the Street quarter resulted the total detail. income discuss and the and lower finance two market portfolio impact primarily our performance which to value appreciation by Main our of portfolio significant debt

from equity companies quarters, in appreciation portfolio income these buyers in that debt addition lead additional related fair highly portfolio our while investments future our in quality middle that middle strategic of drive exit were the portfolio in future combined retaining to could several equity and value will the we attractive second next the of of by these which continue investments. In from upon also pleased the lower in of combination. We're an to combination We potential to exit meaningful strength investments these recognized follow-on in excited one partial our our we debt the a upside investment in the market highlights we company in a incremental acquirer, realizations expect of the companies. and over provided strategic portfolio have favorable increased with few full companies our of believe quarters to lower see which help that companies resulted the realized company, the gain a investment and interest interest quarter, the

activity We quarter. investments of second million, in repayments $XX very our activity market middle pleased net resulting activity. investments lower middle other our total in the investments of in in totaling increase This market are with including new $XX investment after a and investment million, $XXX million lower

million, quarter new million. of net included private loan of investment $XXX after other in investments in a Our activity repayments investment $XXX loan investments resulted our increase and which in the private activities

few We for investors managed about external investment growing the unique favorable next to increase the internally the of continue our positive our to we to strategic consecutive funds asset ] contributions realized second We base Street our remain about quarters. income of a business very fund. management initiatives, asset returns of through and experience to this and for capital the plans of we business. our we strategies and continued management strategy quarter, our we to performance quarter, investment resulting for and liquidity performance we are funds contribution our our providing fees, manage also management positioned conservative fee income. the future [ over management Given results position, business actively The portfolio the about significant remain the our Main continued in remain excited structure together stakeholders. significant our optimistic External our structure the and growth optimistic funds are We've are execute to as for incentive in asset and our seventh our recurring produce we in working to our investment strong other Investment with Manager within well each the that the attractive benefit

Manager, each listing including in MSC Income certain growth excited of Fund, Income strategies a As management upon a ] The MSC of our supplemental few Fund business. Based agreement a shares very by investment the exchange. fund go our these the is investment ] solely management business per investment BDC, non-listed with Income to shareholders investment week, these a Fund, transition supplemental in combined Board a [ fund advised the loan listed to its a favorable a to a upon benefits result be efforts, future future representing eighth amendment proxy September, both statement since details about significant represent both MSC Fund, MSC preliminary effective our fund potential the proposals XXXX. securities and contain earlier to significant the Income and changes adviser would quarter the quarter, External fourth external dividend our to Investment the the increases our at the the the intended private asset for asset advisory on of with of and second the [ this our that consecutive also shares. We're statement declared which payable between of results primary national a the dividend our on changes strategy ago, outlook fund, strategy of our preliminary and and filed believe opportunity weeks catalysts our potential for at and which monthly position we of of to regular proxy to dividends $X.XX focused that become business, funds quarterly activities and to share XXth continued for additional

of per share monthly supplemental for DNII in significantly total quarter and of our future $X.XXX declared currently fourth a yield XXXX dividends an November performance continues payable fourth monthly upon and that expectations supplemental in paid October, also the Based December, quarters the dividend dividend anticipate period of Board positive extent proposing maintain increase dividends regular regular Board monthly to our second regular total dividends in additional current quarter in dividends in Our a each supplemental representing to dividends paid in the The NAV. a the a our of paid of stable paid in dividends is X% December monthly excess XXXX. performance to the period of X%. We exceeds during strong per in recommend the quarter and September shareholders future our share the result our XX-month of representing of regular an expect $X for payable $X.XXX the in will we're continued trailing dividends share, XX-month shareholders declare the XX% result to be for to we supplemental additional for quarter, third XXXX. our favorable trailing to total currently over per providing and over our to of

pipeline. Now turning to investment our

owners that believe represent we and long-term investment in can middle an our next their holding periods of middle investment companies market solution market average. As middle lower for management solutions as We to teams the lower to of the permanent many today, are well we to new above unique and and and market our lower that the differentiated confident I'd financing pipeline activity and expectations characterize over provide attractive lower strong companies few market middle needs months. our flexible

