MidCap Financial Investment Corp Q4 FY2025 earnings call

• Tanner Powell began with overview of fourth quarter results, share repurchase activity (purchased ~1.1 million shares at avg discount 18%, aggregate cost $12.9 million, generating ~$0.03 per share NAV accretion; Board authorized new $100 million stock repurchase plan, with ~$7.9 million remaining capacity, total $107.9 million available). • Dividend adjusted: Board declared quarterly dividend of $0.31 per share. • Ted McNulty reviewed fourth quarter investment activity: new commitments $141 million, gross fundings $156 million, sales/repayments $119 million, net fundings positive $25 million. • Portfolio details: fair value $3.17 billion, invested in 247 companies across 46 industries; direct origination 96%, Merck's 3%, liquid positions 1%; 99% first lien, 92% backed by financial sponsors in direct origination. • Software exposure details: 11.4% of portfolio, diversified, low LTV, median EBITDA $52 million. • Kenny Seifert discussed financial results: total investment income ~$78.4 million (down $4.2 million from prior quarter), net expenses $42.4 million (down $4.9 million), portfolio net loss $45.3 million, net investment income per share $0.39, gap net loss per share $0.14 (excluding one-time cost $0.10). Balance sheet: portfolio fair value $3.17 billion, total principal debt outstanding $2.00 billion, net assets $1.31 billion ($14.18 per share), net leverage 1.45 at quarter end.

Net investment income per share for the quarter was $0.39. Gap net loss per share was $0.14 (including ~$0.04 one-time financing-related expenses; excluding, GAAP net loss per share was $0.10). NAV per share was $14.18 at end of December, down 3.3% from prior quarter. Fourth quarter new commitments: $141 million across 26 transactions. Net funded activity positive $25 million. Merckx paydowns: $7.5 million in December quarter, total $29.5 million by quarter end in February. At end of December, Merck's investment ~$103 million (3% of portfolio fair value), remaining investment includes 4 aircraft and servicing platform (servicing component ~29% of total value). Software exposure: 11.4% of portfolio fair value, primarily cash pay 100% first lien, diversified across 29 borrowers, low average LTV 32%, median EBITDA $52 million. Portfolio non-accrual investments: 2.6% at end of December, down from 3.1% prior quarter. Restored 2 companies to accrual, placed 3 on non-accrual. Borrower net leverage 5.29 times (unchanged from prior quarter), weighted average interest coverage ratio 2.3 times (up from 2.2 times). PIC income 4.8% of total investment income.

• Board authorized new $100 million stock repurchase plan, expect to utilize aggressively with 10B51 trading plan, anticipate fully utilizing current authorization by late May if current discount and trading volumes continue. • Dividend adjusted to $0.31 per share based on reassessment of long-term earning power considering rate changes and other factors. • Confidence in portfolio being well-positioned with primarily true first lien loans, limited software exposure, and visibility into expected repayments limiting impact on net leverage from stock repurchases.

• Market risks affecting forward-looking statements, need to refer to SEC filings for risks. • Potential impact of idiosyncratic issues in certain credits, including those from vintage years, compounded by pockets of market stress. • Uncertainty regarding persistence of stock discounts and its impact on unlocking value for shareholders. • Risks associated with software exposure even though below average, including potential effects of AI disruption and credit metrics of software borrowers. • Impact of changes in base rates and spread compression on investment income and portfolio yields.

Q: Rick Shane asked about future strategies regarding stock buybacks and unlocking value.

A: Howard responded that they'll consider everything to ensure shareholders get full value, noting they'll see how the discount persistence plays out.

Q: Kenneth Lee asked about new $100 million repurchase plan being discretionary and open trading windows.

A: Answered that it's discretionary, enter quiet periods with 10b-5-1 to maximize purchases, and expect to exhaust authorization by late May if current activity continues.

Q: Kenneth Lee followed up on dividends, asking about macro assumptions.

A: Male Speaker said $0.31 dividend was appropriate and achievable, influenced by rate changes, spreads, progress with Merck's, and capital structure initiatives to reduce cost of capital.

Q: Robert Dodd applauded buyback expansion and asked about software exposure metrics.

A: Howard responded that MidCap focused on companies with cash-long positions and embedded consistency, related to their middle market focus and focus on companies with financial covenants.

Q: Casey Alexander asked about common thread in credits from certain vintage.

A: Answered that these are longer-standing credits with idiosyncratic issues compounded by market pockets of stress and sometimes self-induced issues like aggressive acquisition strategies.