Fourth Quarter 2023 Net
Investment Income of $1.07 Per
Share
Fourth Quarter 2023
Distributable Net Investment
Income(1) of
$1.12 Per Share
Net Asset Value of $29.20 Per Share
HOUSTON, Feb. 22,
2024 /PRNewswire/ -- Main Street Capital Corporation
(NYSE: MAIN) ("Main Street") is pleased to announce its financial
results for the fourth quarter and full year ended December 31, 2023. Unless otherwise noted or the
context otherwise indicates, the terms "we," "us," "our" and the
"Company" refer to Main Street and its consolidated
subsidiaries.
Fourth Quarter 2023 Highlights
- Net investment income of $90.1
million (or $1.07 per
share)
- Distributable net investment income(1) of
$94.8 million (or $1.12 per share)
- Total investment income of $129.3
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
- Net increase in net assets resulting from operations of
$139.1 million, or $1.65 per share
- Return on equity(2) of 22.9% on an annualized
basis
- Net asset value of $29.20 per
share at December 31, 2023,
representing an increase of $0.87 per
share, or 3.1%, compared to $28.33
per share at September 30, 2023
- Declared regular monthly dividends totaling $0.72 per share for the first quarter of 2024, or
$0.24 per share for each of January,
February and March 2024, representing
a 6.7% increase from the regular monthly dividends paid in the
first quarter of 2023 and a 2.1% increase from the regular monthly
dividends paid in the fourth quarter of 2023
- Declared and paid a supplemental dividend of $0.275 per share, resulting in total dividends
paid in the fourth quarter of 2023 of $0.98 per share and representing a 28.9% increase
from the total dividends paid in the fourth quarter of 2022 and a
1.6% increase from the total dividends paid in the third quarter of
2023
- Completed $92.3 million in total
lower middle market ("LMM") portfolio investments, including
investments totaling $68.3 million in
two new LMM portfolio companies, which after aggregate repayments
of debt principal, return of invested equity capital and a decrease
in cost basis due to a realized loss resulted in a net increase of
$65.7 million in the total cost basis
of the LMM investment portfolio
- Completed $160.4 million in total
private loan portfolio investments, which after aggregate
repayments of debt principal and sales of debt investments and a
decrease in cost basis due to a realized loss resulted in a net
decrease of $112.5 million in the
total cost basis of the private loan investment portfolio
- Net decrease of $50.3 million in
the cost basis of the middle market investment portfolio from net
investment activity
- Expanded the total commitments under the SPV Facility (as
defined in the Liquidity and Capital Resources section
below) from $255.0 million to
$430.0 million and added two new
lender relationships to the SPV Facility, expanding and
diversifying the lender group to six participating lenders
Full Year 2023 Highlights
- Net investment income of $339.0
million (or $4.14 per
share)
- Distributable net investment income(1) of
$356.8 million (or $4.36 per share)
- Total investment income of $500.4
million
- An industry leading position in cost efficiency, with an
Operating Expenses to Assets Ratio of 1.3%
- Net increase in net assets resulting from operations of
$428.4 million (or $5.23 per share)
- Return on equity(2) of 18.8%
- Net asset value of $29.20 per
share at December 31, 2023,
representing an increase of $2.34 per
share, or 8.7%, compared to $26.86
per share at December 31, 2022
- Paid regular monthly dividends totaling $2.745 per share, representing a 5.8% increase
from prior year
- Paid supplemental dividends totaling $0.95 per share, a 171.4% increase from 2022,
resulting in total dividends paid in 2023 of $3.695 per share, representing a 25.5% increase
from prior year and a new record for total dividends paid in a
year
- Completed $301.3 million in total
LMM portfolio investments, including investments totaling
$196.5 million in six new LMM
portfolio companies, which after aggregate repayments of debt
principal, return of invested equity capital and a decrease in cost
basis due to realized losses resulted in a net increase of
$61.4 million in the total cost basis
of the LMM portfolio investments
- Completed $506.8 million in total
private loan portfolio investments, which after aggregate
repayments of debt principal and sales of debt investments, return
of invested equity capital and a decrease in cost basis due to
realized losses resulted in a net decrease of $46.6 million in the total cost basis of the
private loan portfolio investments
- Net decrease of $112.8 million in
the total cost basis of the middle market portfolio investments,
which resulted from the net investment activity and a decrease in
cost basis due to realized losses
- Further diversified Main Street's capital structure and
enhanced liquidity by (i) expanding the total commitments under the
Corporate Facility (as defined in the Liquidity and Capital
Resources section below) from $920.0
million to $995.0 million,
(ii) amending the SPV Facility to increase the total commitments
from $255.0 million to $430.0 million and (iii) issuing an additional
aggregate principal amount of $50.0
million of the December 2025
Notes (as defined in the Liquidity and Capital Resources
section below)
In commenting on the Company's operating results for the fourth
quarter and full year 2023, Dwayne L.
