Main Street Capital Corporation · NYSE:MAIN
Main Street Capital — Q2 2022 Earnings Presentation
49 slides from Main Street Capital's earnings presentation, Aug 4, 2022
Slide 1: Investor Presentation Second Quarter 2022
Investor Presentation Second Quarter – 2022 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 MAIN has filed a registration statement (which includes a prospectus) with presentation that are forward-looking, and provide other than historical the SEC for any offering to which this communication may relate and
Slide 3: Corporate Overview and Investment Strategy
Main Street Capital Corporation Corporate Overview and Investment Strategy 2 Quarter – 2022 nd 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 $5.8 billion in capital under management(1) operating structure and – Over $4.3 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 the opportunity to both grow net asset value (NAV) per share and generate recurring investments and dividend income and periodic realized gains to support MAIN’s efficient operatin
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 Dividends • Efficient operating structure provides operating leverage to grow Distributable Net Investment Income (DNII) (1), and dividends paid, as investment portfol
Slide 8: DNII and Dividends Per Share
Historical Monthly Dividends, NAV and DNII(1) Per Share $0.90 $28.00 MAIN’s unique focus Recessionary COVID on equity investments $0.80 Period Pandemic $26.00 in the LMM provides DNII and Dividends Per Share $24.00 the opportunity for $0.70 $22.00 NAV Per Share significant NAV per $0.60 share growth
Slide 9: LMM Investment Strategy
LMM Investment Strategy LMM investment Investment Objectives strategy differentiates • High cash yield from secured debt investments (10.9% weighted- MAIN from its average cash coupon as of June 30, 2022); plus competitors and • Dividend income and periodic capital gains from equity provides attract
Slide 10: LMM Investment Opportunity
LMM Investment Opportunity MAIN targets LMM Large and critical portion of U.S. economy investments in • 195,000+ 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 11: 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 • Generate cash yield to support MAIN monthly dividend privately held companies which have
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: Asset Management Business
Asset Management Business MAIN’s asset MAIN(1) is the investment adviser to and administrator of MSC management business Income Fund, Inc. (MSIF), a non-listed BDC represents additional • MAIN(1) provides asset management services, including sourcing, income diversification diligence and post-invest
Slide 14: 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 15: 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: ~$3.2 billion business; MAIN targets Line of Credit: $380 million total operat
Slide 16: MAIN Executive Management Team
MAIN Executive Management Team • Co-founded MAIN; Joined Main Street group in 2002; affiliated with Main Street group since Dwayne Hyzak; CPA(1)(2) 1999 CEO • Director of acquisitions / integration with Quanta Services (NYSE: PWR) • Manager with a Big 5 Accounting Firm’s audit and transaction servic
Slide 17: Monthly Dividends Per Share – Sustainable Growth
Monthly Dividends Per Share – Sustainable Growth Recurring monthly dividend Trailing Twelve Months Monthly Dividends Per Share has never been decreased $2.70 and has shown meaningful (100%) growth since IPO $2.50 Based upon the current $2.30 annualized monthly dividends declared for the $2.10 fourth
Slide 18: Ordinary and Capital Gain Dividends 2017 – 2021
Ordinary and Capital Gain Dividends 2017 – 2021 ($ in millions) MAIN’s unique $200.0 investment strategy $180.0 increases the tax 10% 27% efficiency of the $160.0 20% 90% dividends paid to 20% $140.0 8% our shareholders 80% 92% $120.0 73% 80% $100.0 Capital gain & qualified dividends $80.0 Ordinary
Slide 19: Investment Portfolio
Main Street Capital Corporation Investment Portfolio 2 Quarter – 2022 nd Main Street Capital Corporation NYSE: MAIN mainstcapital.com Page 19
Slide 20: Total Investment Portfolio