our as functions update improve to to investment the match activities our teams, last private of our asset growth performance private they and to average. My We for loan and also continue loan investment characterize treasury pleased significant I'd that very with of expand credit private And to relates and our pipeline accounting the and portfolio and best-in-class have management business. growth business. of asset as our the investment management finance, our be our and portfolio performance team provided today,

activities, in in Main position. a these announced CFO we part changes and areas, several change As of promotions including Street yesterday, these

excited thank while our also managing few of want specific are they as conjunction market future. what investment Operating mean the to as executive serving and management for our significant over years changes last Chief with our and and portfolio. Board for these Directors, company In in his Jesse team and middle of personally, individuals We our CFO, and the about on Officer lower these behalf I for changes, a contributions these

and very he the his to CFO. With solely we investment over focus to operations to our firm, significant that, the excited significant activities on We appreciate continue few this our turn are contributions have value we as back to know our David. add last over where that will I will years and call

David Magdol

and Thanks, Dwayne, good morning, everyone.

strong believe to financial results Dwayne quarter operating Street's the differentiated approach investment our As of unique strength highlighted our continue model. our remarks, we and his platform, in second Main demonstrate

portfolio of second be quarter to overall our most operating are contributed report continue the companies financial We which pleased performance to positive, for results. attractive our to

quarters softness continued portfolio companies some consumer been investments. specific with several we experience did we actively which discretionary are maximize and or recoveries those have we However, products focused in to our for certain services, working on monitoring

of and portion in middle the driver portfolio of investing be the our the and As our in primary and investment our we've the on lower middle strategy been underserved success to lower market discussed past, our both equity debt of continues long-term specifically, the largest companies. focus has and in market

remains investing Dwayne the focus our our to on quarter, unchanged, the market we current differentiated view investment in aspects the will attractiveness middle highlight Our in we middle our that and this as And we market approach. relative to pipeline. Each expect of lower are excited continue be investment about of and noted, of primary try key future. lower strategy area

of For is loan portfolio largest today's some call, primary time going private part our I'm discussing which investment is driver to the our of strategy, the management investment our business. spend second asset and

Main manage on several Investment We External third-party both that funds years, for we client balance private through over loan Manager. our the significantly strategy have Street's and last the the grown sheet

our are debt private equity businesses. cultivate strategic private of firms intermediaries. a loan their in the group represents investment These originated capital and internal of select with equity by sponsored private market secured primarily As relationships maintain strategy through our reminder, professionals investments a investments they and principally senior

and profiles favorable first Our attractive lien with terms. typically investments private yield are loan debt investments

announced first de-emphasizing ago, private average As middle had loans private of of decision resources an rate strategy growing dedicate of years rates, debt our towards XX% strategic loan floating we weighted investments market our while which attractive quarter to XX.X%. Over strategy. yield end, lien loan were our XX% our secured X had interest significant and

approach We management allows our accessing Main were driven our capital investing smaller was manage our manage we to those on our we the that by loans companies were believe shift invested whereby lead majority Street syndicated on existed asset loan intention diligence, vast focus maximize directly able the significant opportunity returns in traditional business. this investments, this private to post-investment make documentation of typically process. the in loan in and investment the We the the due to portfolios and the desire us co-lead than Our market. believe private net for to loan or

funds products end market niche believe credit and competitive smaller in on for competition increased private over the allows market While we our focus thus returns earn few the we years, of and has Street's is us to overall risk-adjusted the last attractive the the investors for Main manage. more the investors

our XX%. private in increased those our benefits from fair ways grow management our overall through investment of value from purposeful our Street loan clients private the portfolio clients. to same while, to loan year, and we platform to investment of strategy providing Main private and pursue External XXXX third-party time our the returns at benefit overall the investment our strategy received this of growth as asset also year-end effectively the business. Through the continued future. intentional capabilities management highly future pipeline, our to Manager, repositioning in credit attractive the allows We private our Investment on look market loan of and Street fee-based time, total strength benefited Main we platform Main to from attractive utilize XX% quarter opportunities third-party business the our our loan our our of asset platform to for forward grow and to our investment additional at professionals' income leverage from we Street team, time loan second private from portfolio of the the platform our value Based of private the total of and During fair has relationships ability and our the