Hyzak, Main Street's Chief Executive Officer, stated, "We
are extremely pleased with our performance in the fourth quarter,
which closed another record year for Main Street across several key
financial metrics. Our fourth quarter performance resulted in
a new quarterly record for net investment income per share,
distributable net investment income per share equal to our existing
quarterly record that was set earlier this year, a new record for
net asset value per share for the sixth consecutive quarter and a
return on equity of approximately 23% for the fourth quarter. Our
strong performance in the fourth quarter continued our positive
performance from the first three quarters of 2023 and resulted in
new annual records for net investment income per share and
distributable net investment income per share and a return on
equity of approximately 19% for the full year. These results
demonstrate the continued and 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. We are further pleased to be
able to generate these returns while intentionally maintaining a
very conservative capital structure and liquidity position during
2023."
Mr. Hyzak continued, "The continued positive momentum across our
platform in 2023 allowed us to deliver significantly increased
value to our shareholders, with a 25% increase in the total
dividends paid to our shareholders in 2023. Despite this
significant increase, our distributable net investment income
exceeded the total dividends paid to our shareholders by over 13%
for the fourth quarter and over 17% for the full year. Based upon
the continued strength of our performance in the fourth quarter, we
recently declared a $0.30 per share
supplemental dividend to be paid in March
2024. This represents our tenth consecutive quarterly
supplemental dividend, to go with the seven increases to our
regular monthly dividends in the same time period, allowing us to
deliver significant value to our shareholders, while continuing to
maintain a conservative dividend policy and retaining a portion of
our income for the future benefit of our stakeholders.
Additionally, with the continued support from our long-term lender
relationships, and the benefits of our recent investment grade debt
offering in January 2024, we enter
2024 with very strong liquidity and a conservative leverage profile
and are excited about the prospects for significant growth in both
our lower middle market and private loan investment strategies. We
appreciate the hard work and efforts of the management teams and
employees at our portfolio companies and continue to be encouraged
by the favorable performance of the companies in our diversified
lower middle market and private loan investment portfolios and
remain confident that these strategies, together with the benefits
of our asset management business and our cost efficient operating
structure, will allow us to continue to deliver superior results
for our shareholders."
Fourth Quarter 2023 Operating Results
The following table provides a summary of our operating results
for the fourth quarter of 2023:
|
Three Months Ended
December 31,
|
|
2023
|
|
2022
|
|
Change
($)
|
|
Change
(%)
|
Interest
income
|
$ 100,690
|
|
$
86,297
|
|
$
14,393
|
|
17 %
|
Dividend
income
|
23,782
|
|
22,416
|
|
1,366
|
|
6 %
|
Fee income
|
4,837
|
|
5,163
|
|
(326)
|
|
(6) %
|
Total investment
income
|
$ 129,309
|
|
$ 113,876
|
|
$
15,433
|
|
14 %
|
|
|
|
|
|
|
|
|
Net investment
income
|
$
90,144
|
|
$
75,940
|
|
$
14,204
|
|
19 %
|
Net investment income
per share
|
$
1.07
|
|
$
0.98
|
|
$
0.09
|
|
9 %
|
|
|
|
|
|
|
|
|
Distributable net
investment income(1)
|
$
94,846
|
|
$
80,004
|
|
$
14,842
|
|
19 %
|
Distributable net
investment income per share(1)
|
$
1.12
|
|
$
1.03
|
|
$
0.09
|
|
9 %
|
|
|
|
|
|
|
|
|
Net increase in net
assets resulting from operations
|
$ 139,078
|
|
$ 106,315
|
|
$
32,763
|
|
31 %
|
Net increase in net
assets resulting from operations per share
|
$
1.65
|
|
$
1.37
|
|
$
0.28
|
|
20 %
|
The $15.4 million increase in total investment income in
the fourth quarter of 2023 from the comparable period of the prior
year was principally attributable to (i) a $14.4 million increase in interest
income, primarily due to an increase in interest rates on
floating rate investment portfolio debt investments primarily
resulting from increases in benchmark index rates, partially offset
by lower average levels of income producing investment portfolio
debt investments and (ii) a $1.4
million increase in dividend income, primarily due
to increased dividend income from our LMM portfolio companies,
partially offset by a $0.3 million
decrease in fee income. The $15.4
million increase in total investment income in the fourth
quarter of 2023 included the impact of a net increase of
$1.1 million in certain income
considered less consistent or non-recurring, including a
$2.3 million increase in income from
accelerated prepayment, repricing and other activity related to
portfolio debt investments, partially offset by a $1.2 million decrease of such dividend income, in
both cases when compared to the same period in 2022.
