Main Street Capital Corporation

This time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughn. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for Main Street Capital Corporation's third quarter 2025 earnings conference call. Joining me today with prepared comments are Dwayne Hijak, Chief Executive Officer, David Magdahl, President and Chief Investment Officer, and Ryan Nelson, Chief Financial Officer. Also participating in the Q&A portion of the call is Nick Mazur, Managing Director and Head of MainStreet's Private Credit Investment Group. MainStreet issued a press release yesterday afternoon that details the company's third quarter financial and operating results. This document is available in the investor relations section of the company's website at mainstcapital.com. A replay of today's call will be available beginning an hour after the completion of the call and will remain available until November 14th. Information on how to access the replay was included in yesterday's release. We also advise you that this conference call is being broadcast live through the internet and can be accessed on the company's homepage. Please note that information reported on this call speaks only as of today, November 7, 2025, and therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call will contain forward-looking statements. Many of these forward-looking statements can be identified by the use of words such as anticipates, believes, expects, intends, will, should, may, or similar expressions. These statements are based on management's estimates, assumptions, and projections as of the date of this call, and there are no guarantees of future performance. Actual results may differ materially from the results expressed or implied in these statements as a result of risks, uncertainties, and other factors, including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission, which can be found on the company's website or at sec.gov. Main Street assumes no obligation to update any of these statements unless required by law. During today's call, management will discuss non-GAAP financial measures, including Distributable Net Investment Income, or DNII. DNII is Net Investment Income, or NII, as determined in accordance with U.S. generally accepted accounting principles, or GAAP, excluding the impact of non-cash compensation expenses. Management believes that presenting DNII and the related per share amount are useful and appropriate supplemental disclosures for analyzing Main Street's financial performance, since non-cash compensation expenses do not result in a net cash impact to Main Street upon settlement. Please refer to yesterday's press release for reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Two additional key performance indicators that management will be discussing on this call are net asset value, or NAV, and return on equity, or ROE. NAV is defined as total assets minus total liabilities and is also reported on a per share basis. MainStreet defines ROE as the net increase in net assets resulting from operations divided by average quarterly NAV. Please note that certain information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. And now I'll turn the call over to MainStreet CEO, Dwayne Hijak. Thanks, Zach.

Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call, and we hope that everyone's doing well. On today's call, David, Ryan, and I will provide you with our key quarterly updates, after which we'll be happy to take your questions. We are pleased with our performance in the third quarter, which resulted in another quarter of strong operating results, highlighted by an annualized return on equity of 17%, favorable levels of DNII per share, a new record for NAV per share for the 13th consecutive quarter. We believe that these continued strong results demonstrate the sustained 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 depth and quality of our portfolio companies, particularly our existing lower middle market portfolio companies. We are also pleased that we further strengthened our capital structure during the quarter, which Ryan will discuss in more detail. We continue to maintain a very strong liquidity position and conservative leverage profile, and we are well positioned for the continued growth of our investment portfolio. We remain confident that our unique investment income and value creation drivers, together with our cost-efficient operations and conservative capital structure, will allow us to continue to deliver superior results for our shareholders in the future. Our favorable results for the third quarter, combined with our positive outlook for the fourth quarter, resulted in our most recent dividend announcements, which I will discuss in more detail later. Our NAV per share increased in the quarter, primarily due to the impact of net fair value increases in both our lower middle market and private loan investment portfolios, which Ryan will discuss in more detail. The continued favorable performance of the majority of our lower middle market portfolio companies resulted in another quarter of strong dividend income contributions and significant net fair value appreciation in our lower middle market equity investments. Based upon our current views of these investments and feedback from our portfolio company management teams, we expect these contributions to continue to be strong for the next few quarters. We also continue to see significant interest from potential buyers in several of our lower middle market portfolio companies, which we expect will lead to favorable realizations over the next few quarters, and which we believe further highlights the strength and quality of our portfolio companies