Total Investment Portfolio Diversity provides Includes complementary LMM debt and equity investments, Private structural protection to Loan debt investments and Middle Market 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) Internet Software & Services, 8% Machinery, 8% Construction & Engineering, 7% Commercial Services & Supplies, 6% Diversified Consumer Services, 5% Distributors, 4% Leisure Equipment & Products, 4% Health Care Providers & Services, 4% Professio
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 44% 28% 16% 21% 44% 14% 21% 8% 4% Recapitalization/ Refinancing Acquisition Growth Capital (1) Excluding MAIN’s Other Portfolio investments, the External Investment
Slide 23: LMM Investment Portfolio
LMM Investment Portfolio LMM Investment 75 portfolio companies / $1.8 billion in fair value Portfolio consists of a • 49% of total investment portfolio at fair value diversified mix of secured debt and lower Debt yielding 11.2%(1) (72% of LMM portfolio at cost) cost basis equity • 99% of debt invest
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 2.6x EBITDA through MAIN debt position seasoned assets with • 2.9x EBITDA to senior interest coverage attractive risk-adjusted • Total leverage of 2.6x EBITDA inc
Slide 25: LMM Portfolio by Industry (as a Percentage of Cost)
LMM Portfolio by Industry (as a Percentage of Cost) Machinery, 11% Construction & Engineering, 8% Professional Services, 7% Energy Equipment & Services, 5% Diversified Consumer Services, 5% Distributors, 5% Containers & Packaging, 4% Tobacco, 4% IT Services, 4% Leisure Equipment & Products, 4% Inter
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 28% 23% 11% 62% 32% 27% 11% 3% 3% Acquisition Growth Capital (1) Based upon portfolio company headquarters Main Street Capital Corporation N
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 N/A – Floating Interest Rate (Wtd. Avg. of 10.8%)(2) 13% Current 2% Interest 2% 7% 44% 29% 12% Current 96% 2% Interest 10% 8% <10% Current Interest 10% Current 5 years 11% Curre
Slide 29: Private Loan Investment Portfolio
Private Loan Investment Portfolio Private Loan Investment 82 investments / $1.3 billion in fair value Portfolio provides a • 35% of total investment portfolio at fair value diversified mix of investments and Average investment size of $16.4 million(1) (less than 1% of total sources of income to port
Slide 30: Middle Market Investment Portfolio
Middle Market Investment Portfolio Middle Market 34 investments / $363.5 million in fair value Investment Portfolio • 10% of total investment portfolio at fair value provides a diversified mix of investments and Average investment size of $12.3 million(1) (less than 1% of total diverse sources of po
Slide 31: Private Loan & Middle Market Portfolios by Industry
Private Loan & Middle Market Portfolios by Industry (as a Percentage of Cost) Internet Software & Services, 13% Commercial Services & Supplies, 10% Construction & Engineering, 6% Health Care Providers & Services, 6% Diversified Consumer Services, 5% Leisure Equipment & Products, 5% Aerospace & Defen
Slide 32: Diversified Private Loan & Middle Market Investments
Diversified Private Loan & Middle Market Investments (as a Percentage of Cost) Invested Capital by Transaction Type Invested Capital by Geography(1) Recapitalization/ Refinancing 54% 29% 9% 31% 29% 17% 14% 4% 13% Growth Capital LBO/MBO Acquisition (1) Based upon portfolio company headquarters and ex
Slide 33: Financial Overview
Main Street Capital Corporation Financial Overview 2 Quarter – 2022 nd Main Street Capital Corporation NYSE: MAIN mainstcapital.com Page 33
Slide 34: MAIN Financial Performance
MAIN Financial Performance Total Investment Income ($ in millions) Distributable Net Investment Income(1) ($ in millions) Year over Year Growth Year over Year Growth (2) 13% 4% (9)% 30% 27% (2) 14% 1% (11)% 30% 29% $300.0 $200.0 $280.0 $289.0 $194.7 $180.0 $260.0 $240.0 $160.0 $165.6 $168.3 $243.4 $
Slide 35: Long-Term Portfolio and DNII Per Share Growth
Long-Term Portfolio and DNII(1) Per Share Growth ($ in millions, except per share data) MAIN has consistently $4,200 $3.40 grown Portfolio $4,000 $3.09 $3.20 Investments $3,800 $2.82 $3.00 and DNII per $3,600 $2.75 $3,718 $2.67 $2.80 $3,400 $3,562 share $3,200 $2.57 $2.60 $2.39 $2.28 Portfolio Inves
Slide 36: Efficient and Leverageable Operating Structure
