Main Street Capital (MAIN) 8 Nov 242024 Q3 Earnings call transcript

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

You may begin.

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

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everyone. Thanks, Dwayne, good and morning,

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

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million increased approximate to quarter activities. maturity maturing increasing to June yield continue the June The outstanding million a $XXX additional issuance. issuance of we be our regulatory of limit. in total this of our $XXX to million, additional in XXXX, unsecured of notes million on the additional September a to an We notes borrowed in year, total debentures, we In capital $XX.X resulting on such X.X% active amount amount $XXX an and XXXX SBIC issued

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

long-term to current to few leverage investment liquidity, such, our expect to financing, targets. Coming the be stated to for would back we our time fund expect closer results. increase of to with our portion last of through operating quarters new a we period next we debt As activity currently level this discussed the continue during and as quarter, greater to

$X.XX for $X.XX of the $X.XX months I the quarters, of results of was per for second year the strong income which second basis, nature, $X.XX below DNII impact and the below per above third third on quarter, than investment of in X certain and These XX.X% DNII of nonrecurring last return ago. As below performance earlier, $X.XX was a than quarter discussed the the the the a the for share the result $X.XX for of on first considered DNII quarter for annualized or quarter. the quarter, was lower year quarter was X.X% per same share or quarter were or per higher and as per share respectively. our X XX.X% less last share the X.X% equity an the share year average consistent and

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

from The Securities. first Rowe from Bryce is Instructions] Riley B. [Operator question

start your and had slipped sounds quarter, wanted lower Dwayne, well around some you to, maybe fourth the Last the might the market middle on like comment, commentary quarter. activity to of pipeline. have the here above-average I it

make And well-above commentary sure any I'm loan to to market the for way. to then then from well-above Just lower around wanted going above right the of middle kind average. that within private the move reading book into and from

Thanks give let question. some has. I'll Bryce. comments. he comments on the any for Sure, initial I'll additional add David

when would X on week I guidance, into there's the at couple a things. is slipped a say October. that in we look pipeline what or middle couple of close of of third had One we investments the I'd script. in touched lower you think that hoping or market just first were expecting the We the quarter

million $XXX activity. about investment new of was that So

investments documentation also or So in market were away. investment relative third diligence actively was part slipped actually reason on expectations for due had our to that the of of that legal underperformance quarter. But on activity we've just, getting or just the transactions a or and number movement in middle X another, we that lower

what case. the deciding he doing owner on operator at Some off and they least was the rethinking X was to were company It diligence and due transaction. a hold doing of issues it of in

my we middle do closing that to head, strategy or that, now the X We of a in at lower QX focus that, good quarter transactions, for expect we those about good have transactions reasons, fourth the quarter. Despite because end close and in area we number XXXX. pipeline. in So in shape between third the X did the continue and And off to won't feel market of both that of close and not be year-end. we X we we'll the had into heading to top least of if think achieve

there been On very the I'd team side, the say private active. loan has

significant those second group of amount bit. for also And a say but we as executed If investment not that to cooled you look I a activity. has quarter, back would little activities third just they pipeline the the off just that had quarter the

classification So David, it's lot back it's add you say efforts the I'd into a but not on that of X quarters the of side. investment on activity middle lower average market a returned would negative after and anything pipeline significant side?

No, I it. covered think you've

Dwayne, perspective, you to of starting talk loan spreads And Can pricing a you're light lower Okay. active rates through around and a then see you pricing portfolios? levels seeing of a that we're the So talk commentary loan. noted the private competitive and within about compressing third little flow obviously of any for all market and around base what quarter kind especially terms bit terms? both private from in pretty

Nick, Sure, component. Bryce. has. leads Managing that our base of Credit him he initial control Again, comments let on and I I'll Director give say that let team, rate we I'll a market would obviously couple our Private the anything add can't

other our like just results it continue what impacted and BDCs that. will to is. We other funds, private is by credit that be So

we part that be the really we on control deal that So your in with. space. to just of to [indiscernible] because you're That's just don't investment to can't going focus management have

seen say The On some maybe it spread would basis I'd ago. points pressure. side, since quarter to basis have is XXX points categorize year way XX we since a probably of pressure the end, I XX

some seeing we're So pressure.