Total cash expenses(3) increased $0.6 million,
or 1.7%, to $34.5 million in the
fourth quarter of 2023 from $33.9
million for the same period in 2022. This increase in total
cash expenses was principally attributable to (i) a $1.3 million increase in interest expense, (ii) a
$1.3 million increase in cash
compensation expenses(3) and (iii) a $0.6 million increase in general and
administrative expense, partially offset by a $2.6 million increase in expenses allocated to
the External Investment Manager. The increase in interest
expense is primarily related to an increased weighted average
interest rate on our debt obligations resulting from an increased
average interest rate on our Credit Facilities due to increases in
benchmark index rates and the addition of our SPV Facility and the
December 2025 Notes at higher
contractual interest rates than debt obligations repaid with such
borrowing proceeds, partially offset by decreased average
outstanding borrowings. The increase in cash compensation
expenses(3) is primarily related to (i) increased
incentive compensation accruals, (ii) increased base compensation
rates and (iii) increased headcount to support our growing
investment portfolio and asset management activities.
Non-cash compensation expenses(3) increased
$0.6 million in the fourth quarter of
2023 from the comparable period of the prior year, primarily driven
by a $0.6 million increase in
share-based compensation.
Our Operating Expenses to Assets Ratio (which includes non-cash
compensation expenses(3)) was 1.3% for the fourth
quarter of 2023, on an annualized basis, as compared to 1.4% for
the same period in 2022 and 1.3% for the full year 2023, as
compared to 1.4% for the full year 2022.
The $14.2 million increase in net
investment income and the $14.8
million increase in distributable net investment
income(1) in the fourth quarter of 2023 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 and distributable net investment
income(1) on a per share basis for the fourth quarter of
2023 each increased by $0.09 per
share, compared to the fourth quarter of 2022, to $1.07 per share and $1.12 per share, respectively. These increases
include the impact of an 8.5% increase in the average shares
outstanding compared to the fourth quarter of 2022 primarily due to
shares issued since the beginning of the comparable period in 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 fourth quarter of
2023 included a net increase of $0.01
per share resulting from an increase in investment income
considered less consistent or non-recurring in nature compared to
the fourth quarter of 2022, as discussed above.
The $139.1 million net increase in
net assets resulting from operations in the fourth quarter of 2023
represents a $32.8 million increase
from the fourth quarter of 2022. This increase was primarily the
result of (i) a $20.8 million
increase in net unrealized appreciation from portfolio investments
(including the impact of accounting reversals relating to realized
gains/income (losses)), (ii) a $14.2
million increase in net investment income as discussed above
and (iii) a $6.6 million decrease in
income tax provision, partially offset by a $8.8 million increase in net realized loss from
investments resulting from a net realized loss of $17.3 million in the fourth quarter of 2023
compared to a net realized loss of $8.5
million in the fourth quarter of 2022. The $17.3
million net realized loss from investments for the fourth quarter
of 2023 was primarily the result of a $15.2
million realized loss on the restructure of a private loan
investment and a realized loss of $2.4
million on the full exit of a LMM portfolio investment,
partially offset by realized gains of $0.3
million on other portfolio investments.
The following table provides a summary of the total net
unrealized appreciation of $65.5
million for the fourth quarter of 2023:
|
Three Months Ended
December 31, 2023
|
|
LMM
(a)
|
|
Private
Loan
|
|
Middle
Market
|
|
Other
|
|
Total
|
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Accounting reversals of
net unrealized (appreciation)
depreciation recognized in prior periods due to net
realized (gains / income) losses recognized during the
current period
|
$
2.1
|
|
$ 12.9
|
|
$
—
|
|
$
(0.4)
|
|
$ 14.6
|
Net unrealized
appreciation (depreciation) relating to
portfolio investments
|
14.5
|
|
4.1
|
|
2.0
|
|
30.3
|
(b)
|
$ 50.9
|
Total net unrealized
appreciation (depreciation) relating
to portfolio investments
|
$ 16.6
|
|
$ 17.0
|
|
$
2.0
|
|
$ 29.9
|
|
$ 65.5
|
|
|
(a)
|
LMM includes unrealized
appreciation on 24 LMM portfolio investments and unrealized
depreciation on 25 LMM portfolio investments.
|
(b)
|
Other includes (i)
$27.9 million of unrealized appreciation relating to the External
Investment Manager, (ii) $1.8 million of net unrealized
appreciation relating to the other portfolio and (iii) $0.4 million
of unrealized appreciation relating to Main Street's deferred
compensation plan assets.
|
Liquidity and Capital Resources
As of December 31, 2023, we had aggregate liquidity of
$1,125.1 million, including (i)
$60.1 million in cash and cash
equivalents and (ii) $1,065.0 million
of aggregate unused capacity under our corporate revolving credit
facility (our "Corporate Facility") and our special purpose vehicle
revolving credit facility (our "SPV Facility" and, together
with our Corporate Facility, our "Credit Facilities"), which we
maintain to support our investment and operating activities.
