MAIN STREET ANNOUNCES THIRD QUARTER 2024 RESULTS
Third Quarter 2024 Net Investment Income of $1.00 Per Share
Third Quarter 2024 Distributable Net Investment Income(1) of $1.06 Per Share
Net Asset Value of $30.57 Per Share
HOUSTON, Nov. 7, 2024 /PRNewswire/ -- Main Street Capital Corporation (NYSE:MAIN) ("Main Street") is pleased to announce its financial results for the third quarter ended September 30, 2024. Unless otherwise noted or the context otherwise indicates, the terms "we," "us," "our" and the "Company" refer to Main Street and its consolidated subsidiaries.
Third Quarter 2024 Highlights
Net investment income of $87.6 million (or $1.00 per share)
Distributable net investment income(1) of $93.0 million (or $1.06 per share)
Total investment income of $136.8 million
An industry leading position in cost efficiency, with a ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of 1.3% on an annualized basis for the quarter and for the trailing twelve-month ("TTM") period ended September 30, 2024
Net increase in net assets resulting from operations of $124.0 million (or $1.42 per share)
Return on equity(2) of 18.8% on an annualized basis for the quarter and 18.7% for the TTM period ended September 30, 2024
Net asset value of $30.57 per share as of September 30, 2024, representing an increase of $0.77 per share, or 2.6%, compared to $29.80 per share as of June 30, 2024, and $1.37 per share, or 4.7%, compared to $29.20 per share as of December 31, 2023
Declared regular monthly dividends totaling $0.735 per share for the fourth quarter of 2024, or $0.245 per share for each of October, November and December 2024, representing a 4.3% increase from the regular monthly dividends paid in the fourth quarter of 2023
Declared and paid a supplemental dividend of $0.30 per share, resulting in total dividends paid in the third quarter of 2024 of $1.035 per share and representing a 7.3% increase from the total dividends paid in the third quarter of 2023
Completed $51.6 million in total lower middle market ("LMM") portfolio investments, including an investment of $11.2 million in a new LMM portfolio company, which after aggregate repayments of debt principal from several LMM portfolio investments and return of invested equity capital from a LMM portfolio investment resulted in a net increase of $2.0 million in the total cost basis of the LMM investment portfolio
Completed $309.3 million in total private loan portfolio investments, which after aggregate repayments and sales of several private loan portfolio debt investments and return of invested capital from a private loan portfolio equity investment resulted in a net increase of $162.7 million in the total cost basis of the private loan investment portfolio
Net decrease of $4.3 million in the total cost basis of the middle market investment portfolio
Further diversified our capital structure by issuing an additional $100.0 million of our June 2027 Notes that bear interest at a rate of 6.50% per year (the "June 2027 Notes") at a premium to par of approximately 102.1%, resulting in a yield-to-maturity of approximately 5.62%
Enhanced our liquidity position by amending our special purpose vehicle revolving credit facility (the "SPV Facility") to increase the total commitments to $600.0 million, extend the final maturity date to September 2029 and decrease the interest rate
Issued $63.8 million of additional Small Business Investment Company ("SBIC") debentures, increasing the total outstanding SBIC debentures to the regulatory maximum amount of $350.0 million as of September 30, 2024
In commenting on the Company's operating results for the third quarter of 2024, Dwayne L. Hyzak, Main Street's Chief Executive Officer, stated, "We are pleased with our performance in the third quarter, which resulted in another quarter of strong operating results highlighted by a return on equity of 18.8%, distributable net investment income per share that continued to exceed the dividends paid to our shareholders and a new record for net asset value per share for the ninth consecutive quarter. We believe that these continued strong results demonstrate the sustainable strength of our overall platform, the benefits of our differentiated and diversified investment strategies, the unique contributions of our asset management business and the continued underlying strength and quality of our portfolio companies."