wish we're And view and have the the we that seeing pressure for based we in companies, than to investments they we our good really what that think continue the strategy still there. but are market well we larger seeing opportunities wasn't quality focused pressure the BDCs are spread find upper We but we of from do on hear private other levels kind our on the of upon less be we to strategy. can that some still middle credit, investment and the that there, pressure loan private are,

it some but there. hasn't deterred us investing So have from seen pressure we

as that we is in us, some seen have stepped of by us Again, really a that's not The respond the have and additional it and other kind thing activity surprised commercial of way but I'd they when sporadic banks of as to we margin can companies Nick say we We be something color. local portfolio part spread. seen to opposed opposed have would control. of expect permanent do some but new to let on come any beat a some repayment in investment our to that up that marketplace, wide your that's I'm more I But the more question, add to on we've seen terms happy regional activity.

think I Dwayne, nailed it you there.

points really to XX consistent a over year. XXX just basis of we've tightening the seen think I

bit see basis I pricing, XX think since end. a quarter we'll points little more

come in a think they're in I step kind competitors year pricing as to to willing bit for a We're to spend some little few budget, of crack need tighter the deals. we'll might down on win seeing that year-end. maybe their and

helpful. That's

other say X we had that Bryce, really QX, about in it, we of the QX and comment. that activity spread good compression. significant just some given I'd feel

Maybe me. Yes, understood. X for last

And go balance comments of made saw here comment quarter? bit the not leaning the about relative fourth nature, available what leverage curious, You to sheet guys to capital capital maybe debt have And investments. little Just third new Was about kind to quarter, the a into debt just didn't the fund conservative knowing down. the of fund. use in why here, kind third net certainly that we on your might you'll that lean future quarter. capital in curious the debt come quarters likely more just in you

a the large some had of middle say But I'd really, really say our market nature. Bryce, just continued conservative factor was, was Yes, biggest pipeline. it we I'd lower

Some of to not fruition. that pipeline come did

program activity otherwise what to than more the in middle market would probably if So going quarter been lower we have be. was under we ATM active the had the known we actual were

not expectations significant average middle other market pipeline in investment that well than coming So nothing above lower the for quarter. to third the fruition

from question Robert James. next The Raymond is from Dodd

follow-on from Just first. X price immediate to an that

you -- QX. are closing of in at ATM closed deals the in them obviously, So Those QX, explained well, some just least why. usage, have

trends lower have on because without into of that there the us QX giving usage we much QX ATM you away? any near with Or like sense color been QX? too deals be going in are can expect ATM give the So closed to the should what term you're essentially prefunded in in the

right market significantly Robert, Yes. pipeline, think I here. you're In the that from middle conclusion. of really the lower building is absence the

expect under should to ATM us the You have to less activity in see QX.

Got it.

theme But it just there? that On recurring do mean, the but we're the the dividend this quarter. that? income, holding QX? didn't I of that's you something Do I the below mean, that dividend there average. say think lot was it this lower come nonrecurring a typically Was Or much thoughts capital as than bit it's was happen incremental dividend quarter normal -- going it's there any not on in income was -- in it happens. little any was Was not like catch there? to happen, up might been of nonrecurring maybe like of to ahead not deferred, you but a

Robert. Sure,

market are continues across comments So can key perform contributors middle continue I'd to then to give perform he for But else really, well. companies to anything the really and they income, the well specifically add I'll a couple of David the lower And really has. board. that portfolio on dividend the again, say

of say, much a it's their to what levels So the not have to it's don't as with they anything or always we concern. visibility interest income, of do that we're seeing predictability decide income. We and on just the visibility capital. not But have high dividend predictability sort you've as and but is performance companies of the

mentioned with we've going that a they're a pursuing focus on for acquisition we think executing have several couple quarters, be to if paying are dividends. I growth of likely companies strategies. they're that strategies, But

from next I that. to X the of quarterly drives the other see just is think you that but impact quarter just some the that, monthly variability

our out, you X is management variability. I that's But you of you'll the or normal saw the get will probably the it on So concerning just the was income if see did, in you asset on quarter-to-quarter point nothing part movement dividend this the side when XX-Q. business. results

fees has less incentive dividend through saw income. you direct and a So impact come on that

the So fluctuation. sure just you that quarter-over-quarter you make look caught at when