composition portfolio. results turning our to investment Now operating the from and overall

numerous in highly with XX, June and end continue markets. a investments companies, spanning maintain diversified portfolio XXX of across we industries As to

fair Investment quarter excluding at External represented portfolio X.X% less portfolio our of Majority X.X% assets. only X% our and and total Manager, our our total largest than our investment income end. XX-month income for of of portfolio of the trailing company, our Our investment period represented investments value

in portfolio middle in the return portfolio realized investments completed losses, invested -- our loan lower and quarter private total We capital of $XXX after loan middle activity increase resulted net in private a $XX increase investments, Our total in private in portfolio lower million. repayments of which a resulted aggregate included million. market net of of investment $XXX of after our investments, which equity in second market aggregate debt on in million debt million, our investments repayments $XXX

quarter, had cost XX at portfolio, value. portfolio results investments middle fair to on representing investments goals. and XX value billion the total our of during this Finally, the of high had $XX portfolio, a of we market million $XXX long-term investment in strategy, market companies continue deliver cost resulting related the loan in and included above companies, at value, Street's remaining million to end our fair we XX X% lower portfolio basis. In total a portfolio middle continues of our of decrease in middle is in investment portfolio in had representing middle perform over at market $X.X market investment XXX% Main summary, our end the a net companies, in was XX% value of than quarter, investment our private representing of billion portfolio. At We first value. quarter basis. In the deemphasize our of less as portfolio investments our $X.X The fair fair over we which fair of level

yesterday. With results, Jesse our I on we that, cover portfolio position. over structure press are call the details to liquidity at financial included and the capital release turn that our in will issued to Additional end quarter investment

Jesse Morris

with operating quarter. comments, David. To you, our echo Dwayne's the David's pleased and results we for are second Thank

quarter $XXX.X quarter Our second total $X.X the million, and $X.X million the of investment second from for XXXX of quarter X.X% income by or increasing by XXXX. X.X% or was first the over million

activity our increased David was strong the last quarter. by unique by or the the second the on compared companies, the a management business, resulting continued with benefited net of by an by by which, our in and impact to loan year asset Dwayne on, underlying the drove touched private the by first strong was market nonrecurring to investment million impact performance nonaccrual. Dividend the differentiated across increased partially first benchmark management business, XX.X% first with levels X.X% Our year the the $X.X and of $X.X ago income when between level net lower our $X.X strength and continued the from by from the in during ago investments million activity management this together $X.X on second first prior investments from results million and our a of over unusual million unusual quarter. middle primarily quarter, strength the majority asset and year our and as the quarters. The investment of increase investment increase the The When and demonstrates market XXXX impact in and in income lower the decreased increase a investment over increased increased asset strategies. Interest quarter nonaccrual. year driven of million by increases decrease for or income middle of benefits a dividends an dividends index of nonrecurring a of from included quarter. Fee the offset investment the dividend the increased and of in level compared portfolios second strong offset portfolio income in or $X.X comparable first $X.X million after increased of increase comparable to including quarter quarter, ago or rates, income, quarter, year from

aggregate first amount the comparable decreased levels prior and fees considered these from million the the second The year quarter this to of were $X.X by first The quarter elevated quarter and for year. of items refinancing prepayment included nonrecurring.

equity related [ as debt are from second less other investments, income certain quarter, investments, accelerated and impact million the prepayment, the consistent the For ] than these totaled and average considered lower repricing of quarter. In to items our the activity dividends first the nonrecurring with in our odd quarters including than million prior mentioned lower consistent were aggregate, $X.X the prior the earlier, and of I year million. X nature, $X.X $X.X

operating and excluding Our percentage compensation on driven expense, as expenses, our The administrative-related total operating expense, share-based interest of annualized a be continues and assets our industry. lowest million in the quarter a expenses. by increases interest ago, increased average by for basis ratio was expense an our from the year expenses $X largely in general total amongst X.X% and to of

million Investment during million contributed $X.X quarter. an Our incentive $X.X $X.X during External from the with the year million by management the ended quarter, Manager million positive to Manager $X.X from second management. first and prior from from The $X.X primarily assets the the as of a result quarter our under increasing of the the of total the million net a and assets of performance under quarter, earned year million The billion. $X.X income ago quarter, $X.X in investment fees first increase manager

