Ha Sustainable Infrastructure Capital, Inc. · NYSE:HASI
Ha Sustainable Infrastructure Capital — Main Street Capital — Q1 2019 Earnings Presentation
48 slides from Ha Sustainable Infrastructure Capital's earnings presentation, May 10, 2019
Slide 1: Investor Presentation First Quarter 2019
Investor Presentation First Quarter – 2019 Main MainStreet Capital Street Capital Corporation Corporation NYSE: MAIN NYSE: MAIN mainstcapital.com mainstcapital.com Page 1
Slide 2: Disclaimers
Disclaimers Main Street Capital Corporation (MAIN) cautions that statements in this The summary descriptions and other information included herein are presentation that are forward-looking, and provide other than historical intended only for informational purposes and convenient reference. The infor
Slide 3: Corporate Overview
Main Street Capital Corporation Investor Presentation Corporate Overview 1 Quarter – 2019 st Main Street Capital Corporation NYSE: MAIN mainstcapital.com Page 3
Slide 4: MAIN is a Principal Investor in Private Debt and Equity
MAIN is a Principal Investor in Private Debt and Equity Hybrid debt and equity Internally-managed Business Development Company (BDC) investment strategy, • IPO in 2007 internally managed • Over $4.1 billion in capital under management(1) operating structure and – Over $2.9 billion internally at MAIN
Slide 5: MAIN is a Principal Investor in Private Debt and Equity
MAIN is a Principal Investor in Private Debt and Equity MAIN’s unique Long-term focus on delivering our shareholders sustainable investment strategy, growth in net asset value and recurring dividends per share efficient operating structure and Consistent cash dividend yield – dividends paid monthly
Slide 6: MAIN is a Principal Investor in Private Debt and Equity
MAIN is a Principal Investor in Private Debt and Equity Focus on LMM equity Equity investments in LMM portfolio provide both the investments and opportunity to grow net asset value (NAV) per share and efficient operating generate realized gains to support dividend growth structure differentiates • N
Slide 7: MAIN Strategy Produces Differentiated Returns
MAIN Strategy Produces Differentiated Returns Enhanced Value Proposition - Three Ways to Win are Better Than One 1. Sustain and Grow Total Dividends • Efficient operating structure provides operating leverage to grow distributable net investment income, and dividends paid, as investment portfolio an
Slide 8: DNII and Dividends Per Share
Quarterly Historical Dividend, Net Asset Value (“NAV”) Per Share Growth and Distributable Net Investment Income (“DNII”) $0.90 $26.00 MAIN’s unique focus on equity investments Recessionary $24.00 $0.80 Period in the Lower Middle DNII and Dividends Per Share $22.00 Market provides the $0.70 $20.00 NA
Slide 9: MAIN Historical Highlights
MAIN Historical Highlights ($ in millions, except per shares amounts) Milestones 2007 - 2012 2013 2014 2015 2016 2017 2018 2019(1) Significant IPO $64.5 NASDAQ Supplemental S&P Investment Supplemental Supplemental Supplemental Supplemental Supplemental Events(2) Listing (Oct 2007) Dividends:
Slide 10: Lower Middle Market (LMM) Investment Strategy
Lower Middle Market (LMM) Investment Strategy LMM investment Investment Objectives strategy differentiates • High cash yield from secured debt investments (11.4% weighted- MAIN from its average cash coupon as of March 31, 2019); plus competitors and • Dividend income and periodic capital gains from
Slide 11: LMM Investment Opportunity
LMM Investment Opportunity MAIN targets LMM Large and critical portion of U.S. economy investments in • 175,000+ domestic LMM businesses(1) established, profitable companies LMM is under-served from a capital perspective and less competitive Characteristics of LMM provide beneficial risk- Inefficien
Slide 12: Middle Market Debt Investment Strategy
Middle Market Debt Investment Strategy MAIN maintains a portfolio Investment Objective of debt investments in • Generate cash yield to support MAIN monthly dividend Middle Market companies Investments in secured and/or rated debt investments • First lien, senior secured debt investments • Floating r
Slide 13: Private Loan Investment Strategy
