MAIN STREET ANNOUNCES THIRD QUARTER 2024 RESULTS
Third
Quarter 2024 Net Investment Income of
Third
Quarter 2024 Distributable Net Investment Income
(1)
of
Net Asset Value of
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 ofSeptember 30, 2024 , representing an increase of$0.77 per share, or 2.6%, compared to$29.80 per share as ofJune 30, 2024 , and$1.37 per share, or 4.7%, compared to$29.20 per share as ofDecember 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 andDecember 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 ourJune 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 toSeptember 2029 and decrease the interest rate - Issued
$63.8 million of additionalSmall Business Investment Company ("SBIC") debentures, increasing the total outstanding SBIC debentures to the regulatory maximum amount of$350.0 million as ofSeptember 30, 2024
In commenting on the Company's operating results for the third quarter of 2024,
Third Quarter 2024 Operating Results
The following table provides a summary of our operating results for the third quarter of 2024:
|
Three Months Ended |
||||||
|
2024 |
|
2023 |
|
Change ($) |
|
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
Total cash expenses(3) increased
Non-cash compensation expenses(3) increased
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
The
The following table provides a summary of the total net unrealized appreciation of
|
Three Months Ended |
||||||||
|
LMM |
|
Private |
|
Middle |
|
Other |
|
Total |
|
|
|
|
|
(dollars in millions) |
|
|
|
|
Accounting reversals of net unrealized appreciation |
$ (0.5) |
|
$ (27.2) |
|
$ - |
|
$ (0.2) |
|
$ (27.9) |
Net unrealized appreciation (depreciation) relating to |
25.7 |
|
(7.3) |
|
(3.4) |
|
34.6 |
(b) |
49.6 |
Total net unrealized appreciation (depreciation) relating |
$ 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) |
|
|
Liquidity and Capital Resources
As of
Several details regarding our capital structure as of
- 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 ofOctober 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 ofOctober 1, 2024 . -
$500.0 million of notes outstanding that bear interest at a rate of 3.00% per year (the "July 2026 Notes"). TheJuly 2026 Notes mature onJuly 14, 2026 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. -
$400.0 million ofJune 2027 Notes outstanding that bear interest at a rate of 6.50% per year with a yield-to-maturity of approximately 6.34%. TheJune 2027 Notes mature onJune 4, 2027 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 notes outstanding that bear interest at a rate of 6.95% per year (the "March 2029 Notes"). TheMarch 2029 Notes mature onMarch 1, 2029 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 SBIC debentures through our wholly owned SBIC subsidiaries. These debentures, which are guaranteed by theU.S. Small Business Administration (the "SBA"), had a weighted-average annual fixed interest rate of 3.28% and mature ten years from original issuance. The first maturity related to our existing SBIC debentures occurs in the first quarter of 2027, and the weighted-average remaining duration was 5.9 years. -
$150.0 million of notes outstanding that bear interest at a weighted-average rate of 7.74% per year (the "December 2025 Notes"). TheDecember 2025 Notes mature onDecember 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
$2.7 billion , or$30.57 per share.
Investment Portfolio Information as of
The following table provides a summary of the investments in our LMM portfolio, private loan portfolio and middle market portfolio as of
|
|
As of |
||||
|
|
LMM (a) |
|
Private Loan |
|
Middle Market |
|
|
|
|
(dollars in millions) |
|
|
Number of portfolio companies |
|
84 |
|
92 |
|
17 |
Fair value |
|
$ 2,468.8 |
|
$ 1,883.3 |
|
$ 178.2 |
Cost |
|
$ 1,924.5 |
|
$ 1,937.7 |
|
$ 218.3 |
Debt investments as a % of portfolio (at cost) |
|
72.2 % |
|
95.9 % |
|
88.0 % |
Equity investments as a % of portfolio (at cost) |
|
27.8 % |
|
4.1 % |
|
12.0 % |
% of debt investments at cost secured by first priority lien |
|
99.2 % |
|
99.9 % |
|
97.6 % |
Weighted-average annual effective yield (b) |
|
13.0 % |
|
12.4 % |
|
12.6 % |
Average EBITDA (c) |
|
$ 9.6 |
|
$ 35.0 |
|
$ 53.1 |
|
|
(a) |
We had equity ownership in all of our LMM portfolio companies, and our average fully diluted equity ownership in those portfolio companies was 39%. |
(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 four LMM portfolio companies, five private loan portfolio companies and two middle market 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 and those portfolio companies whose primary operations have ceased and only residual value remains. |
|
|
The fair value of our LMM portfolio company equity investments was 211% 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 2.8 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 2.9 to 1.0 and 2.5 to 1.0, respectively.(4) (5)
As of
- Other portfolio investments in 14 entities, collectively totaling
$162.4 million in fair value and$155.8 million in cost basis, which comprised 3.3% and 3.7% of our investment portfolio at fair value and cost, respectively; and - Our investment in the
External Investment Manager, with a fair value of$218.4 million and a cost basis of$29.5 million , which comprised 4.4% and 0.7% of our investment portfolio at fair value and cost, respectively.