fair the value in The market portfolio was the appreciation middle we lower by Manager, net compared quarter, partially investments. loan performance appreciation, by other lower in portfolio middle our portfolio companies. of business, by fair was of appreciation our External driven a generated value first net an appreciation its decrease External in of fair to as our a million. fair a portfolio, multiples our management value appreciation the specific the of ended by by portfolio The our by net value fair recorded fair in in of at in net value realized appreciation market and positive second the in of cost. of impact portfolio result of value portfolio performance appreciation which net certain middle of Investment a value Manager We portfolio. The company we approximately value spreads. X.X% was approximately portfolio, offset the the was net was portfolio the External value asset with investment investment of partially our quarter fair total our loan company positive the certain purposes. at depreciation the our of recorded exit market and increase underperformance, performance net continued by the and on comprising portfolio We by Investment X.X% private traded in offset portfolio investments driven largely market our Manager, fair the During value strong private fair of net driven of net value driven The The Investment in unrealized one in by benchmark decreases gains continued middle appreciation our driven end in $XX.X of on offset net valuation fair other nonaccrual, peers, favorable impact partially evaluation our including our portfolio publicly quarter. the at the fees market the use

share markets. NAV, second record to share and quarter first ago As a end $X.XX $X.XX significant exposure quarter. over with the year on of when the David or value, indicated, increased a to per compared X.X% underperforming relate to the end asset largely consumer to new of Net at investments nonaccrual quarter for $XX.XX per second companies or the the by NAV

calculated ratios by leverage to and X.XXx, than X.Xx asset net ] X.X debentures coverage ratio our divided respectively. long-term total $X.XX X.X [ our was our regulatory more debt, value of target continue debt-to-equity conservative X.XXx, was as asset to range slightly excluding SBIC regular to Our and and be these

In May million aided X.X%. we quarter to We issued maturity. our on million at rate $XXX be notes continue coupon the June, activities by repaid in we active unsecured In on capital relationships. due June strong a of notes at maturing May, of $XXX XXXX our this with XXXX

in SBIC lenders program, commitments. or diversified ATM corporate to facility billion quarter. After during credit in and under to million with $X.X also of our funds billion including strong giving credit by $XX.X and and a year, at-the-market, continue XXXX also raising to capital and our to this June We increasing were activities one net We effect the for maintain of our maturity the of extended the cash in and million June, investment commitments facilities liquidity, amended proceeds of first the of the billion. active $X.XXX $XXX XX $X we group availability quarter our approximately of second

believe strong leverage, our for to to our and continue well continued and We investment strengths attractive our us strategy. to proven significant to capital, the have continue allowing execute that have positioned future, access liquidity conservative us us to benefit historically

our to course we current and of level As expect a results. we targets. Coming fund long-term investment quarter, would currently to line expect of liquidity, this our our continue in be with XXXX the more year operating greater debt proportion new back leverage stated we last in to of discussed to such, with through financing, the as during activity to increase net

a result the was quarter of on second of record share on first share, basis and first last share first investment per for $X.XX year. of the an share the than ago respectively. our and in per nature $X.XX the combined share the the over certain paid of basis, quarter for than supplemental for the last DNII a period same was line share were an average DNII. Total XX.X% DNII a our of was the the during in lower than paid for same quarter. The X.X% the of per the per of nonrecurring strong most year declines months -- per year XX.X% As dividends income in prior than per X X.X% the $X.XX for $X.XX impact or a $X.XX quarter share the considered and increase consistent per including $X.XX dividends with less lower second year in or accounting share X annualized quarters, lower was the our quarter of $X.XX share, for DNII total dividend quarter, lower per the equity the and second on XX% quarter, performance return and quarter

the Given the outlook operating per strength and share September rest our a dividend of year, results $X.XX of approved the supplemental Board for in payable of our the XXXX.

the third dividends year. paid dividends of were per total the dividend, supplemental third a quarter the total representing share, X.X% -- quarter With $X.XXX over are XXXX last of for in declared the increase

XXXX. of per dividends recurring for share approved also of of total fourth the for Board per Our quarter monthly share a $X.XXX $X.XXX

back the underlying third of in expect least per for portfolio, given DNII the of with level the share during upside we quarter quarter. With that, actual so now at our I line the and take potential with questions. activities of call over income any driven strength strong quarter the and the another turn operator $X.XX investment earnings dividend portfolio forward, can expected the we Looking by to top will

Operator

[Operator Robert with Dodd Instructions] Raymond the of comes question Our first line from James.