Several details regarding our capital structure as of
December 31, 2023 are as follows:
- Our Corporate Facility included $995.0
million in total commitments from a diversified group of 18
participating lenders, plus an accordion feature that allows us to
request an increase in the total commitments under the facility to
up to $1.4 billion.
- $200.0 million in outstanding
borrowings under our Corporate Facility, with an interest rate of
7.3% based on SOFR effective for the contractual reset date of
January 1, 2024.
- Our SPV Facility included $430.0
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 $450.0 million.
- $160.0 million in outstanding
borrowings under our SPV Facility, with an interest rate of 7.9%
based on SOFR effective for the contractual reset date of
January 1, 2024.
- $500.0 million of notes
outstanding that bear interest at a rate of 3.00% per year (the
"July 2026 Notes"). The July 2026 Notes mature on July 14, 2026 and may be redeemed in whole or in
part at any time at our option subject to certain make-whole
provisions.
- $450.0 million of notes
outstanding that bear interest at a rate of 5.20% per year (the
"May 2024 Notes"). The May 2024 Notes mature on May 1, 2024 and may be redeemed in whole or in
part at any time at our option subject to certain make-whole
provisions.
- $350.0 million of outstanding
Small Business Investment Company ("SBIC") debentures through our
wholly owned SBIC subsidiaries. These debentures, which are
guaranteed by the U.S. Small Business Administration, had a
weighted-average annual fixed interest rate of 3.00% and mature ten
years from original issuance. The first maturity related to our
existing SBIC debentures occurs in the first quarter of 2024, and
the weighted-average remaining duration was 4.6 years.
- $150.0 million of notes
outstanding that bear interest at a weighted average rate of 7.74%
per year (the "December 2025 Notes").
The December 2025 Notes mature on
December 23, 2025 and may be redeemed
in whole or in part at any time at our option subject to certain
make-whole provisions.
- We maintain investment grade debt ratings from each of Fitch
Ratings and S&P Global Ratings, both of which have assigned us
investment grade corporate and credit ratings of BBB- with a stable
outlook.
- Our net asset value totaled $2.5
billion, or $29.20 per
share.
In January 2024, we issued
$350.0 million in aggregate principal
amount of 6.95% unsecured notes due March 1, 2029 (the
"March 2029 Notes"). The total net
proceeds from the offering of the March
2029 Notes, resulting from the public issue price and after
underwriting discounts and estimated offering expenses payable,
were approximately $346.3
million.
Investment Portfolio Information as of December 31,
2023(4)
The following table provides a summary of the investments in our
LMM portfolio, private loan portfolio and middle market portfolio
as of December 31, 2023:
|
|
As of December
31, 2023
|
|
|
LMM
(a)
|
|
Private
Loan
|
|
Middle
Market
|
|
|
|
|
(dollars in
millions)
|
|
|
Number of portfolio
companies
|
|
80
|
|
87
|
|
23
|
Fair value
|
|
$
2,273.0
|
|
$
1,453.5
|
|
$
243.7
|
Cost
|
|
$
1,782.9
|
|
$
1,470.1
|
|
$
294.4
|
Debt investments as a %
of portfolio (at cost)
|
|
72.0 %
|
|
94.7 %
|
|
91.4 %
|
Equity investments as a
% of portfolio (at cost)
|
|
28.0 %
|
|
5.3 %
|
|
8.6 %
|
% of debt investments
at cost secured by first priority lien
|
|
99.2 %
|
|
100.0 %
|
|
99.1 %
|
Weighted-average annual
effective yield (b)
|
|
13.0 %
|
|
12.9 %
|
|
12.5 %
|
Average EBITDA
(c)
|
|
$
8.2
|
|
$
27.2
|
|
$
64.2
|
|
|
(a)
|
We had equity ownership
in all of our LMM portfolio companies, and our average fully
diluted equity ownership in those portfolio companies was
40%.
|
(b)
|
The weighted-average
annual effective yields were computed using the effective interest
rates for all debt investments at cost, including amortization of
deferred debt origination fees and accretion of original issue
discount but excluding fees payable upon repayment of the debt
instruments and any debt investments on non-accrual
status.
|
(c)
|
The average EBITDA is
calculated using a simple average for the LMM portfolio and a
weighted-average for the private loan and middle market portfolios.
