MSC Income Fund, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Appreciated shareholders' support for the successful equity offering and NYSE listing, which provided liquidity and debt capacity.
• Fourth quarter net investment income per share $0.35, NAV per share $15.53 (+$0.15 QoQ). ROE 13.2% Q4, 9.1% full year 2024.
• Focused on deploying liquidity from equity offering into private loan investments, maintaining fully invested position until Jan 2026 when regulatory leverage capacity doubles.
• Recommended $0.35 regular and $0.01 supplemental dividend payable May 1, expecting total dividends tied to net investment income.
• Main Street purchased over $21M equity in Fund, including $4M in Jan offering, and has a share purchase plan.

Segment Performance

• Private Loan Investment Portfolio: In the fourth quarter, most private loan portfolio companies had positive operating performance, but there was softness in consumer discretionary-focused ones, leading to net fair value depreciation. It decreased by $6 million on a cost basis. As of year end, 94% was secured debt, over 99% first lien, 98% floating loans, with a weighted average yield of 12% (down 110 bps from 2023) and 84 portfolio companies with $678 million fair value (58% of total investment portfolio).
• Lower Middle Market Portfolio: Increased by $16 million on a cost basis. At year end, had 57 portfolio companies, $436 million fair value, 53% debt (weighted avg yield 13%, over 99% first lien) and 47% equity, 9% average ownership.
• Total Investment Portfolio: As of Dec 31, 151 portfolio companies, highly diversified, largest portfolio companies represented less than 4% of fair value and less than 3% of income.

Guidance

• 2025 focus on deploying liquidity into private loan investments, maintaining fully invested until Jan 2026 when regulatory leverage doubles.
• Expect total quarterly dividends to be regular plus supplemental, tied to net investment income.
• Amended credit facility to increase commitments, working to lower debt cost.

Risks

• Softness in certain private loan portfolio companies with consumer discretionary products/services, monitoring and working to maximize recoveries.
• Impact of tariffs, government spending changes, and broader economic conditions on portfolio performance.
• Forward-looking statements subject to risks, uncertainties, and factors in SEC filings.

Question and Answer

• Q: Originations pipeline for private loan? **A: Dwayne and Nick mention pipeline is above average, with recent progress, some transactions moving closer to execution. Gross originations ~$100M closed to date, but net change depends on repayments.
• Q: Spreads on private loan investments? **A: Spreads have come in 75-150 bps last 12 months, another 25 bps tighter since year end, direct side stable, expected to continue.
• Q: Leverage and full investment? **A: Balance 2025 to get closer to full capacity, expanded leverage in Jan 2026, confident in ability to secure debt capital.
• Q: Dividend income and consumer discretionary? **A: Dividend income volatile, but lower middle market performing well. Consumer discretionary investments need economic tailwind for recovery, longer term initiative.
• Q: Incremental capital from IPO? **A: Incremental capital doesn't change strategy, but gives more liquidity, aim to deploy soon, confident in pipeline.
• Q: Realized losses and non-accruals? **A: Realized losses didn't significantly impact non-accruals, mostly reflected in prior unrealized depreciation. Tax expenses Q4 higher than ongoing, excise tax included.
• Q: Prepayments and capital markets? **A: No specific visibility on Q2/Q3 prepayments, but seeing more repayment activity. Capital markets activity expectations modest/cautious post-election.
• Q: Credit quality? **A: New investments and front end of pipeline feel good, existing portfolios (outside consumer) performing well, diversified portfolio provides protection.