Robert Dodd

positive. quarter. on lower -- recall time well pipeline. last Congratulations mean to the the That the as about sounds you I'm market trying middle average. above I quite clarifying question I characterized

incremental middle give you is? ] can like on market tour the stronger. [ what that lower Because seems that pipeline us So getting any keeps

the is anything of incremental unique. there to coming kind that? mean, characteristics really So the owners is that's Obviously, of driving But I any table? in every clean deal activity business

Dwayne Hyzak

don't table. Thanks know for the question. I the to driving point anything that's if come have owners specific I to

that intermediaries is proposing eventually I teams at lot here then unique Main to And the we job owners. a of think Street I there. success internally the doing of having with our a think business and we think to we're deal what are better

market that middle to trying guidance you are lower is very, very pipeline the strong. We

We quarter. expect originations have good to this

may feel it about which of moving into why really the pipeline, the guidance. good Some we gave but the is we fourth quarter, end up

have documentation. As we you've get and in us say diligence the heard legal through past, always to due

next additional things next his But to the change. have the change. pipeline, economy feel also now, couple we market about can any on originations can couple lower The really let and he middle quarters. I'll comments over we of good robust add might that months, right side. really, expect have of always David So

David Magdol

whereas our that's it's interest I'd is I not rate ago the just we like up, and some to as with is we of volume year had to The other make of unclear, quite a well were their our network. incoming having that think only hit it. observation a like. market, hitting deal time interest referral outlook We're think and and intermediaries ago rising visibility rates there in good were a kind having year it's on quite a more pause as a to and advise led resonating Dwayne go clients, part result

Robert Dodd

Got it. Got it.

lots a than it private of better is of deals, on seeing maybe the mean number loan is seeing because of about that that average strike average funds, I just -- deals you're side, are or et ask, pricing from price you're cetera, I a like is mean compression, people seen the number On of deals and number BDCs average talk the but the rejecting I've who that too tight.

pricing pipeline that rather in something So comes consideration than loan? any on in is later private that's characteristics? impact having is that the Or

Dwayne Hyzak

Yes.

few give the have the to on on Nick on I'll our clear well average. for Robert, middle above We was a... I'll loan you and But guidance, private he any commentary Meserve additional guidance has side. average side. The his market was comments, did be let add So a lower just

Robert Dodd

I middle the well private average. is didn't Is average? meant. market, if because I fact only or which Sorry, loan was the that the above that. mean characterize pricing that lower what I inflow that's of Sorry, versus

Dwayne Hyzak

make we question No okay. kind -- sure That's I problem. to just right. the want we're of got

press you our us our quarter see you'll very the as loan for XX-Q, quarter the you'll in private As a very, see, on release, saw side. robust was in second

we diligence, lot documentation, pipeline, a cetera, more back both the the of working end, legal but on a through front end on getting et the So process had and the importantly, closing. to success of

think see that other So so broader doing the you standpoint, that side, think than I you think in but see market the a I middle typically think we the And August, People seasonal the today market, broader are do lower we other seasonality. vacation. things part market, of as robust. I see on a don't that pipeline focusing on on transactions. is reason averaged the quarter just September. much recent is some They're of from was this slowdown the that

the than the We make view we smaller These market, participate other just which you part world. kind of the are sure or it's of part of heard what part continue of our BDCs you've private to different credit the clarified, a the most to say in in. the again, see us market as past, private equity world

to see thinks is let a give standpoint opportunities, what leverage that helpful. I'll standpoint, Nick We But risk standpoint. pricing very attractive color are from comments he an any additional both continue think we or and underwriting