These calculations exclude certain portfolio companies, including
two LMM portfolio companies and two private loan portfolio
companies, as EBITDA is not a meaningful valuation metric for our
investments in these portfolio companies, and those portfolio
companies whose primary purpose is to own real estate.
|
The fair value of our LMM portfolio company equity investments
was 201% of the cost of such equity investments, and our LMM
portfolio companies had a median net senior debt (senior
interest-bearing debt through our debt position less cash and cash
equivalents) to EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) ratio of 2.6 to 1.0 and a median
total EBITDA to senior interest expense ratio of 2.5 to 1.0.
Including all debt that is junior in priority to our debt position,
these median ratios were 2.7 to 1.0 and 2.5 to 1.0,
respectively.(4) (5)
As of December 31, 2023, our investment portfolio also
included:
- Other portfolio investments in 15 entities, collectively
totaling $142.0 million in fair value
and $149.1 million in cost basis,
which comprised 3.3% and 4.0% of our investment portfolio at fair
value and cost, respectively; and
- Our investment in the External Investment Manager, with a fair
value of $174.1 million and a cost
basis of $29.5 million, which
comprised 4.1% and 0.8% of our investment portfolio at fair value
and cost, respectively.
As of December 31, 2023, non-accrual investments comprised
0.6% of the total investment portfolio at fair value and 2.3% at
cost, and our total portfolio investments at fair value were 115%
of the related cost basis.
External Investment Manager
MSC Adviser I, LLC is our wholly owned portfolio company and
registered investment adviser that provides investment management
services to external parties (the "External Investment Manager").
We share employees with the External Investment Manager and
allocate costs related to such shared employees and other operating
expenses to the External Investment Manager. The total contribution
of the External Investment Manager to our net investment income
consists of the combination of the expenses we allocate to the
External Investment Manager and the dividend income we earn from
the External Investment Manager. During the fourth quarter of 2023,
the External Investment Manager earned $5.8
million of management fee income, an increase of
$0.3 million from the fourth quarter
of 2022, and incentive fees of $3.8
million, an increase of $1.4 million from the fourth
quarter of 2022. In addition, we allocated $6.0 million of total expenses to the External
Investment Manager, an increase of $2.6
million from the fourth quarter of 2022. The increase in
management fee income was attributable to an increase in assets
under management. The increase in incentive fees was attributable
to the favorable performance and improved operating results from
the assets managed for clients. The increase in expenses allocated
to the External Investment Manager was primarily related to
increased overall operating costs at Main Street, an increase in
assets under management and the positive operating results from the
assets managed for clients. The combination of the dividend income
we earned from the External Investment Manager and expenses we
allocated to it resulted in a total contribution to our net
investment income of $9.2 million, representing an increase of
$2.2 million from the fourth quarter
of 2022. We completed the initial closing of limited partner
commitments for a new private loan fund managed by the External
Investment Manager in September 2023
and held our second closing in December
2023 as this new fund continues to execute its fund raising
activities. The new fund is exclusively focused on investments in
our private loan investment strategy and provides us an additional
opportunity for continued growth of the benefits from the External
Investment Manager. The External Investment Manager ended the
fourth quarter of 2023 with total assets under management of
$1.5 billion.
Fourth Quarter and Full Year 2023 Financial Results
Conference Call / Webcast
Main Street has scheduled a conference call for Friday,
February 23, 2024 at 10:00 a.m. Eastern
Time to discuss the fourth quarter and full year 2023
financial results.
You may access the conference call by dialing 412-902-0030 at
least 10 minutes prior to the start time. The conference call can
also be accessed via a simultaneous webcast by logging into the
investor relations section of the Main Street web site at
https://www.mainstcapital.com.
A telephonic replay of the conference call will be available
through Friday, March 1, 2024 and may be accessed by dialing
201-612-7415 and using the passcode 13743850#. An audio archive of
the conference call will also be available on the investor
relations section of the company's website at
https://www.mainstcapital.com shortly after the call and will be
accessible until the date of Main Street's earnings release for the
next quarter.
For a more detailed discussion of the financial and other
information included in this press release, please refer to the
Main Street Annual Report on Form 10-K for the year ended
December 31, 2023 to be filed with the Securities and Exchange
Commission (www.sec.gov) and Main Street's Fourth Quarter 2023
Investor Presentation to be posted on the investor relations
section of the Main Street website at
https://www.mainstcapital.com.
ABOUT MAIN STREET CAPITAL CORPORATION
Main Street (www.mainstcapital.com) is a principal investment
firm that primarily provides long-term debt and equity capital to
lower middle market companies and debt capital to middle market
companies. Main Street's portfolio investments are typically made
to support management buyouts, recapitalizations, growth
financings, refinancings and acquisitions of companies that operate
in diverse industry sectors. Main Street seeks to partner with
entrepreneurs, business owners and management teams and generally
provides "one-stop" financing alternatives within its lower middle
market investment strategy. Main Street's lower middle market
companies generally have annual revenues between $10 million and $150
million. Main Street's middle market debt investments are
made in businesses that are generally larger in size than its lower
middle market portfolio companies.
