MAIN STREET ANNOUNCES 2023 FOURTH QUARTER AND ANNUAL RESULTS
Fourth
Quarter 2023 Net Investment Income of
Fourth
Quarter 2023 Distributable Net Investment Income
(1)
of
Net Asset Value of
Fourth Quarter 2023 Highlights
- Net investment income of
$90.1 million (or$1.07 per share) - Distributable net investment income(1) of
$94.8 million (or$1.12 per share) - Total investment income of
$129.3 million - An industry leading position in cost efficiency, with a ratio of total non-interest operating expenses as a percentage of quarterly average total assets ("Operating Expenses to Assets Ratio") of 1.3% on an annualized basis
- Net increase in net assets resulting from operations of
$139.1 million , or$1.65 per share - Return on equity(2) of 22.9% on an annualized basis
- Net asset value of
$29.20 per share atDecember 31, 2023 , representing an increase of$0.87 per share, or 3.1%, compared to$28.33 per share atSeptember 30, 2023 - Declared regular monthly dividends totaling
$0.72 per share for the first quarter of 2024, or$0.24 per share for each of January, February andMarch 2024 , representing a 6.7% increase from the regular monthly dividends paid in the first quarter of 2023 and a 2.1% increase from the regular monthly dividends paid in the fourth quarter of 2023 - Declared and paid a supplemental dividend of
$0.275 per share, resulting in total dividends paid in the fourth quarter of 2023 of$0.98 per share and representing a 28.9% increase from the total dividends paid in the fourth quarter of 2022 and a 1.6% increase from the total dividends paid in the third quarter of 2023 - Completed
$92.3 million in total lower middle market ("LMM") portfolio investments, including investments totaling$68.3 million in two new LMM portfolio companies, which after aggregate repayments of debt principal, return of invested equity capital and a decrease in cost basis due to a realized loss resulted in a net increase of$65.7 million in the total cost basis of the LMM investment portfolio - Completed
$160.4 million in total private loan portfolio investments, which after aggregate repayments of debt principal and sales of debt investments and a decrease in cost basis due to a realized loss resulted in a net decrease of$112.5 million in the total cost basis of the private loan investment portfolio - Net decrease of
$50.3 million in the cost basis of the middle market investment portfolio from net investment activity - Expanded the total commitments under the SPV Facility (as defined in the Liquidity and Capital Resources section below) from
$255.0 million to$430.0 million and added two new lender relationships to the SPV Facility, expanding and diversifying the lender group to six participating lenders
Full Year 2023 Highlights
- Net investment income of
$339.0 million (or$4.14 per share) - Distributable net investment income(1) of
$356.8 million (or$4.36 per share) - Total investment income of
$500.4 million - An industry leading position in cost efficiency, with an Operating Expenses to Assets Ratio of 1.3%
- Net increase in net assets resulting from operations of
$428.4 million (or$5.23 per share) - Return on equity(2) of 18.8%
- Net asset value of
$29.20 per share atDecember 31, 2023 , representing an increase of$2.34 per share, or 8.7%, compared to$26.86 per share atDecember 31, 2022 - Paid regular monthly dividends totaling
$2.745 per share, representing a 5.8% increase from prior year - Paid supplemental dividends totaling
$0.95 per share, a 171.4% increase from 2022, resulting in total dividends paid in 2023 of$3.695 per share, representing a 25.5% increase from prior year and a new record for total dividends paid in a year - Completed
$301.3 million in total LMM portfolio investments, including investments totaling$196.5 million in six new LMM portfolio companies, which after aggregate repayments of debt principal, return of invested equity capital and a decrease in cost basis due to realized losses resulted in a net increase of$61.4 million in the total cost basis of the LMM portfolio investments - Completed
$506.8 million in total private loan portfolio investments, which after aggregate repayments of debt principal and sales of debt investments, return of invested equity capital and a decrease in cost basis due to realized losses resulted in a net decrease of$46.6 million in the total cost basis of the private loan portfolio investments - Net decrease of
$112.8 million in the total cost basis of the middle market portfolio investments, which resulted from the net investment activity and a decrease in cost basis due to realized losses - Further diversified Main Street's capital structure and enhanced liquidity by (i) expanding the total commitments under the Corporate Facility (as defined in the Liquidity and Capital Resources section below) from