Private Loan Investment Strategy Private Loan portfolio Investment Objectives investments are primarily • Access proprietary investments with attractive risk-adjusted return debt investments in characteristics privately held companies • Generate cash yield to support MAIN monthly dividend which have
Slide 14: Asset Management Business
Asset Management Business MAIN’s asset In May 2012, MAIN(1) entered into an investment sub-advisory management business agreement with the investment advisor to HMS Income Fund, Inc., represents additional a non-listed BDC income diversification • MAIN(1) provides asset management services, includin
Slide 15: MAIN Regulatory Framework
MAIN Regulatory Framework Highly regulated Operates as a Business Development Company structure provides • Regulated by Securities and Exchange Commission - 1940 Act significant advantages • Publicly-traded, private investment company and protections to our shareholders, including Regulated Investme
Slide 16: MAIN Corporate Structure – Internally Managed
MAIN Corporate Structure – Internally Managed “Internally managed” structure means no Main Street Capital external management fees Corporation or expenses are paid, (BDC/RIC) providing operating leverage to MAIN’s Assets: ~$2,034 million business. MAIN targets Line of Credit: $340 million total oper
Slide 17: MAIN Co-Founders and Executive Management Team
MAIN Co-Founders and Executive Management Team • Co-founded MAIN and MAIN predecessor funds (1997) Vince Foster; CPA & JD(1)(2)(3) • Co-founded Quanta Services (NYSE: PWR) Executive Chairman • Partner in charge of a Big 5 Accounting Firm’s Corporate Finance/Mergers and Acquisitions practice for the
Slide 18: Post-IPO TTM Dividends Per Share – Sustainable Growth
Post-IPO TTM Dividends Per Share – Sustainable Growth Cumulative dividends paid or TTM Dividends Per Share declared from October 2007 $3.00 IPO (at $15.00 per share) through Q3 2019 equal $2.75 $26.285 per share(1) $2.50 Recurring monthly dividend has never been decreased $2.25 and has shown meaning
Slide 19: Transition of Supplemental Dividends into Monthly Dividends
Transition of Supplemental Dividends into Monthly Dividends MAIN has concluded Background and History that it is in position to • MAIN declared its first supplemental dividend in Q4 2012 begin the conversion of • MAIN was primarily investing in LMM debt and equity prior to 2012, without the added in
Slide 20: Total Investment Portfolio
Total Investment Portfolio Diversity provides Includes complementary LMM debt and equity investments, Middle structural protection to Market debt investments and Private Loan debt investments investment portfolio, revenue sources, income, Total investment portfolio at fair value consists of approxim
Slide 21: Total Portfolio by Industry (as a Percentage of Cost)
Total Portfolio by Industry (as a Percentage of Cost) (1) Construction & Engineering, 7% Media, 7% Machinery, 6% Energy Equipment & Services, 6% Commercial Services & Supplies, 5% Diversified Telecommunication Services, 5% Specialty Retail, 4% Internet Software & Services, 4% Hotels, Restaurants & L
Slide 22: Diversified Total Portfolio (as a Percentage of Cost)
Diversified Total Portfolio (as a Percentage of Cost) (1) Invested Capital by Transaction Type Invested Capital by Geography (2) LBO/MBO 41% 27% 20% 14% 41% 11% 28% 12% 6% Recapitalization/ Refinancing Acquisition Growth Capital (1) Excluding MAIN’s Other Portfolio investments and the External Inves
Slide 23: LMM Investment Portfolio
LMM Investment Portfolio LMM Investment 70 portfolio companies / $1,214.2 million in fair value Portfolio consists of a • 49% of total investment portfolio at fair value diversified mix of secured debt and lower Debt yielding 12.2% (69% of LMM portfolio at cost) cost basis equity • 99% of debt inves
Slide 24: LMM Investment Portfolio
LMM Investment Portfolio LMM Investment Portfolio Median LMM portfolio credit statistics: is a pool of high quality, • Senior leverage of 3.2x EBITDA to MAIN debt position seasoned assets with • 2.6x EBITDA to senior interest coverage attractive risk-adjusted • Total leverage of 3.4x EBITDA includin