Main Street, through its wholly-owned portfolio company MSC
Adviser I, LLC ("MSC Adviser"), also maintains an asset management
business through which it manages investments for external parties.
MSC Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended.
FORWARD-LOOKING STATEMENTS
Main Street cautions that statements in this press release which
are forward–looking and provide other than historical information,
including but not limited to Main Street's ability to successfully
source and execute on new portfolio investments and deliver future
financial performance and results, are based on current conditions
and information available to Main Street as of the date hereof and
include statements regarding Main Street's goals, beliefs,
strategies and future operating results and cash flows. Although
its management believes that the expectations reflected in those
forward–looking statements are reasonable, Main Street can give no
assurance that those expectations will prove to be correct. Those
forward-looking statements are made based on various underlying
assumptions and are subject to numerous uncertainties and risks,
including, without limitation: Main Street's continued
effectiveness in raising, investing and managing capital; adverse
changes in the economy generally or in the industries in which Main
Street's portfolio companies operate; the impacts of macroeconomic
factors on Main Street and its portfolio companies' business and
operations, liquidity and access to capital, and on the U.S. and
global economies, including impacts related to pandemics and other
public health crises, risk of recession, inflation, supply chain
constraints or disruptions and changes in market index interest
rates; changes in laws and regulations or business, political
and/or regulatory conditions that may adversely impact Main
Street's operations or the operations of its portfolio companies;
the operating and financial performance of Main Street's portfolio
companies and their access to capital; retention of key investment
personnel; competitive factors; and such other factors described
under the captions "Cautionary Statement Concerning Forward-Looking
Statements" and "Risk Factors" included in Main Street's filings
with the Securities and Exchange Commission (www.sec.gov). Main
Street undertakes no obligation to update the information contained
herein to reflect subsequently occurring events or circumstances,
except as required by applicable securities laws and
regulations.
MAIN STREET CAPITAL
CORPORATION
|
Consolidated
Statements of Operations
|
(in thousands,
except shares and per share amounts)
|
|
|
Three Months
Ended
December 31,
|
|
Year Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
INVESTMENT
INCOME:
|
|
|
|
|
|
|
|
Interest, fee and
dividend income:
|
|
|
|
|
|
|
|
Control
investments
|
$ 51,664
|
|
$ 45,215
|
|
$
197,150
|
|
$
155,967
|
Affiliate
investments
|
16,106
|
|
16,662
|
|
69,829
|
|
54,963
|
Non–Control/Non–Affiliate investments
|
61,539
|
|
51,999
|
|
233,406
|
|
165,930
|
Total investment
income
|
129,309
|
|
113,876
|
|
500,385
|
|
376,860
|
EXPENSES:
|
|
|
|
|
|
|
|
Interest
|
(24,410)
|
|
(23,060)
|
|
(102,575)
|
|
(78,276)
|
Compensation
|
(11,419)
|
|
(10,063)
|
|
(46,279)
|
|
(36,543)
|
General and
administrative
|
(5,128)
|
|
(4,567)
|
|
(18,042)
|
|
(16,050)
|
Share–based
compensation
|
(4,169)
|
|
(3,598)
|
|
(16,520)
|
|
(13,629)
|
Expenses allocated to
the External Investment Manager
|
5,961
|
|
3,352
|
|
22,050
|
|
12,965
|
Total
expenses
|
(39,165)
|
|
(37,936)
|
|
(161,366)
|
|
(131,533)
|
NET INVESTMENT
INCOME
|
90,144
|
|
75,940
|
|
339,019
|
|
245,327
|
NET REALIZED GAIN
(LOSS):
|
|
|
|
|
|
|
|
Control
investments
|
—
|
|
—
|
|
(50,532)
|
|
(5,822)
|
Affiliate
investments
|
(2,234)
|
|
(4,659)
|
|
(18,729)
|
|
(3,319)
|
Non–Control/Non–Affiliate investments
|
(15,050)
|
|
(3,856)
|
|
(51,246)
|
|
3,929
|
Total net realized
loss
|
(17,284)
|
|
(8,515)
|
|
(120,507)
|
|
(5,212)
|
NET UNREALIZED
APPRECIATION (DEPRECIATION):
|
|
|
|
|
|
|
|
Control
investments
|
39,014
|
|
36,064
|
|
161,793
|
|
56,682
|
Affiliate
investments
|
6,830
|
|
6,611
|
|
33,689
|
|