$920.0 million to$995.0 million , (ii) amending the SPV Facility to increase the total commitments from$255.0 million to$430.0 million and (iii) issuing an additional aggregate principal amount of$50.0 million of theDecember 2025 Notes (as defined in the Liquidity and Capital Resources section below)
In commenting on the Company's operating results for the fourth quarter and full year 2023,
Fourth Quarter 2023 Operating Results
The following table provides a summary of our operating results for the fourth quarter of 2023:
|
Three Months Ended |
||||||
|
2023 |
|
2022 |
|
Change ($) |
|
Change (%) |
Interest income |
$ 100,690 |
|
$ 86,297 |
|
$ 14,393 |
|
17 % |
Dividend income |
23,782 |
|
22,416 |
|
1,366 |
|
6 % |
Fee income |
4,837 |
|
5,163 |
|
(326) |
|
(6) % |
Total investment income |
$ 129,309 |
|
$ 113,876 |
|
$ 15,433 |
|
14 % |
|
|
|
|
|
|
|
|
Net investment income |
$ 90,144 |
|
$ 75,940 |
|
$ 14,204 |
|
19 % |
Net investment income per share |
$ 1.07 |
|
$ 0.98 |
|
$ 0.09 |
|
9 % |
|
|
|
|
|
|
|
|
Distributable net investment income(1) |
$ 94,846 |
|
$ 80,004 |
|
$ 14,842 |
|
19 % |
Distributable net investment income per share(1) |
$ 1.12 |
|
$ 1.03 |
|
$ 0.09 |
|
9 % |
|
|
|
|
|
|
|
|
Net increase in net assets resulting from operations |
$ 139,078 |
|
$ 106,315 |
|
$ 32,763 |
|
31 % |
Net increase in net assets resulting from operations per share |
$ 1.65 |
|
$ 1.37 |
|
$ 0.28 |
|
20 % |
The $15.4 million increase in total investment income in the fourth quarter of 2023 from the comparable period of the prior year was principally attributable to (i) a
Total cash expenses(3) increased $0.6 million, or 1.7%, to
Non-cash compensation expenses(3) increased
Our Operating Expenses to Assets Ratio (which includes non-cash compensation expenses(3)) was 1.3% for the fourth quarter of 2023, on an annualized basis, as compared to 1.4% for the same period in 2022 and 1.3% for the full year 2023, as compared to 1.4% for the full year 2022.
The
The
The following table provides a summary of the total net unrealized appreciation of
|
Three Months Ended |
||||||||
|
LMM |
|
Private |
|
Middle |
|
Other |
|
Total |
|
|
|
|
|
(dollars in millions) |
|
|
|
|
Accounting reversals of net unrealized (appreciation) |
$ 2.1 |
|
$ 12.9 |
|
$ — |
|
$ (0.4) |
|
$ 14.6 |
Net unrealized appreciation (depreciation) relating to |
14.5 |
|
4.1 |
|
2.0 |
|
30.3 |
(b) |
$ 50.9 |
Total net unrealized appreciation (depreciation) relating |
$ 16.6 |
|
$ 17.0 |
|
$ 2.0 |
|
$ 29.9 |
|
$ 65.5 |
|
|
(a) |
LMM includes unrealized appreciation on 24 LMM portfolio investments and unrealized depreciation on 25 LMM portfolio investments. |
(b) |
Other includes (i) |
Liquidity and Capital Resources
As of
Several details regarding our capital structure as of
- Our Corporate Facility included
$995.0 million in total commitments from a diversified group of 18 participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to$1.4 billion . -
$200.0 million in outstanding borrowings under our Corporate Facility, with an interest rate of 7.3% based on SOFR effective for the contractual reset date ofJanuary 1, 2024 . - Our SPV Facility included
$430.0 million in total commitments from a diversified group of six participating lenders, plus an accordion feature that allows us to request an increase in the total commitments under the facility to up to$450.0 million . -
$160.0 million in outstanding borrowings under our SPV Facility, with an interest rate of 7.9% based on SOFR effective for the contractual reset date ofJanuary 1, 2024 . -
$500.0 million of notes outstanding that bear interest at a rate of 3.00% per year (the "July 2026 Notes"). TheJuly 2026 Notes mature onJuly 14, 2026 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. -
$450.0 million of notes outstanding that bear interest at a rate of 5.20% per year (the "May 2024 Notes"). TheMay 2024 Notes mature onMay 1, 2024 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. -
$350.0 million of outstandingSmall Business Investment Company ("SBIC") debentures through our wholly owned SBIC subsidiaries. These debentures, which are guaranteed by theU.S. Small Business Administration , had a weighted-average annual fixed interest rate of 3.00% and mature ten years from original issuance. The first maturity related to our existing SBIC debentures occurs in the first quarter of 2024, and the weighted-average remaining duration was 4.6 years. -
$150.0 million of notes outstanding that bear interest at a weighted average rate of 7.74% per year (the "December 2025 Notes"). TheDecember 2025 Notes mature onDecember 23, 2025 and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. - We maintain investment grade debt ratings from each of Fitch Ratings and
S&P Global Ratings , both of which have assigned us investment grade corporate and credit ratings of BBB- with a stable outlook. - Our net asset value totaled
$2.5 billion , or$29.20 per share.