Nicholas Meserve

that pretty think much I it. covers

Part I obviously think could third at quarter is -- through XQ. large for right the transactions closed have good. overall, us. for of QX. for portfolio the moved That But that big that quarter the feels XQ one some in was end a pulling quarter of the

little Dwayne spread not condensed like much in. not think on necessarily above it's a that said, whether bit, in average. Spreads as or on question it's average smaller have market a play I the a the we

Robert Dodd

about while. about, concern you where some any Got And one seen while. credit economy more I've not are consumer-facing of obviously, headwinds a for consumer side the it. maybe if then there a segments there talked are talking on any new mean, you've direct? I I the or it signs can. that Dave, emerging of Are portfolio been

Dwayne Hyzak

We've reason. concerns think investment from I consumer but your talking new to of not for Robert, been we've very than been risk a about area Yes, for that. off a quarters, couple standpoint that for point, while, risk in specific or a just a longer

but the seeing broader think for just our it you're not portfolio, U.S. wrong across been a I think in economy. have think I while, I we but

headwinds had overall quarter in where feedback some those that nonaccruals. an just in to same that that had for trying look an the you that have a we it of and of last and rest quarters. When hopefully, -- of from companies challenges increase got seeing standpoint, internally, parts shouldn't because couple you portfolio, others, at doing good by of we large, broader surprise the is feel But the been well. to The communicate and You're the economy, point we've it. about been already for this the everywhere these with industry the

income middle the You lower dividend in market. our see that from

fair You value that the changes. in see

So it. about we good feel

to continue of segment. portfolio an company-specific of broad-based is economic probably if more more something consumer it struggling, an We issue a that is outside or company than a portfolio say, it's industry from standpoint

Operator

Our Securities. Bryce the next question of B. from Riley line comes with Rowe

Bryce Rowe

I you Maybe Dwayne, average a follow-ups I've terms of of been you guys know certainly lower new, a middle questioning of have, don't pipeline, but agree. it's the mix kind the there. new? you couple long above I it if Can talk versus time. in terms versus maybe Robert's that of about pipeline market well incumbent-type describe relationships to add-ons before, as in so heard within

Dwayne Hyzak

Yes, Bryce.

what add-ons very our high-performing two of companies of are companies. from think very, the some nice quarter, standpoint really second we strategic reiterate to existing just an acquisitions for we investment So two did finance into help attractive portfolio have portfolio to

platforms, basis, it the about pricing, else a news of it's consistent take would today. new which be stages, much earlier look at not X more we being look new might pipeline we're it's are as when platforms. potential weighted the done valuation, mix consistently really into pipeline forward would kind I pipeline, debt perspective in these you is X guidance consideration, say towards excited that is everything as is so There of As transaction, to current counting the we've today. is you long-term guidance with favorable that the pipeline or on that The platforms. gets more all in This add-ons our equity, from what type of us leverage good what but

Bryce Rowe

more sense if maybe Just one And curious consistent on of maybe private you've kind attachment in are Any for loan then leverage what the That's loans? within points Okay. helpful. activity. it's where with the done past. private

Dwayne Hyzak

hasn't been changed Bryce, we've really last the Yes. where it years. from few in

that of kind usually Xx. still X.Xx in X.Xx X.Xx that range, So to to

Bryce Rowe

Okay. Good deal.

are nonaccrual some maybe the Private loan market? general maybe what coming creating for just nonaccrual some time. they look not of to investment bucket see, middle certainly Let's surprise Consumer you are guys talk discretionary, on have it about and inflows? talked Just nonaccruals, market? in the certainly portion portfolio quite lower from newer inflows, of we hear you the the at weakness. If a middle some about

Dwayne Hyzak

These on market mostly are the side. lower middle

Bryce Rowe

Okay.

quarter. the a or middle again of we In deemphasis approach quarter? the in activity the second lot proactive second approach market, more of of kind of clearly, Is here that a the a reactive just refinance given saw terms in

Dwayne Hyzak

deemphasizing we've I'd for you area being an while. market about middle been that Yes. heard the talk a Bryce, say, us

at going to portfolio I than less be either we're when a individual that lumpy. XX opportunity. of or down come is it's to think or just The forget portfolio going to refinancing companies. change, movement if down I it's look date XX you names. quarter-to-quarter really And maturity to XX

second assets happened going kind we'll happy repayments private quarter-to-quarter the we should and based shrink upon in welcome lower just of were which those continued strategies. move be to those with think capital I middle current and continue opportunities but that we environment conducive do loan the portfolio the or or as be I market to think to quarter, lumpy going constructive on. what it's what's into

Bryce Rowe

Okay.