10,314
|
Non–Control/Non–Affiliate investments
|
19,663
|
|
2,063
|
|
37,095
|
|
(42,180)
|
Total net unrealized
appreciation
|
65,507
|
|
44,738
|
|
232,577
|
|
24,816
|
INCOME
TAXES:
|
|
|
|
|
|
|
|
Federal and state
income, excise and other taxes
|
(1,970)
|
|
(1,541)
|
|
(6,633)
|
|
(5,199)
|
Deferred
taxes
|
2,681
|
|
(4,307)
|
|
(16,009)
|
|
(18,126)
|
Income tax benefit
(provision)
|
711
|
|
(5,848)
|
|
(22,642)
|
|
(23,325)
|
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
|
$
139,078
|
|
$
106,315
|
|
$
428,447
|
|
$
241,606
|
NET INVESTMENT
INCOME PER SHARE—BASIC AND DILUTED
|
$
1.07
|
|
$
0.98
|
|
$
4.14
|
|
$
3.29
|
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS PER SHARE—BASIC AND DILUTED
|
$
1.65
|
|
$
1.37
|
|
$
5.23
|
|
$
3.24
|
WEIGHTED-AVERAGE
SHARES OUTSTANDING—BASIC AND DILUTED
|
84,443,301
|
|
77,802,377
|
|
81,916,663
|
|
74,482,176
|
MAIN STREET CAPITAL
CORPORATION
|
Consolidated Balance
Sheets
|
(in thousands,
except per share amounts)
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Investments at fair
value:
|
|
|
|
|
Control
investments
|
|
$
2,006,698
|
|
$
1,703,172
|
Affiliate
investments
|
|
615,002
|
|
618,359
|
Non–Control/Non–Affiliate investments
|
|
1,664,571
|
|
1,780,646
|
Total
investments
|
|
4,286,271
|
|
4,102,177
|
Cash and cash
equivalents
|
|
60,083
|
|
49,121
|
Interest and dividend
receivable and other assets
|
|
89,337
|
|
82,731
|
Receivable for
securities sold
|
|
—
|
|
381
|
Deferred financing
costs, net
|
|
7,879
|
|
7,475
|
Total
assets
|
|
$
4,443,570
|
|
$
4,241,885
|
LIABILITIES
|
|
|
|
|
Credit
Facilities
|
|
$
360,000
|
|
$
607,000
|
July 2026
Notes (par: $500,000 as of both
December 31, 2023 and
December 31, 2022)
|
|
498,662
|
|
498,136
|
May 2024
Notes (par: $450,000 as of both
December 31, 2023 and
December 31, 2022)
|
|
450,182
|
|
450,727
|
SBIC debentures (par:
$350,000 ($63,800 due within one year) and
$350,000 as of December 31, 2023 and December 31, 2022,
respectively)
|
|
344,535
|
|
343,914
|
December 2025
Notes (par: $150,000 and $100,000 as of
December 31,
2023 and December 31, 2022, respectively)
|
|
148,965
|
|
99,325
|
Accounts payable and
other liabilities
|
|
62,576
|
|
52,092
|
Interest
payable
|
|
17,025
|
|
16,580
|
Dividend
payable
|
|
20,368
|
|
17,676
|
Deferred tax liability,
net
|
|
63,858
|
|
47,849
|
Total
liabilities
|
|
1,966,171
|
|
2,133,299
|
|
|
|
|
|
NET
ASSETS
|
|
|
|
|
Common stock
|
|
848
|
|
784
|
Additional paid–in
capital
|
|
2,270,549
|
|
2,030,531
|
Total undistributed
earnings
|
|
206,002
|
|
77,271
|
Total net
assets
|
|
2,477,399
|
|
2,108,586
|
Total liabilities and
net assets
|
|
$
4,443,570
|
|
$
4,241,885
|
NET ASSET VALUE PER
SHARE
|
|
$
29.20
|
|
$
26.86
|
MAIN STREET CAPITAL
CORPORATION
|
Reconciliation of
Distributable Net Investment Income,
|
Total Cash Expenses,
Non-Cash Compensation Expenses
|
and Cash
Compensation Expenses
|
(in thousands,
except per share amounts)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net investment
income
|
$
90,144
|
|
$
75,940
|
|
$
339,019
|
|
$
245,327
|
Non-cash
compensation expenses(3)
|
4,702
|
|
4,064
|
|
17,769
|
|
12,195
|
Distributable net
investment income(1)
|
$
94,846
|
|
$
80,004
|
|
$
356,788
|
|
$
257,522
|
|
|
|
|
|
|
|
|
Per share
amounts:
|
|
|
|
|
|
|
|
Net investment income
per share -
|
|
|
|
|
|
|
|
Basic and diluted
|
$
1.07
|
|
$
0.98
|
|
$
4.14
|
|
$
3.29
|
Distributable net
investment income per share -
|
|
|
|
|
|
|
|
Basic and diluted(1)
|
$
1.12
|
|
$
1.03
|
|
$
4.36
|
|
$
3.46
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Share–based
compensation
|
$
(4,169)
|
|
$
(3,598)
|
|
$
(16,520)
|
|
$
(13,629)
|
Deferred compensation
(expense) benefit
|
(533)
|
|
(466)
|
|
(1,249)
|
|
1,434
|
Total non-cash
compensation expenses(3)
|
(4,702)
|
|
(4,064)
|
|
(17,769)
|
|
(12,195)
|
|
|
|
|
|
|
|
|
Total
expenses
|
(39,165)
|
|
(37,936)
|
|
(161,366)
|
|
(131,533)
|
Less non-cash
compensation expenses(3)
|
4,702
|
|
4,064
|
|
17,769
|
|
12,195
|
Total cash
expenses(3)
|
$
(34,463)
|
|
$
(33,872)
|
|
$
(143,597)
|
|
$
(119,338)
|
|
|
|
|
|
|
|
|
Compensation
|
$
(11,419)
|
|
$
(10,063)
|
|
$