Efficient and Leverageable Operating Structure MAIN’s internally “Internally managed” structure means no external management managed operating fees or expenses are paid structure provides significant operating Alignment of interest between management and investors leverage and greater • Greater ince
Slide 37: MAIN Maintains a Significant Operating Cost Advantage
MAIN Maintains a Significant Operating Cost Advantage Operating Expenses as a Percentage of Total Assets(1) 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Other BDCs 0.5% MAIN Excl. Excl. Non-cash Other Non-cash Commercial MAIN (2) Exp (3) BDCs (4)(5) Exp (4)(6) Banks (7) 0.0% (1) Total expenses excluding inter
Slide 38: MAIN Income Statement Summary
MAIN Income Statement Summary Q2 22 vs. Q2 21 ($ in 000's) Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Change (1) Total Investment Income $ 67,294 $ 76,779 $ 82,166 $ 79,395 $ 85,200 27% Expenses: Interest Expense (14,400) (14,711) (15,921) (16,687) (17,295) (20)% G&A Expense(2) (7,258) (9,917) (11,626) (8,054) (
Slide 39: MAIN Per Share Change in Net Asset Value (NAV)
MAIN Per Share Change in Net Asset Value (NAV) ($ per share) Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Beginning NAV $ 22.65 $ 23.42 $ 24.27 $ 25.29 $ 25.89 Distributable Net Investment Income(1) 0.67 0.76 0.78 0.76 0.78 Share-based Compensation Expense (0.04) (0.05) (0.04) (0.04) (0.05) Deferred Compensation (
Slide 40: MAIN Balance Sheet Summary
MAIN Balance Sheet Summary ($ in 000's, except per share amounts) Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 LMM Portfolio Investments $ 1,341,332 $ 1,494,109 $ 1,716,415 $ 1,795,456 $ 1,816,255 Private Loan Investments 863,621 845,961 1,141,772 1,260,664 1,309,020 Middle Market Portfolio Investments 434,744 420
Slide 41: MAIN Liquidity and Capitalization
MAIN Liquidity and Capitalization ($ in 000's) Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Cash and Cash Equivalents $ 58,796 $ 59,569 $ 32,629 $ 17,952 $ 43,383 Availability Under Credit Facility (1), (2) 686,000 655,000 535,000 517,000 475,000 Remaining SBIC Debentures Capacity 28,000 - - - - Total Liquidity $
Slide 42: Stable, Long-Term Leverage – Significant Unused Capacity
Stable, Long-Term Leverage – Significant Unused Capacity Facility Interest Rate Maturity Principal Drawn MAIN maintains a conservative capital $855.0 million structure, with limited Credit Facility (1)(2) L+1.875% floating (3.6% (3)) April 2026 (4) $380.0 million overall leverage and low cost, long-
Slide 43: Long-term Maturity of Debt Obligations
Long-term Maturity of Debt Obligations MAIN’s conservative $900 capital structure $850 $500.0 provides long-term $800 access to attractively- $750 priced and structured $700 $650 debt facilities $600 • Allows for investments $550 (in millions) in assets with long-term $500 $450.0 holding periods / i
Slide 44: Interest Rate Impact and Sensitivity
Interest Rate Impact and Sensitivity While MAIN’s financial results are The following table illustrates the approximate annual changes in the components of MAIN’s net investment income due to hypothetical subject to impact from changes in increases (decreases) in interest rates(1)(2) (dollars in tho
Slide 45: Significant Management Ownership / Investment
Significant Management Ownership / Investment Significant equity # of Shares (2) June 30, 2022 (3) ownership by MAIN’s Management (1) 3,262,012 $125,685,322 management team, coupled with internally managed structure, provides alignment of interest between MAIN’s management and our shareholders (1) I
Slide 46: MAIN Total Return Performance Since IPO
MAIN Total Return Performance Since IPO TOTAL RETURN PERFORMANCE SINCE IPO 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 individu
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: Non-GAAP Information
Non-GAAP Information Distributable net investment income is net investment income, as Net Debt to NAV Ratio is calculated as the Debt to NAV Ratio as determined in accordance with U.S. generally accepted accounting principles, determined in accordance with U.S. GAAP, except that total debt is reduce
Slide 49: 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 Vincent D. Foster Dwayne L. Hyzak Robert J. Dodd 1300 Post Oak Blvd, 8th Floor Dwayne L. Hyzak Ch