Mr. Hyzak continued, "The total dividends paid to our shareholders in the third quarter of 2024 increased by over 7% when compared to the third quarter of 2023, continuing our trend of increasing the dividends paid to our shareholders over the past few years. Our distributable net investment income per share in the third quarter exceeded the dividends paid to our shareholders, with our distributable net investment income exceeding the monthly dividends paid to our shareholders by 44% and the total dividends paid to our shareholders by 2%. In addition, our strong third quarter results and favorable outlook for the fourth quarter resulted in the declaration of a $0.30 per share supplemental dividend to be paid in December 2024, representing our thirteenth consecutive quarterly supplemental dividend, to go with the eight increases to our regular monthly dividends since the fourth quarter of 2021. We are also pleased that we further improved our strong capital structure and liquidity position during the quarter and continue to maintain very strong liquidity and a conservative leverage profile, which we believe is important in the current economic environment. We ended the quarter with attractive investment pipelines in both our lower middle market and private loan investment strategies, and we remain excited about the current opportunities in our lower middle market and private loan investment strategies and in our asset management business, each of which have us well positioned for the future."
Third Quarter 2024 Operating Results
The following table provides a summary of our operating results for the third quarter of 2024:
Three Months Ended September 30,
2024
2023
Change ($)
Change (%)
Interest income
$ 110,551
$ 99,381
$ 11,170
11 %
Dividend income
23,239
21,192
2,047
10 %
Fee income
3,034
2,664
370
14 %
Total investment income
$ 136,824
$ 123,237
$ 13,587
11 %
Net investment income
$ 87,596
$ 82,179
$ 5,417
7 %
Net investment income per share
$ 1.00
$ 0.99
$ 0.01
1 %
Distributable net investment income (1)
$ 92,973
$ 86,171
$ 6,802
8 %
Distributable net investment income per share (1)
$ 1.06
$ 1.04
$ 0.02
2 %
Net increase in net assets resulting from operations
$ 124,007
$ 103,261
$ 20,746
20 %
Net increase in net assets resulting from operations per share
$ 1.42
$ 1.25
$ 0.17
14 %
The $13.6 million increase in total investment income in the third quarter of 2024 from the comparable period of the prior year was principally attributable to (i) an $11.2 million increase in interest income, primarily due to higher average levels of income producing investment portfolio debt investments, partially offset by an increase in investments on non-accrual status and a decrease in interest rates on floating rate investment portfolio debt investments primarily resulting from decreases in benchmark index rates, (ii) a $2.0 million increase in dividend income, primarily due to increased dividend income from certain of our LMM portfolio companies and (iii) a $0.4 million increase in fee income. The $13.6 million increase in total investment income in the third quarter of 2024 includes the impact of a net increase of $1.6 million in certain income considered less consistent or non-recurring, primarily related to (i) a $1.7 million increase in such interest income from accelerated prepayment, repricing and other activity related to certain investment portfolio debt investments and (ii) a $0.3 million increase in such dividend income, partially offset by a $0.4 million decrease in such fee income when compared to the same period in 2023.
Total cash expenses(3) increased $6.8 million, or 18.3%, to $43.9 million in the third quarter of 2024 from $37.1 million for the same period in 2023. This increase in total cash expenses was principally attributable to a $7.1 million increase in interest expense, partially offset by a $0.6 million decrease in cash compensation expenses.(3) The increase in interest expense is primarily related to (i) an increased weighted-average interest rate on our debt obligations resulting from the issuance of the March 2029 Notes (as defined in the Liquidity and Capital Resources section below) and the June 2027 Notes and the repayment of the notes repaid at maturity in May 2024 and (ii) an increase in average borrowings outstanding used to fund a portion of the growth of our investment portfolio. The decrease in cash compensation expenses(3) is primarily related to decreased incentive compensation accruals, partially offset by (i) increased base compensation rates and (ii) increased headcount to support our growing investment portfolio and asset management activities.
Non-cash compensation expenses(3) increased $1.4 million in the third quarter of 2024 from the comparable period of the prior year, primarily driven by (i) a $0.7 million increase in share-based compensation and (ii) a $0.7 million increase in deferred compensation expense.
Our Operating Expenses to Assets Ratio (which includes non-cash compensation expenses(3)) was 1.3% for the third quarter of both 2024 and 2023, on an annualized basis.