In
Investment Portfolio Information as of
The following table provides a summary of the investments in our LMM portfolio, private loan portfolio and middle market portfolio as of
|
|
As of |
||||
|
|
LMM (a) |
|
Private Loan |
|
Middle Market |
|
|
|
|
(dollars in millions) |
|
|
Number of portfolio companies |
|
80 |
|
87 |
|
23 |
Fair value |
|
$ 2,273.0 |
|
$ 1,453.5 |
|
$ 243.7 |
Cost |
|
$ 1,782.9 |
|
$ 1,470.1 |
|
$ 294.4 |
Debt investments as a % of portfolio (at cost) |
|
72.0 % |
|
94.7 % |
|
91.4 % |
Equity investments as a % of portfolio (at cost) |
|
28.0 % |
|
5.3 % |
|
8.6 % |
% of debt investments at cost secured by first priority lien |
|
99.2 % |
|
100.0 % |
|
99.1 % |
Weighted-average annual effective yield (b) |
|
13.0 % |
|
12.9 % |
|
12.5 % |
Average EBITDA (c) |
|
$ 8.2 |
|
$ 27.2 |
|
$ 64.2 |
|
|
(a) |
We had equity ownership in all of our LMM portfolio companies, and our average fully diluted equity ownership in those portfolio companies was 40%. |
(b) |
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. |
(c) |
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the private loan and middle market portfolios. These calculations exclude certain portfolio companies, including two LMM portfolio companies and two private loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies, and those portfolio companies whose primary purpose is to own real estate. |
The fair value of our LMM portfolio company equity investments was 201% of the cost of such equity investments, and our LMM portfolio companies had a median net senior debt (senior interest-bearing debt through our debt position less cash and cash equivalents) to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio of 2.6 to 1.0 and a median total EBITDA to senior interest expense ratio of 2.5 to 1.0. Including all debt that is junior in priority to our debt position, these median ratios were 2.7 to 1.0 and 2.5 to 1.0, respectively.(4) (5)
As of
- Other portfolio investments in 15 entities, collectively totaling
$142.0 million in fair value and$149.1 million in cost basis, which comprised 3.3% and 4.0% of our investment portfolio at fair value and cost, respectively; and - Our investment in the
External Investment Manager, with a fair value of$174.1 million and a cost basis of$29.5 million , which comprised 4.1% and 0.8% of our investment portfolio at fair value and cost, respectively.
As of
External Investment Manager
Fourth Quarter and Full Year 2023 Financial Results Conference Call / Webcast
Main Street has scheduled a conference call for
You may access the conference call by dialing 412-902-0030 at least 10 minutes prior to the start time. The conference call can also be accessed via a simultaneous webcast by logging into the investor relations section of the Main Street web site at https://www.mainstcapital.com.
A telephonic replay of the conference call will be available through
For a more detailed discussion of the financial and other information included in this press release, please refer to the Main Street Annual Report on Form 10-K for the year ended
ABOUT
Main Street (www.mainstcapital.com) is a principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. Main Street's portfolio investments are typically made to support management buyouts, recapitalizations, growth financings, refinancings and acquisitions of companies that operate in diverse industry sectors. Main Street seeks to partner with entrepreneurs, business owners and management teams and generally provides "one-stop" financing alternatives within its lower middle market investment strategy. Main Street's lower middle market companies generally have annual revenues between
Main Street, through its wholly-owned portfolio company
FORWARD-LOOKING STATEMENTS