As of
External Investment Manager
We continue to execute our fund-raising activities of limited partner commitments for our second private loan fund managed by the
Third Quarter 2024 Financial Results Conference Call / Webcast
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
A telephonic replay of the conference call will be available through
For a more detailed discussion of the financial and other information included in this press release, please refer to the Main Street Quarterly Report on Form 10-Q for the quarterly period ended
ABOUT
Main Street (www.mainstcapital.com) is a principal investment firm that primarily provides customized long-term debt and equity capital solutions to lower middle market companies and debt capital to private companies owned by or in the process of being acquired by a private equity fund. 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 customized "one-stop" debt and equity financing solutions within its lower middle market investment strategy. Main Street seeks to partner with private equity fund sponsors and primarily invests in secured debt investments in its private loan investment strategy. Main Street's lower middle market portfolio companies generally have annual revenues between
Main Street, through its wholly owned portfolio company
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
Consolidated Statements of Operations (in thousands, except shares and per share amounts) (Unaudited) |
|||||||
|
|||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest, fee and dividend income: |
|
|
|
|
|
|
|
Control investments |
$ 50,134 |
|
$ 48,645 |
|
$ 152,572 |
|
$ 145,485 |
Affiliate investments |
20,884 |
|
15,267 |
|
61,813 |
|
53,722 |
Non–Control/Non–Affiliate investments |
65,806 |
|
59,325 |
|
186,201 |
|
171,867 |
Total investment income |
136,824 |
|
123,237 |
|
400,586 |
|
371,074 |
EXPENSES: |
|
|
|
|
|
|
|
Interest |
(33,474) |
|
(26,414) |
|
(89,411) |
|
(78,165) |
Compensation |
(11,644) |
|
(11,560) |
|
(35,225) |
|
(34,860) |
General and administrative |
(4,564) |
|
(4,324) |
|
(14,159) |
|
(12,915) |
Share–based compensation |
(4,868) |
|
(4,164) |
|
(13,853) |
|
(12,351) |
Expenses allocated to the External Investment Manager |
5,322 |
|
5,404 |
|
16,768 |
|
16,089 |
Total expenses |
(49,228) |
|
(41,058) |
|
(135,880) |
|
(122,202) |
NET INVESTMENT INCOME |
87,596 |
|
82,179 |
|
264,706 |
|
248,872 |
NET REALIZED GAIN (LOSS): |
|
|
|
|
|
|
|
Control investments |
- |
|
546 |
|
(352) |
|
(50,532) |
Affiliate investments |
32 |
|
(228) |
|
786 |
|
(16,495) |
Non–Control/Non–Affiliate investments |
26,350 |
|
346 |
|
16,995 |
|
(36,196) |
Total net realized gain (loss) |
26,382 |
|
664 |
|
17,429 |
|
(103,223) |
NET UNREALIZED APPRECIATION (DEPRECIATION): |
|
|
|
|
|
|
|
Control investments |
50,348 |
|
29,838 |
|
88,007 |
|
122,779 |
Affiliate investments |
7,181 |
|
5,188 |
|
22,609 |
|
26,859 |
Non–Control/Non–Affiliate investments |
(35,791) |
|
(8,015) |
|
(25,185) |
|
17,432 |
Total net unrealized appreciation |
21,738 |
|
27,011 |
|
85,431 |
|
167,070 |
INCOME TAXES: |
|
|
|
|
|
|
|
Federal and state income, excise and other taxes |
(2,457) |
|
(1,256) |
|
(6,185) |
|
(4,663) |
Deferred taxes |
(9,252) |
|
(5,337) |
|
(27,534) |
|
(18,690) |
Income tax provision |
(11,709) |
|
(6,593) |
|
(33,719) |
|
(23,353) |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ 124,007 |
|
$ 103,261 |
|
$ 333,847 |
|
$ 289,366 |
NET INVESTMENT INCOME PER SHARE-BASIC AND DILUTED |
$ 1.00 |
|
$ 0.99 |
|
$ 3.07 |
|
$ 3.07 |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ 1.42 |
|
$ 1.25 |
|
$ 3.87 |
|
$ 3.57 |
WEIGHTED-AVERAGE SHARES OUTSTANDING-BASIC AND DILUTED |
87,459,533 |
|
82,921,764 |
|
86,268,415 |
|
81,065,195 |