The $5.4 million increase in net investment income and the $6.8 million increase in distributable net investment income(1) in the third quarter of 2024 from the comparable period of the prior year were both principally attributable to the increase in total investment income, partially offset by increased expenses, each as discussed above. Net investment income increased by $0.01 per share and distributable net investment income(1) increased by $0.02 per share for the third quarter of 2024 as compared to the third quarter of 2023, to $1.00 per share and $1.06 per share, respectively. These increases include the impact of a 5.5% increase in the weighted-average shares outstanding compared to the third quarter of 2023 primarily due to shares issued since the beginning of the comparable period of the prior year through our (i) at-the-market ("ATM") equity issuance program, (ii) dividend reinvestment plan and (iii) equity incentive plans. Net investment income and distributable net investment income(1) on a per share basis in the third quarter of 2024 included a net increase of $0.01 and $0.02 per share, respectively, resulting from an increase in investment income and an increase in non-cash deferred compensation expenses, in both cases considered less consistent or non-recurring in nature compared to the third quarter of 2023, as discussed above.
The $124.0 million net increase in net assets resulting from operations in the third quarter of 2024 represents a $20.7 million increase from the third quarter of 2023. This increase was primarily the result of (i) a $25.7 million increase in net realized gain from investments resulting from a net realized gain of $26.4 million in the third quarter of 2024 compared to a net realized gain of $0.7 million in the third quarter of 2023 and (ii) a $5.4 million increase in net investment income, partially offset by (i) a $5.3 million decrease in net unrealized appreciation from portfolio investments (including the impact of accounting reversals relating to realized gains/income (losses)) and (ii) a $5.1 million increase in income tax provision. The $26.4 million net realized gain from investments for the third quarter of 2024 was primarily the result of a $25.5 million net realized gain on the full exit of a private loan investment.
The following table provides a summary of the total net unrealized appreciation of $21.7 million for the third quarter of 2024:
Three Months Ended September 30, 2024
LMM(a)
Private Loan
Middle Market
Other
Total
(dollars in millions)
Accounting reversals of net unrealized appreciationrecognized in prior periods due to net realized gains / income recognized during the current period
$ (0.5)
$ (27.2)
$ -
$ (0.2)
$ (27.9)
Net unrealized appreciation (depreciation) relating toportfolio investments
25.7
(7.3)
(3.4)
34.6
(b)
49.6
Total net unrealized appreciation (depreciation) relatingto portfolio investments
$ 25.2
$ (34.5)
$ (3.4)
$ 34.4
$ 21.7
(a)
LMM includes unrealized appreciation on 39 LMM portfolio investments and unrealized depreciation on 20 LMM portfolio investments.
(b)
Includes (i) $31.8 million of unrealized appreciation related to the External Investment Manager, (ii) $2.3 million of net unrealized appreciation related to the other portfolio and (iii) $0.5 million of net unrealized appreciation related to the assets of the deferred compensation plan.
Liquidity and Capital Resources
As of September 30, 2024, we had aggregate liquidity of $1.334 billion, including (i) $84.4 million in cash and cash equivalents and (ii) $1.250 billion of aggregate unused capacity under our corporate revolving credit facility (our "Corporate Facility") and our SPV Facility (with our Corporate Facility and SPV Facility together, our "Credit Facilities"), which we maintain to support our investment and operating activities.
Several details regarding our capital structure as of September 30, 2024 are as follows:
Our Corporate Facility included $1.110 billion in total commitments from a diversified group of 19 participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to $1.665 billion.
$300.0 million in outstanding borrowings under our Corporate Facility, with an interest rate of 7.2% based on SOFR effective for the contractual reset date of October 1, 2024.
Our SPV Facility included $600.0 million in total commitments from a diversified group of six participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to $800.0 million.
$160.0 million in outstanding borrowings under our SPV Facility, with an interest rate of 7.6% based on SOFR effective for the contractual reset date of October 1, 2024.
$500.0 million of notes outstanding that bear interest at a rate of 3.00% per year (the "
