Main Street Capital Corporation Q1 FY2025 earnings call

• First quarter annualized return on equity was 16.5%, DNII per share exceeded dividends paid, and NAV per share reached a new record for the 11th consecutive quarter. • Closed exit of Heritage Vet Partners investment with a realized gain of over $55 million. • Lower middle market investment activity: net increase of $57 million; private loan investment activity: net increase of $26 million. • Asset Management Business funds advised had favorable performance, with MSC Income Fund growing its investment portfolio after NYSE listing and equity offering. • Board declared a supplemental dividend of $0.30 per share payable in June and adjusted regular monthly dividends. • Investment portfolio is highly diversified with investments in 189 companies across industries, and recorded net fair value appreciation of $33.6 million.

The lower middle market investment activity resulted in a net increase in lower middle market investments of $57 million. The private loan investment activity resulted in a net increase in private loan investments of $26 million. As of quarter end, the lower middle market portfolio included investments in 86 companies, representing $2.6 billion of fair value, which was 31% above related cost basis. The private loan portfolio had investments in 90 companies, representing $1.9 billion of fair value. The total investment portfolio at fair value was 18% above related cost basis.

• Expect headwinds on topline earnings from potential decrease in floating market rates and tariff impacts, but expect favorable earnings in Q2 2025 with expected DNII of at least $1.03 per share, potentially with upside from portfolio activities and market uncertainty resolution. • Plan to utilize more debt capacity to grow investment portfolio and move leverage closer to target range.

• Tariff exposure in portfolio companies, with some lower middle market and private loan companies having exposure to imported raw materials or offshore manufacturing, though manageable with mitigation efforts. • Potential negative impact from decrease in floating market rates and tariff impacts on topline earnings. • Risk of non-accrual investments and fair value depreciation in certain portfolio segments due to specific company performance or market spreads.

Q: Please be more expressive on tariff exposure in the portfolio, including offshore manufacturing, imported raw materials, etc.

A: Most lower middle market companies are U.S. businesses with limited tariff exposure, but some have high single-digit percentage exposure. Private loan side similar, with first-lien senior secured position providing cushion. Management teams are working to mitigate risk.

Q: Concern about non-recurring income items slowing down, with portfolio companies being more conservative?

A: Dividend income is variable but current portfolio companies are doing well with conservative capital structures, expecting good dividend income in Q2.

Q: Visibility on more exit activities like Heritage Vet Partners?

A: Exit activity is more in line with business as usual, with past large exits like Pearl Meyer and Heritage Vet Partners done during uncertain times.

Q: Pace of leverage growth and operational expense ratio?

A: Leverage growth dependent on investment activity, aiming to move closer to target range. Operational expense ratio variability tied to incentive compensation based on performance.

Q: Expectations for scale growth and run rate for earnings from MSC Advisor?

A: Base management fee tied to investment activity, incentive fee variable with performance. Expect second quarter in line with first quarter, future dependent on investment activity and economic performance.