Main Street Capital Corporation

Greetings, and welcome to the Main Street Capital first 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 requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Zach Vaughn, You may begin.

Thank you, Operator, and good morning, everyone. Thank you for joining us for Main Street Capital Corporation's first quarter 2026 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 Meserve, 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 first quarter 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 May 15th. 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, May 8, 2026, and therefore, you are advised that any 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, and DNII before taxes. 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. DNII before taxes is NII, as determined in accordance with GAAP, excluding the impact of non-cash compensation expenses, and any tax expenses included in NII. Management believes that presenting DNII and DNII before taxes and the related per share amounts is useful and appropriate supplemental disclosure for analyzing Main Street Capital Corporation's financial performance since non-cash compensation expenses do not result in a net cash impact to Main Street upon settlement. And tax expenses included in NII may include excise tax expense, which is not solely attributable to NII and deferred taxes, which are not payable in the current period. Please refer to yesterday's press release for a 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 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 Mainstreet's CEO, Dwayne Hijak. Thanks, Zach.

Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call. We hope that everyone's doing well. On today's call... we will provide our key quarterly updates, after which we'll be happy to take your questions. We were pleased with our performance in the first quarter, particularly given the backdrop of significant economic and geopolitical uncertainties, which resulted in DNII before taxes per share, in line with our expectations and prior guidance, and strong investment activity in our lower-middle-market investment strategy, following our very strong investment activity in the fourth quarter of 2025, resulting in significant growth of our lower-middle-market investment portfolio, over the last two quarters. We believe that these results continue to demonstrate the sustainable strength of our overall platform, the benefits of our differentiated and diversified investment strategies, and the continued strength and quality of our portfolio companies, particularly our lower-middle-market portfolio companies. We're also pleased that we further strengthened our capital structure since the beginning of the year, despite the challenging environment, which Ryan will discuss in more detail. Given our strong liquidity position and conservative leverage profile, We're 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 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 DNII before taxes for the first quarter and net realized gains over the last two quarters, combined with our outlook for the second quarter, resulted in our most recent dividend announcements, which I will discuss in more detail later. Our NAB per share increased in the quarter, primarily due to the accretive impact of our equity issuances and the impact of a net fair value increase in our lower-minimum market investment portfolio, partially offset by net fair value decreases in our private loan investment portfolio and our asset management business, 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 favorable dividend income contributions and net fair value appreciation in our low-emitter market equity investments. Based upon our current views of these investments and feedback from our portfolio company management teams, we expect these favorable contributions to continue. We're also pleased to have exited our investments in a high-performing low-emitter market portfolio company, KBK Industries, in the first quarter. resulting in a material realized gain in addition to the significant dividends received over the life of our equity investment. We continue to see significant interest from potential buyers in several of our lower-minimum 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 follow-on investments we made in our lower-minimum market strategy during the quarter, which included investments in three new portfolio companies and follow-on investments in five high-performing portfolio companies to support strategic acquisitions, resulting in a net increase in lower middle market investments of $157 million. Our private loan investment activity in the quarter was slower than our expected normal quarterly activity, primarily due to lower overall levels of private equity industry investment activity, resulting in a net increase in private loan investments of $37 million. Dave will discuss our investment activity in more detail. 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 first quarter, resulting in a meaningful 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. We're 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 requirements, debt capacity, which became effective at the end of January, 2026, the fund maintained significant capacity to add additional debt to fund future growth of its investment portfolio. The Missing Income Fund's first quarter 2006 financial results conference call will be held later this morning for those who would like additional details. Based upon our results for the first quarter, combined with our favorable outlook for the second quarter, earlier this week our board declared a supplemental dividend of 30 cents per share, payable in June, representing our 19th consecutive quarterly supplemental dividend and an increase to our regular monthly dividends for the third quarter of 2026 to 26.5 cents per share. These third quarter regular monthly dividends represent a 3.9% increase from the regular monthly dividends paid in the third quarter of 2025. Supplemental dividend for June is a result of our favorable level of DNII report taxes in the first quarter and our net realized gains over the last two quarters. 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 second quarter, we currently anticipate proposing an additional significant supplemental dividend payable in September 2026. Now turning to our current investment pipeline, as of today I would characterize our lower middle market investment pipeline as average. Consistent with our experience in prior periods of broad economic uncertainty, we believe that our ability to provide highly flexible and customized financing solutions to lower middle market companies and their owners and management teams together with our differentiated long-term to permanent holding periods, represents an even more attractive solution to the needs of many lower-middle-market companies, and we're excited about our expectations for continued growth of our lower-middle-market investment portfolio. Similarly, in our private loan investment strategy, we are seeing an improved lending environment and significant opportunities, which we believe position us well to capitalize on new private loan investment opportunities and to generate growth for our private loan investment portfolio and our asset management business. And as of today, I'd characterize our private loan investment pipeline as average. With that, I will turn the call over to David.