Main Street cautions that statements in this press release which are forward–looking and provide other than historical information, including but not limited to Main Street's ability to successfully source and execute on new portfolio investments and deliver future financial performance and results, are based on current conditions and information available to Main Street as of the date hereof and include statements regarding Main Street's goals, beliefs, strategies and future operating results and cash flows. Although its management believes that the expectations reflected in those forward–looking statements are reasonable, Main Street can give no assurance that those expectations will prove to be correct. Those forward-looking statements are made based on various underlying assumptions and are subject to numerous uncertainties and risks, including, without limitation: Main Street's continued effectiveness in raising, investing and managing capital; adverse changes in the economy generally or in the industries in which Main Street's portfolio companies operate; the impacts of macroeconomic factors on Main Street and its portfolio companies' business and operations, liquidity and access to capital, and on the
|
|||||||
Consolidated Statements of Operations |
|||||||
(in thousands, except shares and per share amounts) |
|||||||
|
|||||||
|
Three Months Ended
|
|
Year Ended
|
||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
INVESTMENT INCOME: |
|
|
|
|
|
|
|
Interest, fee and dividend income: |
|
|
|
|
|
|
|
Control investments |
$ 51,664 |
|
$ 45,215 |
|
$ 197,150 |
|
$ 155,967 |
Affiliate investments |
16,106 |
|
16,662 |
|
69,829 |
|
54,963 |
Non–Control/Non–Affiliate investments |
61,539 |
|
51,999 |
|
233,406 |
|
165,930 |
Total investment income |
129,309 |
|
113,876 |
|
500,385 |
|
376,860 |
EXPENSES: |
|
|
|
|
|
|
|
Interest |
(24,410) |
|
(23,060) |
|
(102,575) |
|
(78,276) |
Compensation |
(11,419) |
|
(10,063) |
|
(46,279) |
|
(36,543) |
General and administrative |
(5,128) |
|
(4,567) |
|
(18,042) |
|
(16,050) |
Share–based compensation |
(4,169) |
|
(3,598) |
|
(16,520) |
|
(13,629) |
Expenses allocated to the External Investment Manager |
5,961 |
|
3,352 |
|
22,050 |
|
12,965 |
Total expenses |
(39,165) |
|
(37,936) |
|
(161,366) |
|
(131,533) |
NET INVESTMENT INCOME |
90,144 |
|
75,940 |
|
339,019 |
|
245,327 |
NET REALIZED GAIN (LOSS): |
|
|
|
|
|
|
|
Control investments |
— |
|
— |
|
(50,532) |
|
(5,822) |
Affiliate investments |
(2,234) |
|
(4,659) |
|
(18,729) |
|
(3,319) |
Non–Control/Non–Affiliate investments |
(15,050) |
|
(3,856) |
|
(51,246) |
|
3,929 |
Total net realized loss |
(17,284) |
|
(8,515) |
|
(120,507) |
|
(5,212) |
NET UNREALIZED APPRECIATION (DEPRECIATION): |
|
|
|
|
|
|
|
Control investments |
39,014 |
|
36,064 |
|
161,793 |
|
56,682 |
Affiliate investments |
6,830 |
|
6,611 |
|
33,689 |
|
10,314 |
Non–Control/Non–Affiliate investments |
19,663 |
|
2,063 |
|
37,095 |
|
(42,180) |
Total net unrealized appreciation |
65,507 |
|
44,738 |
|
232,577 |
|
24,816 |
INCOME TAXES: |
|
|
|
|
|
|
|
Federal and state income, excise and other taxes |
(1,970) |
|
(1,541) |
|
(6,633) |
|
(5,199) |
Deferred taxes |
2,681 |
|
(4,307) |
|
(16,009) |
|
(18,126) |
Income tax benefit (provision) |
711 |
|
(5,848) |
|
(22,642) |
|
(23,325) |
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ 139,078 |
|
$ 106,315 |
|
$ 428,447 |
|
$ 241,606 |
NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED |
$ 1.07 |
|
$ 0.98 |
|
$ 4.14 |
|
$ 3.29 |
NET INCREASE IN NET ASSETS RESULTING FROM |
$ 1.65 |
|
$ 1.37 |
|
$ 5.23 |
|
$ 3.24 |
WEIGHTED-AVERAGE SHARES |
84,443,301 |
|
77,802,377 |
|
81,916,663 |
|
74,482,176 |
|
||||
Consolidated Balance Sheets |
||||
(in thousands, except per share amounts) |
||||
|
||||
|
|
|
|
|
|
|
2023 |
|
2022 |
|
|
|
|
|
ASSETS |
|
|
|
|
Investments at fair value: |
|
|
|
|
Control investments |
|
$ 2,006,698 |
|
$ 1,703,172 |
Affiliate investments |
|
615,002 |
|
618,359 |
Non–Control/Non–Affiliate investments |
|
1,664,571 |
|
1,780,646 |
Total investments |
|
4,286,271 |
|
4,102,177 |
Cash and cash equivalents |
|
60,083 |
|
49,121 |