Slide 25: LMM Portfolio by Industry (as a Percentage of Cost)
LMM Portfolio by Industry (as a Percentage of Cost) Machinery, 10% Energy Equipment & Services, 10% Construction & Engineering, 9% Electronic Equipment, Instruments & Components, 7% Leisure Equipment & Products, 5% Professional Services, 5% Food Products, 5% Containers & Packaging, 4% Specialty Reta
Slide 26: Diversified LMM Portfolio (as a Percentage of Cost)
Diversified LMM Portfolio (as a Percentage of Cost) Invested Capital by Transaction Type Invested Capital by Geography (1) LBO/MBO Recapitalization/ Refinancing 45% 28% 24% 7% 44% 33% 8% 3% 8% Acquisition Growth Capital (1) Based upon portfolio company headquarters Main Street Capital Corporation NY
Slide 27: LMM Portfolio Attributes Reflect Investment Strategy
LMM Portfolio Attributes Reflect Investment Strategy High yielding secured Security Position on Debt Capital Fully Diluted Equity Ownership % as a Percentage of Cost debt investments coupled with significant equity participation = Attractive 1st Lien 50.0% and 1.0% - 2nd Lien/ risk-adjusted returns
Slide 28: Term and Total Interest Coupon of Existing LMM Debt Investments
Term and Total Interest Coupon of Existing LMM Debt Investments Original Term Total Interest Coupon (1) < 5 years > 5 years 16% Current N/A – Floating Interest Interest Rate (Wtd. Avg. of 11.9%)(2) 15% Current 3% 2% Interest 4% 2% 3% 6% 14% Current 44% Interest 13% Current Interest 24% 93% 5% 5% 9%
Slide 29: Middle Market Investment Portfolio
Middle Market Investment Portfolio Middle Market 55 investments / $566.7 million in fair value Investment Portfolio • 23% of total investment portfolio at fair value provides a diversified mix of investments, Average investment size of $10.9 million(1) (less than 1% of total diverse sources of portf
Slide 30: Private Loan Investment Portfolio
Private Loan Investment Portfolio Private Loan Investment 58 investments / $540.0 million in fair value Portfolio provides a • 21% of total investment portfolio at fair value diversified mix of investments and Average investment size of $9.9 million(1) (less than 1% of total sources of income to por
Slide 31: Middle Market & Private Loan Portfolios by Industry
Middle Market & Private Loan Portfolios by Industry (as a Percentage of Cost) Media, 9% Aerospace & Defense, 7% Diversified Telecommunication Services, 7% Commercial Services & Supplies, 6% Oil, Gas & Consumable Fuels, 6% Construction & Engineering, 5% Specialty Retail, 5% Communications Equipment,
Slide 32: Diversified Middle Market & Private Loan Investments
Diversified Middle Market & Private Loan Investments (as a Percentage of Cost) Invested Capital by Transaction Type Invested Capital by Geography (1) Recapitalization/ Refinancing 39% 37% 26% 17% 21% 14% 22% 3% 21% Growth LBO/MBO Acquisition (1) Based upon portfolio company headquarters and excludin
Slide 33: Financial Overview
Main Street Capital Corporation Investor Presentation Financial Overview 1 Quarter – 2019 st Main Street Capital Corporation NYSE: MAIN mainstcapital.com Page 33
Slide 34: MAIN Financial Performance
MAIN Financial Performance Total Investment Income ($ in millions) Distributable Net Investment Income ($ in millions) Year over Year Growth Year over Year Growth 17% 8% 15% 13% 10%(1) 14% 10% 17% 14% 6%(1) $240.0 $180.0 $233.4 $220.0 $160.0 $165.8 $200.0 $205.7 $140.0 $145.4 $180.0 $178.3 $160.0 $1
Slide 35: Long-Term Portfolio and DNII Per Share Growth
Long-Term Portfolio and DNII Per Share Growth Since 2007, MAIN ($ in millions, except per share data) has accretively $2.76 $2.76 grown Portfolio $2,600 $2.80 $2.56 Investments by $2,400 $2.60 $2.39 $2,454 $2,497 $2.29 $2.31 2262%, (or by $2,200 $2.40 $2.17 $2,171 239% on a per $2,000 $2.09 $2.20 $1
Slide 36: Efficient and Leverageable Operating Structure
Efficient and Leverageable Operating Structure MAIN’s internally “Internally managed” structure means no external management managed operating fees or expenses are paid structure provides significant operating Alignment of interest between management and investors leverage and greater • Greater ince
Slide 37: MAIN Maintains a Significant Operating Cost Advantage