(46,279)
|
|
$
(36,543)
|
Share-based
compensation
|
(4,169)
|
|
(3,598)
|
|
(16,520)
|
|
(13,629)
|
Total compensation
expenses
|
(15,588)
|
|
(13,661)
|
|
(62,799)
|
|
(50,172)
|
Non-cash compensation
expenses(3)
|
4,702
|
|
4,064
|
|
17,769
|
|
12,195
|
Total cash compensation
expenses(3)
|
$
(10,886)
|
|
$
(9,597)
|
|
$
(45,030)
|
|
$
(37,977)
|
MAIN STREET CAPITAL
CORPORATION
Endnotes
(1) Distributable net investment income is net investment income
as determined in accordance with U.S. Generally Accepted Accounting
Principles, or U.S. GAAP, excluding the impact of non-cash
compensation expenses(3). Main Street believes
presenting distributable net investment income and the related per
share amount is useful and appropriate supplemental disclosure for
analyzing its financial performance since non-cash compensation
expenses(3) do not result in a net cash impact to Main
Street upon settlement. However, distributable net investment
income is a non-U.S. GAAP measure and should not be considered as a
replacement for net investment income or other earnings measures
presented in accordance with U.S. GAAP and should be reviewed only
in connection with such U.S. GAAP measures in analyzing Main
Street's financial performance. A reconciliation of net investment
income in accordance with U.S. GAAP to distributable net investment
income is detailed in the financial tables included with this press
release.
(2) Return on equity equals the net increase in net assets
resulting from operations divided by the average quarterly total
net assets for the three-month and trailing twelve-month periods
ended December 31, 2023.
(3) Non-cash compensation expenses consist of (i) share-based
compensation and (ii) deferred compensation expense or benefit,
both of which are non-cash in nature. Share-based compensation does
not require settlement in cash. Deferred compensation expense or
benefit does not result in a net cash impact to Main Street upon
settlement. The appreciation (depreciation) in the fair value of
deferred compensation plan assets is reflected in Main Street's
Consolidated Statements of Operations as unrealized appreciation
(depreciation) and an increase (decrease) in compensation expenses,
respectively. Cash compensation expenses are total compensation
expenses as determined in accordance with U.S. GAAP, less non-cash
compensation expenses. Total cash expenses are total expenses, as
determined in accordance with U.S. GAAP, excluding non-cash
compensation expenses. Main Street believes presenting cash
compensation expenses, non-cash compensation expenses and total
cash expenses is useful and appropriate supplemental disclosure for
analyzing its financial performance since non-cash compensation
expenses do not result in a net cash impact to Main Street upon
settlement. However, cash compensation expenses, non-cash
compensation expenses and total cash expenses are non-U.S. GAAP
measures and should not be considered as a replacement for
compensation expenses, total expenses or other earnings measures
presented in accordance with U.S. GAAP and should be reviewed only
in connection with such U.S. GAAP measures in analyzing Main
Street's financial performance. A reconciliation of compensation
expenses and total expenses in accordance with U.S. GAAP to cash
compensation expenses, non-cash compensation expenses and total
cash expenses is detailed in the financial tables included with
this press release.
(4) Portfolio company financial information has not been
independently verified by Main Street.
(5) These credit statistics exclude portfolio companies on
non-accrual or for which EBITDA is not a meaningful metric.
Contacts:
Main Street Capital Corporation
Dwayne L. Hyzak, CEO,
dhyzak@mainstcapital.com
Jesse E. Morris, CFO and COO,
jmorris@mainstcapital.com
713-350-6000
Dennard Lascar Investor
Relations
Ken Dennard /
ken@dennardlascar.com
Zach Vaughan /
zvaughan@dennardlascar.com
713-529-6600
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content:https://www.prnewswire.com/news-releases/main-street-announces-2023-fourth-quarter-and-annual-results-302069208.html
SOURCE Main Street Capital Corporation