Interest and dividend receivable and other assets |
|
89,337 |
|
82,731 |
Receivable for securities sold |
|
— |
|
381 |
Deferred financing costs, net |
|
7,879 |
|
7,475 |
Total assets |
|
$ 4,443,570 |
|
$ 4,241,885 |
LIABILITIES |
|
|
|
|
Credit Facilities |
|
$ 360,000 |
|
$ 607,000 |
|
|
498,662 |
|
498,136 |
|
|
450,182 |
|
450,727 |
SBIC debentures (par: |
|
344,535 |
|
343,914 |
|
|
148,965 |
|
99,325 |
Accounts payable and other liabilities |
|
62,576 |
|
52,092 |
Interest payable |
|
17,025 |
|
16,580 |
Dividend payable |
|
20,368 |
|
17,676 |
Deferred tax liability, net |
|
63,858 |
|
47,849 |
Total liabilities |
|
1,966,171 |
|
2,133,299 |
|
|
|
|
|
NET ASSETS |
|
|
|
|
Common stock |
|
848 |
|
784 |
Additional paid–in capital |
|
2,270,549 |
|
2,030,531 |
Total undistributed earnings |
|
206,002 |
|
77,271 |
Total net assets |
|
2,477,399 |
|
2,108,586 |
Total liabilities and net assets |
|
$ 4,443,570 |
|
$ 4,241,885 |
NET ASSET VALUE PER SHARE |
|
$ 29.20 |
|
$ 26.86 |
|
|||||||
Reconciliation of Distributable Net Investment Income, |
|||||||
Total Cash Expenses, Non-Cash Compensation Expenses |
|||||||
and Cash Compensation Expenses |
|||||||
(in thousands, except per share amounts) |
|||||||
|
|||||||
|
Three Months Ended |
|
Year Ended |
||||
|
|
|
|
||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net investment income |
$ 90,144 |
|
$ 75,940 |
|
$ 339,019 |
|
$ 245,327 |
Non-cash compensation expenses(3) |
4,702 |
|
4,064 |
|
17,769 |
|
12,195 |
Distributable net investment income(1) |
$ 94,846 |
|
$ 80,004 |
|
$ 356,788 |
|
$ 257,522 |
|
|
|
|
|
|
|
|
Per share amounts: |
|
|
|
|
|
|
|
Net investment income per share - |
|
|
|
|
|
|
|
Basic and diluted |
$ 1.07 |
|
$ 0.98 |
|
$ 4.14 |
|
$ 3.29 |
Distributable net investment income per share - |
|
|
|
|
|
|
|
Basic and diluted(1) |
$ 1.12 |
|
$ 1.03 |
|
$ 4.36 |
|
$ 3.46 |
|
|||||||
|
Three Months Ended |
|
Year Ended |
||||
|
|
|
|
||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Share–based compensation |
$ (4,169) |
|
$ (3,598) |
|
$ (16,520) |
|
$ (13,629) |
Deferred compensation (expense) benefit |
(533) |
|
(466) |
|
(1,249) |
|
1,434 |
Total non-cash compensation expenses(3) |
(4,702) |
|
(4,064) |
|
(17,769) |
|
(12,195) |
|
|
|
|
|
|
|
|
Total expenses |
(39,165) |
|
(37,936) |
|
(161,366) |
|
(131,533) |
Less non-cash compensation expenses(3) |
4,702 |
|
4,064 |
|
17,769 |
|
12,195 |
Total cash expenses(3) |
$ (34,463) |
|
$ (33,872) |
|
$ (143,597) |
|
$ (119,338) |
|
|
|
|
|
|
|
|
Compensation |
$ (11,419) |
|
$ (10,063) |
|
$ (46,279) |
|
$ (36,543) |
Share-based compensation |
(4,169) |
|
(3,598) |
|
(16,520) |
|
(13,629) |
Total compensation expenses |
(15,588) |
|
(13,661) |
|
(62,799) |
|
(50,172) |
Non-cash compensation expenses(3) |
4,702 |
|
4,064 |
|
17,769 |
|
12,195 |
Total cash compensation expenses(3) |
$ (10,886) |
|
$ (9,597) |
|
$ (45,030) |
|
$ (37,977) |
Endnotes
(1) Distributable net investment income is net investment income as determined in accordance with
(2) Return on equity equals the net increase in net assets resulting from operations divided by the average quarterly total net assets for the three-month and trailing twelve-month periods ended
(3) Non-cash compensation expenses consist of (i) share-based compensation and (ii) deferred compensation expense or benefit, both of which are non-cash in nature. Share-based compensation does not require settlement in cash. Deferred compensation expense or benefit does not result in a net cash impact to Main Street upon settlement. The appreciation (depreciation) in the fair value of deferred compensation plan assets is reflected in
(4) Portfolio company financial information has not been independently verified by Main Street.
(5) These credit statistics exclude portfolio companies on non-accrual or for which EBITDA is not a meaningful metric.
Contacts:
713-350-6000
713-529-6600
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