NEWS

“Announces First Quarter 2025 Earnings Release and Conference Call Schedule

HOUSTON, April 16, 2025 /PRNewswire/ — Main Street Capital Corporation (NYSE: MAIN) (“Main Street” or the “Company”) is pleased to announce its preliminary operating results for the first quarter of 2025 and its first quarter 2025 earnings release and conference call schedule.

In commenting on the Company’s preliminary operating results for the first quarter of 2025, Dwayne L. Hyzak, Main Street’s Chief Executive Officer, stated, “We are pleased with our performance in the first quarter, which resulted in another quarter of strong operating results, including a new record for net asset value per share for the eleventh consecutive quarter, favorable distributable net investment income per share and significant net unrealized appreciation, which resulted in an estimated return on equity of over 16% for the first quarter. We are pleased with our first quarter 2025 results and look forward to sharing the full details of our results in a few weeks.”

Preliminary Estimates of First Quarter 2025 Results

Main Street’s preliminary estimate of first quarter 2025 net investment income (“NII”) is $1.00 to $1.02 per share and distributable net investment income (“DNII”) is $1.06 to $1.08 per share.⁽¹⁾

Main Street’s preliminary estimate of net asset value (“NAV”) per share as of March 31, 2025 is $32.00 to $32.06, representing an increase of $0.35 to $0.41 per share, or 1.1% to 1.3%, from the NAV per share of $31.65 as of December 31, 2024, with this increase after the impact of the supplemental dividend paid in March 2025 of $0.30 per share. The estimated increase in NAV per share is primarily due to the net fair value increase on the investment portfolio resulting from the net unrealized appreciation and the net realized loss on portfolio investments, including a decrease in the fair value of the wholly-owned asset manager, and the accretive impact of equity issuances during the quarter, partially offset by the net tax provision for the quarter.

As a result of Main Street’s preliminary estimates of NII, net changes in the fair market value of its investment portfolio and the net tax provision as noted above, Main Street estimates that it generated a quarterly annualized return on equity of over 16% for the first quarter of 2025.⁽²⁾

Main Street preliminarily estimates that investments on non-accrual status comprised 1.7% of the total investment portfolio at fair value and 4.5% at cost as of March 31, 2025.

Investment Portfolio Activity

The Company’s first quarter 2025 operating activities include the following investment activity in the lower middle market (“LMM”), private loan and middle market investment strategies:

• $86.2 million in total LMM portfolio investments, which after aggregate repayments of debt investments resulted in a net increase of $57.3 million in the total cost basis of the LMM investment portfolio;
  
• $138.2 million in total private loan portfolio investments, which after aggregate repayments of debt investments, return of invested equity capital and a decrease in cost basis due to realized losses on several private loan portfolio investments resulted in a net increase of $25.6 million in the total cost basis of the private loan investment portfolio; and
  
• a net decrease of $44.2 million in the total cost basis of the middle market investment portfolio”.

ANALYSIS

Profits

In the IVQ 2024 MAIN reported Net Investment Income NII) of $90.4 million or $1.02 per share (NIIPS) and its non-GAAP measure – Distributable Net Investment Income (DNII)  of $95.3 million, or $1.08 per share (DNIIPS). The analysts tend to use NIIPS when offering up projections. Currently, the consensus for the IQ 2025 is for NIIPS to reach $1.02 – unchanged. MAIN’s own estimate of $1.00-$1.02 for the first quarter suggests recurring earnings will meet, or be slightly below analyst expectations and last quarter’s performance.

Given that MAIN – and all BDCs – are contending with the 0.25% SOFR rate cut that occurred in December 2024 for the full 3 first months of 2025 that result seems to be a positive. Moreover, with the BDC likely issuing new shares constantly, the pressure to increase profits is enhanced. We expect the actual NII number will be higher even if NIIPS is flat or slightly down.

Net Asset Value Per Share

Almost uniquely amongst BDCs, MAIN has been able to greatly increase its NAVPS over the years. As the BDC NAV Change Table shows, MAIN’s NAVPS has increased 32% between the end of 2019 and the end of 2024, or 1.6% a quarter on average. In the past 12 months, this metric has increased by 8.4% – the third best performance amongst the 46 BDCs we track.

As a result, MAIN has set its bar for NAVPS very high. The preliminary results suggesting a 1.1% to 1.3% increase in the IQ 2024 would be very favorable for most BDCs, but is slightly behind trend for MAIN. (BDC Best Ideas, though, projected 2025 NAVPS growth of 4.0%). We assume the drop in the value of MAIN’s investment manager now that MSC Income Fund (MSIF) has gone public weighed materially on the final number. That write-down was predicted by MAIN itself, reflecting the lower compensation income to be received from MSIF now that it’s public.

Non Accruals

Although this data does not tell us much in isolation, we know that MAIN’s non-accrual investments at fair market value accounted for 0.9% of the total investment portfolio and 3.5% at cost at the end of the IVQ 2024. The latest numbers are 1.7% at FMV and 4.5% at cost – i.e. slightly higher. The absolute amount involved of higher non-performing assets at cost should be around $40mn. Assuming a 12% yield being forgone, that’s ($4.8mn) of income erosion. To put that into context, MAIN’s total investment income in 2024 amounted to $541mn.

Investment Activity

In the IQ 2024, MAIN booked $91.8 million in total LMM portfolio investments, which after aggregate repayments of debt principal and return of invested equity capital resulted in a net increase of $67.0 million in the total cost basis of the LMM investment portfolio. That’s very similar to the IQ 2025 numbers quoted above: $86.2mn booked and $57.3mn net change.

Last year MAIN booked $154.5 million in total private loan investments, versus $138.2mn this year. The net increase of $54.9 million in 2024 was higher than the $25.6mn in the IQ 2025.

The BDC has been divesting itself of its “middle market loan portfolio”, recording a net drop of ($21.9mn) in IQ 2024 and roughly doubling that in 2025.

VIEWS

Normal Caveats

As always, we want to point out right away that these “preliminary results” press releases from MAIN, CSWC and others have the capacity to mislead and cause very different conclusions to be drawn once the full performance picture is revealed.

With that said, the glimpses that have been communicated suggest MAIN continues to perform at its prior levels.

If there are to be drops in earnings or book value or a significant jump in bad debt or an inability to increase the size of the portfolio, it’s all in the future.