Main Street Capital Corporation

Greetings and welcome to the Main Street Capital Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, 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 fourth 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 Main Street's Private Credit Investment Group. Main Street issued a press release yesterday afternoon that details the company's fourth quarter and full year financial and operating results. This document is available on the investor relations section of the company's website at mainstcapital.com. The replay of today's call will be available beginning an hour after the completion of the call and will remain available until March 6th. 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, February 27th, 2026, and therefore, we're 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. Any 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. The Ministry 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. Mainstream defines ROE as the net increase in net assets resulting from operations divided by the 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 Main Street CEO, Duane Hijack.

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, we will provide you with our key quarterly updates. We're also providing a few updates on our performance for the full year. Following our comments, we will be happy to take your questions. We're extremely pleased with our continued strong performance in the fourth quarter, which closed another great year for Main Street. Our strong performance resulted in a return on equity of 17.7% for the fourth quarter and 17.1% for the full year. Strong levels of DNII per share, a new record NAV per share for the 14th consecutive quarter, and extremely strong investment activity in our unique lower middle market investment strategy, which resulted in an annual record for gross lower middle market investments. We believe that these continued strong results demonstrate the 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 strength and quality of our portfolio companies, particularly our existing lower middle market portfolio companies. We remain confident that our unique investment income and value creation drivers, together with our cost efficient operations and conservative capital structure, allow us to continue to deliver superior results for our shareholders in the future. Our favorable results in the fourth quarter, combined with our positive outlook for the first 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 significant net fair value increases in both our low-limit market and private loan investment portfolios, including the benefits of material net realized gains, which Ryan will discuss in more detail The continued favorable performance of the majority of our lower-minimum market portfolio companies resulted in another quarter of strong dividend income contributions and significant net fair value appreciation in our lower-minimum market equity investments. Based upon our current views of these investments and feedback from our portfolio company management teams, we expect the strong contributions to continue. I've been consistent with my comments over the last few quarters, and as David will discuss in more detail, we're pleased to have exited our investments in one high-performing lower middle market portfolio company, Mystic Logistics, in the fourth quarter, and our investments in another high-performing company, KBK Industries, in the first quarter of 2026, in both cases resulting in material realized gains in addition to significant dividends received over the life of our equity investments. We believe that these investments serve as yet another great example of our highly unique lower middle market investment strategy, which delivered significant benefits for both Main Street and our management team partners, including significant dividend income, fair value appreciation, and realized gains, resulting in best-in-class returns on our equity investments in addition to the highly attractive interest income on our debt investments. Even after these recent realizations, we 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 are also excited about the new and following investments we made in our lower middle market strategy during the quarter, which included the addition of five new portfolio companies and a net increase in lower middle market investments of $253 million, representing our highest level of quarterly lower middle market net investment activity since the fourth quarter of 2021. Consistent with our prior guidance, Our private loan investment activity in the fourth quarter returned to our expected normal level of quarterly activity and generated a net increase of $109 million in our private loan portfolio. In addition to the favorable investment realizations in our lower middle market portfolio, we also completed successful exits of two private loan portfolio company equity investments in the fourth quarter, both at meaningful premiums to our third quarter 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. Funds we advise through our external investment manager continue to experience favorable performance in the fourth quarter, resulting in significant incentive fee income for our asset management business, 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 and 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 which is solely focused on the private loan investment strategy with respect to new portfolio company investments. As a result of the increase to its regulatory debt capacity, which became effective at the end of January, 2026, the fund maintained significant capacity to add additional debt to fund the future growth of its investment portfolio. MSC Income's fourth quarter and full year 2025 financial results conference call will be held later this morning for those who would like additional details. Based upon our results for the fourth 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 March, representing our 18th consecutive quarterly supplemental dividend, and regular monthly dividends for the second quarter of 2026 of 26 cents per share. The second quarter regular monthly dividends represent a 4% increase from the regular monthly dividends paid in the second quarter of 2025. Supplemental dividend for March is a result of our strong performance in the fourth quarter and will result in total supplemental dividends paid during the trailing 12-month period of $1.20 per share, representing an additional 39% 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 first quarter, we currently anticipate proposing an additional significant supplemental dividend payable in June 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 and 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're confident in our expectations for strong lower-middle-market investment activity in the first 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 future and significant value creation opportunities for these portfolio companies in the longer-term future, consistent with the successes we've demonstrated and experienced with other portfolio companies. To date, in the first quarter of 2026, we have made follow-on investments in four high-performing lower middle market portfolio companies to support strategic acquisitions for a total of over $45 million and incremental investments in those 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. 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.