and their exceptional leadership teams. We're also excited about the new and following investments we made in our lower middle market portfolio companies during the quarter, which resulted in the addition of three new portfolio companies and a net increase in lower middle market investments of $61 million. Consistent with our guidance last quarter, our private loan investment activity in the quarter continued to be slower than our expected normal quarterly activity, resulting in a net decrease in private loan investments of $69 million. In addition to the potential for favorable investment realizations in our lower middle market portfolio, we also recently exited one of our private loan portfolio company equity investments and have a second exit in process, subject to customary closing conditions and regulatory approvals, with these activities representing total realized gains of at least $35 million, both at meaningful premiums to our quarter-end fair values. David will discuss our investment activity in more detail. Given our conservative capital structure and strong liquidity position, we remain very well positioned to continue the growth of our investment portfolio for the foreseeable future, and we are excited about the current opportunities we are seeing. We also continue to produce positive results in our asset management business. The funds we advise through our external investment manager continue to experience favorable performance in the third quarter, resulting in significant incentive fee income for our asset management business for the 12th consecutive quarter, and together with our recurring base management fees, a significant contribution to our net investment income. We remain excited about our plans for the external funds that we manage as we execute our investment strategies, and we are optimistic about the future performance of the funds and the attractive returns we are providing to the investors of each fund. We also remain excited about our strategy for growing our asset management business within our internally managed structure. As part of these efforts, we remain focused on growing the investment portfolio of MSC Income Fund, a publicly traded BDC advised by our external investment manager and our largest asset management business client, which maintains meaningful current liquidity and will benefit from a significant increase to its regulatory debt capacity at the end of January, 2026. In addition to deploying the fund's current liquidity into new private loan investments, we also continue to focus on maximizing the benefits of the fund's legacy lower middle market investment portfolio and are excited about the near-term expectations for additional realized value creation over the next few quarters. Based upon our results for the third quarter, combined with our favorable outlook in each of our primary investment strategies and for our asset management business, earlier this week our board declared a supplemental dividend of 30 cents per share payable in December, representing our 17th consecutive quarterly supplemental dividend, and it increased our regular monthly dividends for the first quarter of 2026 to 26 cents per share. These first quarter regular monthly dividends represent a 4% increase from the regular monthly dividends paid in the first quarter of 2025. The supplemental dividend for December is a result of our strong performance in the third quarter and our near-term expectations for additional net realized gains and will result in total supplemental dividends paid during the trailing 12-month period of $1.20 per share, representing an additional 40% paid to our shareholders in excess of our regular monthly dividends. We currently expect to recommend that our board continue to declare future supplemental dividends to the extent DNII before taxes significantly exceeds our regular monthly dividends paid or we generate net realized gains and we maintain a stable to positive NAV in future quarters. Based upon our expectations for continued favorable performance in the fourth quarter, we currently anticipate proposing an additional significant supplemental dividend payable in March 2026. Now turning to our current investment pipeline, As of today, I would characterize our lower middle market investment pipeline as above average. Consistent with our experience in prior periods of broad economic uncertainty, we believe that our ability to provide unique and flexible financing solutions to lower middle market companies and their owners and management teams in our differentiated long-term to permanent holding periods represent an even more attractive solution to the needs of many lower middle market companies given the current economic environment, and we are confident in our expectations for strong lower middle market investment activity in the fourth quarter. In addition, we continue to have an increased number of existing portfolio companies that are actively executing acquisition growth strategies that we anticipate will provide attractive follow-on investment opportunities for us in the near term and significant value creation opportunities for these portfolio companies in the longer term, consistent with the successes we demonstrated and experienced with other portfolio companies. We also continue to be pleased with the performance of our private credit team and the significant growth they have provided for our private loan portfolio and our asset management business over the last few years. Our investment pipeline has increased significantly since our last conference call, and as of today, I would characterize our private loan investment pipeline as above average. With that, I will turn the call over to David.