Consolidated Balance Sheets (in thousands, except per share amounts) |
||||
|
||||
|
|
|
|
|
|
|
2024 |
|
2023 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Investments at fair value: |
|
|
|
|
Control investments |
|
$ 2,104,576 |
|
$ 2,006,698 |
Affiliate investments |
|
784,092 |
|
615,002 |
Non–Control/Non–Affiliate investments |
|
2,022,386 |
|
1,664,571 |
Total investments |
|
4,911,054 |
|
4,286,271 |
Cash and cash equivalents |
|
84,421 |
|
60,083 |
Interest and dividend receivable and other assets |
|
86,420 |
|
89,337 |
Deferred financing costs, net |
|
12,882 |
|
7,879 |
Total assets |
|
$ 5,094,777 |
|
$ 4,443,570 |
LIABILITIES |
|
|
|
|
Credit Facilities |
|
$ 460,000 |
|
$ 360,000 |
|
|
499,057 |
|
498,662 |
|
|
401,136 |
|
- |
|
|
346,822 |
|
- |
SBIC debentures (par: |
|
343,122 |
|
344,535 |
|
|
149,353 |
|
148,965 |
|
|
- |
|
450,182 |
Accounts payable and other liabilities |
|
71,553 |
|
62,576 |
Interest payable |
|
18,513 |
|
17,025 |
Dividend payable |
|
21,575 |
|
20,368 |
Deferred tax liability, net |
|
91,392 |
|
63,858 |
Total liabilities |
|
2,402,523 |
|
1,966,171 |
NET ASSETS |
|
|
|
|
Common stock |
|
880 |
|
848 |
Additional paid–in capital |
|
2,418,089 |
|
2,270,549 |
Total undistributed earnings |
|
273,285 |
|
206,002 |
Total net assets |
|
2,692,254 |
|
2,477,399 |
Total liabilities and net assets |
|
$ 5,094,777 |
|
$ 4,443,570 |
NET ASSET VALUE PER SHARE |
|
$ 30.57 |
|
$ 29.20 |
Reconciliation of Distributable Net Investment Income, Total Cash Expenses, Non-Cash Compensation Expenses and Cash Compensation Expenses (in thousands, except per share amounts) (Unaudited) |
|||||||
|
|||||||
|
Three Months Ended |
|
Nine Months Ended |
||||
|
|
|
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Net investment income |
$ 87,596 |
|
$ 82,179 |
|
$ 264,706 |
|
$ 248,872 |
Non-cash compensation expenses (3) |
5,377 |
|
3,992 |
|
14,927 |
|
13,068 |
Distributable net investment income (1) |
$ 92,973 |
|
$ 86,171 |
|
$ 279,633 |
|
$ 261,940 |
|
|
|
|
|
|
|
|
Per share amounts: |
|
|
|
|
|
|
|
Net investment income per share - |
|
|
|
|
|
|
|
Basic and diluted |
$ 1.00 |
|
$ 0.99 |
|
$ 3.07 |
|
$ 3.07 |
Distributable net investment income per share - |
|
|
|
|
|
|
|
Basic and diluted (1) |
$ 1.06 |
|
$ 1.04 |
|
$ 3.24 |
|
$ 3.23 |
|
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended |
|
Nine Months Ended |
||||
|
|
|
|
||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
Share–based compensation |
$ (4,868) |
|
$ (4,164) |
|
$ (13,853) |
|
$ (12,351) |
Deferred compensation (expense) benefit |
(509) |
|
172 |
|
(1,074) |
|
(717) |
Total non-cash compensation expenses (3) |
(5,377) |
|
(3,992) |
|
(14,927) |
|
(13,068) |
|
|
|
|
|
|
|
|
Total expenses |
(49,228) |
|
(41,058) |
|
(135,880) |
|
(122,202) |
Less non-cash compensation expenses (3) |
5,377 |
|
3,992 |
|
14,927 |
|
13,068 |
Total cash expenses (3) |
$ (43,851) |
|
$ (37,066) |
|
$ (120,953) |
|
$ (109,134) |
|
|
|
|
|
|
|
|
Compensation |
$ (11,644) |
|
$ (11,560) |
|
$ (35,225) |
|
$ (34,860) |
Share-based compensation |
(4,868) |
|
(4,164) |
|
(13,853) |
|
(12,351) |
Total compensation expenses |
(16,512) |
|
(15,724) |
|
(49,078) |
|
(47,211) |
Non-cash compensation expenses (3) |
5,377 |
|
3,992 |
|
14,927 |
|
13,068 |
Total cash compensation expenses (3) |
$ (11,135) |
|
$ (11,732) |
|
$ (34,151) |
|
$ (34,143) |
|
|
|
|
(1) |
Distributable net investment income is net investment income as determined in accordance with |
|
|
(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 TTM periods ended |
|
|
(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 |
|
|
(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:
713-350-6000
713-529-6600
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