Okay. private -- take for me. Dwayne, of strategy. go Income Fund the talk public about the of why And loan loan kind straight one a Can as part maybe to the of of then lose that? to possible lower about talked you piece you MSC last the simply just middle and private market converting

Dwayne Hyzak

Sure, Bryce.

for a been working the to with to As MSC you've long-term was heard determine answer the Fund say we've collectively the past, right us what try in fund. we for Board the Income while thought

think forward providing both of really from a not I years, we X of to base we also our think come way kind at think strategy, Street. XX long-term X, really returns and for going structure, shareholders incentive deliver a X Income and Income our really, again, Fund. And you same will, that outcome. the a really are up with a to the both When was, a we what will from with good Main for what best-in-class really, or at opportunity the long for produce shareholders the is ability but Street, MSC good of but time, what our Main management we fee structure for Income look outcome attractive fee is when Fund, in MSC attractive plus, shareholders the outcome real term, a say something MSC we've really So of Fund for think years fee loan perspective, best that private an be that couple attractive

to to that a going outcome. than that's BDCs, positive what just be right see Nick fee We be different it and the to very with given different going from areas think be something we answer. credit team you focus be traded the So class and think will I able Sammy that publicly structure, that's it's think our on private asset to best-in-class other deliver

Operator

Instructions] next question [Operator with from Securities. Truist Our the line comes Mark Hughes of

Mark Hughes

flow-through will be fee What going impact fees saying of the be some may Is impact, kind what of reduced the that external near-term presumably there have or the maybe that listing expenses you're I income? term? long will of be increased the to in any adviser it on volatility, term. very the profitable hear some the short in

Dwayne Hyzak

Mark. Sure,

between we're long color and we're MSC Main So Obviously give here try we management what in fee at proposing a the grow in do we Income a fees, of Fund, to some what decrease just in to if a the at the and there. an to from we're are so doing assets. bit Street position base position little impact be X.XX% X.X%, there'll term to

You the you should If goes good direction. the really to the of get also continue fee. incentive have that performance, we other catalyst a benefit have

should of just road the day we cetera, can we it's fund positives and the answer markets, long think subsequent think assets debt the a and think the growth year the with we fee down from X.X%. that capital outcome with listing access going out what for be X little there's capital, X.XX% But come the growth. of and a at drag, growth et of bit of a several term right the the the the potentially the when of it's change, think look to So we minimal you

Mark Hughes

exposure there? have a economy, is addressed a rebound And this. the it the this consumer, company broader see you but you would to of related just if better markdowns sorry on the there's to I'm rebound specific? if the minutes And investment you -- then couple the Or might and of addressed a footing, ago, gets marks

Dwayne Hyzak

question. good a it's Mark, No, Yes.

the industry for have that's faced quarters. I think mean, it's some communicating these from both. Clearly, what headwinds we've companies been standpoint. I an of last couple

challenges that at them they've of a several least companies has or been working through, do. positive. have issues But not these company-specific also that So been

combination their not management path of specific to it's out look a those going quarter. while we will going you fair will think I of figure the value what it of expect those the to value with teams portfolio improvement long-term So fair recovery forward, rebound right marks And the When a This and or is. names. before at a a you should significant that's value And that for to on working next marks us companies the play to significantly see a take two. just out. be long-term while fair path take

Operator

would for concludes comments. now the question-and-answer this over closing And turn our to floor back management session. to I like

Dwayne Hyzak

we Just look to want third you. earnings to to for joining say talking release in after morning, again our and November. thank Thank quarter you everyone, forward early us you, again, this

Operator

and gentlemen, you teleconference. Ladies does thank today's conclude your for participation. This

disconnect may You a have and lines your wonderful day.

Main Street Capital (MAIN) 9 Aug 242024 Q2 Earnings call transcript