I did that. you. catch Thank

go Sorry, ahead.

to pulled No, all that's I the portfolio say comments, echo being going in Dwayne's back. was there's thematically nothing to

contributors just that their platform in but innovation are various You such. also assets reinvesting only way of new product not doing and pursuing have own and by acquisition strategies

there. it flows nothing ebbs There's and So quarter-by-quarter. just thematic

Got it. could. if I then And more, X

actually that But give can in gain in -- through realized private yet. also the portfolio, You asset loan quarter on end? realized I'm the if after held? QX? income to I Was it after end me and source -- was gone is you I was, of in $XX manager out million that figure going gain, obviously, trying asset that to that that was I mentioned haven't the what was if was fee it that quarter it that when incentive a think, just side. Is think from And it a happens. or affect

incentive was Robert. will the It in not impact QX, fees. It

question Hughes next Truist from Securities. The is Mark Instructions] [Operator from

curiosity, lower election? by out activity the influenced Just market was middle of the

at was it I Bryce, into at all. move still we diligence, may was to going and X certain things due get situations. the different terms. don't think say in Like forward to If by you're to we're you banks. election influenced aren't I bit those response but very would the we consistent it earlier be When said want in expecting there,

when say not other and that that happen, other I'd a has to changing was X So at the you factors of operator in in situations, the the diligence transaction it owner have his least agree resulted side those then with mind. that. closing, X was

a Yes. On nonaccruals, uptick. just slight

see kind where could what end work the or I in mentioned timing Any markets improvement? think sense on you're you continuing you that. of to might potentially through that had consumer discretionary, be

expect in consumer, months. in over so situations also The have, a early consistent or progress happens Yes. of it's we to do trend each that expect but nonaccrual a we kind progress significant see new business focused of continued I a that on be see QX there. we name QX think was specific Whether couple do seen the next that or the there. of it the But to to it's consumer-focused business. in remains on

to going something road that's a expect happen recovery we to longer-term as quickly. to think to it opposed I be

Then but market think some the lower you've this, about the first contours seeing last growth touched I quarter that EBITDA growth versus, anything the you're portfolio, the of of months? Understood. middle within kind on X say, of

Mark. of a companies overperforming then as put if whole the performers any more the end, you portfolio and of Yes, put the maybe underperforming overperforming the just tell But exceptionally think middle, it companies little good bit, that, a kind -- of definitely, on X on well. continues do The numbers, you standpoint kind of slightly a the to a to well. bunch really right of in groups the we middle. The say are out it just perform is it's I'd a flat in buckets, probably well. perform I portfolio qualitative really, side other are What down really on continue would I companies end didn't where kind into at to companies performing X the looked from concerning. of a nothing exceptionally

more activity portfolio regional would has go your How stabilized? or are? involved you there Is repayment then in I'll to getting And the that process say some about banks, talked that you activity you Yes. that selectively. prepayment banks through or the again. far maybe question much ask

bought Mark, into then come a they'd and where or across, the usually local well us performed private it's banks X banked part it's years a a we the after buyout sponsor much come or back year refinance regional them. idiosyncratic and take it they've They the rate. banks say, cheaper used the company more in in at did I'd past and before

we example bank business, local bit was ago ]. S+XXX 'XX, before to Obviously, decade-plus a then a [indiscernible] X the on a recent got at the involved. of [ got first S+XXX [ So we're for it we going ] of refi'd think little -- and weeks quarter in company I an

yes. Yes,

particular there, say? just trend no So as idiosyncratic you

regional bank. much, I'd much than Exactly. localized say it's more banks our

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

to I we again, look late Main in just Street. thank this want release. appreciate again And after support joining our talking for everyone, us to say interest to forward of your you February long-term year-end you earnings morning. and We

teleconference. concludes today's This

Thank this at lines your disconnect time. may you You for your participation.