MAIN Maintains a Significant Operating Cost Advantage Operating Expenses as a Percentage of Total Assets(1) 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Other BDCs 0.5% MAIN Excl. Excl. Share-Based Other Share-Based Commercial MAIN (2) Comp. (3) BDCs (4)(5) Comp. (4)(6) Banks (7) 0.0% (1) Total operating expe
Slide 38: MAIN Income Statement Summary
MAIN Income Statement Summary Q1 19 vs. Q1 18 (1) (1) ($ in 000's) Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 % Change (2) Total Investment Income $ 55,942 $ 59,869 $ 58,263 $ 59,280 $ 61,365 10% Expenses: Interest Expense (10,265) (10,833) (10,884) (11,511) (11,916) -16% G&A Expense (6,399) (7,092) (7,157) (3,4
Slide 39: MAIN Per Share Change in Net Asset Value (NAV)
MAIN Per Share Change in Net Asset Value (NAV) ($ per share) Q1 18(1) Q2 18 Q3 18 Q4 18 Q1 19(1) Beginning NAV $ 23.53 $ 23.67 $ 23.96 $ 24.69 $ 24.09 Distributable Net Investment Income 0.67 0.70 0.66 0.72 0.68 Share-Based Compensation Expense (0.04) (0.04) (0.04) (0.04) (0.04) Net Realized Gain (L
Slide 40: MAIN Balance Sheet Summary
MAIN Balance Sheet Summary ($ in 000's, except per share amounts) Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 LMM Portfolio Investments $ 1,049,772 $ 1,084,897 $ 1,149,008 $ 1,195,035 $ 1,214,179 Middle Market Portfolio Investments 617,941 591,600 607,666 576,929 566,700 Private Loan Investments 496,533 516,836 4
Slide 41: MAIN Liquidity and Capitalization
MAIN Liquidity and Capitalization ($ in 000's) Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Cash and Cash Equivalents $ 29,090 $ 40,484 $ 50,303 $ 54,181 $ 47,368 Availability Under Credit Facility (1) 397,000 366,000 430,000 404,000 365,000 Remaining SBIC Debentures Capacity 32,200 32,200 200 200 25,200 Total Liq
Slide 42: Stable, Long-Term Leverage – Significant Unused Capacity
Stable, Long-Term Leverage – Significant Unused Capacity MAIN maintains a Facility Interest Rate Maturity Principal Drawn conservative capital $705.0 million L+1.875% floating (4.4% September 2023 (fully structure, with limited Credit Facility (1) as of March 31, 2019) revolving until maturity) $340
Slide 43: Long-term Maturity of Debt Obligations
Long-term Maturity of Debt Obligations MAIN’s conservative 400 capital structure provides long-term 350 $16.0 access to attractively- priced and structured 300 debt facilities 250 • (in millions) Allows for investments in assets with long-term 200 holding periods / illiquid positions and greater $34
Slide 44: Positive Impact from Rising Interest Rates
Positive Impact from Rising Interest Rates MAIN’s capital structure and The following table illustrates the approximate annual changes in the investment portfolio provides components of MAIN’s net investment income due to hypothetical increases (decreases) in interest rates(1) (dollars in thousands)
Slide 45: Significant Management Ownership / Investment
Significant Management Ownership / Investment Significant equity # of Shares (2) March 31, 2019 (3) ownership by MAIN’s Management (1) 3,371,493 $125,419,540 management team, coupled with internally managed structure, provides alignment of interest between MAIN’s management and our shareholders (1)
Slide 46: MAIN Total Return Performance Since IPO
MAIN Total Return Performance Since IPO Recessionary Period Notes: (1) Assumes dividends reinvested on date paid (2) The Main Street Peer Group includes all BDCs that have been publicly-traded for at least one year and that have total assets greater than $500 million based on individual SEC Filings
Slide 47: Executive Summary
Executive Summary Unique focus on under-served Lower Middle Market • Inefficient asset class with less competition • Unique market opportunity with attractive risk-adjusted returns • Generally first lien, senior secured debt investments plus meaningful equity participation Invest in complementary in
Slide 48: MAIN Corporate Data
MAIN Corporate Data Please visit our website at www.mainstcapital.com for additional information Board of Directors Executive Officers Research Coverage Corporate Headquarters Investor Relation Contacts Michael Appling, Jr. Dwayne L. Hyzak Tim Hayes 1300 Post Oak Blvd, 8th Floor Dwayne L. Hyzak Chie