Main Street Capital (MAIN) Earnings Transcript

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DATE

Feb. 27, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Dwayne Hyzak
• President & Chief Investment Officer — David Magdol
• Chief Financial Officer — Ryan Nelson
• Managing Director & Head of Private Credit Investment Group — Nicholas T. Meserve
• Managing Director, Investor Relations — Zach Vaughan

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TAKEAWAYS

• Return on equity (ROE) -- Achieved 17.7% during the quarter and 17.1% for the year, reflecting continued outperformance in core strategies.
• Net asset value (NAV) per share -- Ended at a record $33.33, up $0.55 sequentially and $1.07, or 5.3%, year over year, driven by net fair value increases in key portfolios.
• Total investment income -- Reported $145.5 million for the quarter, up $5.1 million (3.6%) year over year, and $5.7 million (4.1%) sequentially from fiscal Q3 2025 (period ended Sept. 30, 2025).
• Dividend income -- Grew by $11.4 million year over year, and $4.6 million sequentially, mainly due to positive performance and increased nonrecurring dividends.
• Interest income -- Declined by $7.2 million year over year, and $0.5 million sequentially, primarily from higher non-accruals and lower interest rates.
• Lower middle market investments -- Achieved a net increase of $253 million for the quarter, and $700 million for the year, marking the highest origination year in firm history.
• Private loan portfolio -- Net increase of $109 million for the quarter, and totaled $672 million in gross investments for the year; now makes up 43% of investments at cost.
• Material realized gains -- $50.8 million recognized in the quarter; $77 million in net realized gains, and $150 million in net fair value appreciation for lower middle market investments over the year.
• Supplemental and regular dividends -- Board declared a $0.30 per share supplemental dividend (March), totaling $1.20 per share in trailing twelve months, plus regular 2026 monthly dividends of $0.26 per share, a 4% increase.
• Operating expense ratio -- Operating expenses excluding interest were 1.4% of average total assets for the quarter (annualized), among the lowest in the sector.
• Non-accrual status -- Investments on non-accrual comprised 1% of portfolio at fair value, and 3.3% at cost at quarter end.
• External investment manager contribution -- Contributed $9.3 million to quarterly net investment income, and $34.6 million for the year, with $4.2 million in quarterly incentive fees, and $14.5 million for the year.
• Leverage and liquidity -- Regulatory debt-to-equity leverage at 0.71x (below targets); available liquidity over $1.2 billion, supported by credit facilities and cash.
• Follow-on investments in fiscal Q1 2026 (period ended Mar. 31, 2026) -- Over $45 million invested in four lower middle market companies to support strategic acquisitions, signaling continued pipeline strength.

SUMMARY

Main Street Capital Corporation (NYSE:MAIN) delivered record annual and quarterly net asset value per share, reflecting substantial fair value appreciation and material realized gains from its distinctive lower middle market and private loan strategies. The asset management segment posted meaningful growth in incentive fees and base management fees, enabled by solid performance of externally managed funds and increased regulatory debt capacity for MSC Income Fund. Management described both the lower middle market and private loan investment pipelines as "above average," highlighting organic growth initiatives following recent internal promotions and team expansions. Portfolio concentration remains low, with the largest holding accounting for only 5.2% of annual investment income and 3.3% of portfolio fair value. The company's internally developed talent and conservative capital structure underpin its confidence in maintaining opportunistic growth as economic conditions remain uncertain.

• CEO Hyzak said, "pipeline as above average," citing unique and flexible capital solutions, and continued attractiveness for owner-operators in economic uncertainty.
• President Magdol noted, "we have increased our monthly dividends per share by 136%, and we have declared cumulative total dividends to our shareholders of more than $49 per share," positioning the company well relative to its S&P 500 benchmark.
• The company completed significant follow-on investments during fiscal Q1 2026 (period ended Mar. 31, 2026), reinforcing its strategy of supporting acquisitions and growth initiatives within existing portfolio companies.
• Exposure to software and low-end consumer sector remains limited, with management prioritizing value-based investments, and closely monitoring sectors impacted by technology change and consumer headwinds.
• Sustained low operating expense ratios stem from the company's internally managed structure, and long-standing alignment of employee and shareholder interests.
• Management indicated plans to pursue additional asset management growth outside the MSC Income Fund, and alluded to potential updates on new strategies in the near term.

INDUSTRY GLOSSARY

• Lower middle market: Privately held companies typically generating $5 million-$300 million in annual revenue, targeted for both equity and debt investments by business development companies like Main Street Capital Corporation.
• Net asset value (NAV): Total assets minus total liabilities, reported on a per-share basis for investment companies.
• DNII (distributable net investment income): Net investment income excluding non-cash compensation expenses, reflecting cash-based earnings available for distribution.
• Private loan portfolio: Debt investments in larger middle market firms (often private equity-backed), which may include limited equity co-investments.

Full Conference Call Transcript

Zach Vaughan: Thank you, operator, and good morning, everyone. Thank you for joining us for Main Street Capital Corporation's fourth quarter 2025 earnings conference call. Joining me today with prepared comments are Dwayne Hyzak, Chief Executive Officer, David Magdol, President and Chief Investment Officer, and Ryan Nelson, Chief Financial Officer. Also participating in the Q&A portion of the call is Nicholas T. Meserve, Managing Director and Head of Main Street's Private Credit Investment Group. Main Street issued a press release yesterday afternoon that details the company's fourth quarter and full-year financial and operating results. The document is available on the Investor Relations section of the company's website at mainstcapital.com.

A replay of today's call will be available beginning an hour after the completion of the call and will remain available until March 6. Information on how to access the replay was included in yesterday's release. We also advise you that this conference call is being broadcast live through the Internet and can be accessed on the company's homepage. Please note that information reported on this call speaks only as of today, 02/27/2026, and therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call will contain forward-looking statements.

Any of these forward-looking statements can be identified by the use of words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may,” or similar expressions. Statements are based on management's estimates, assumptions, and projections as of the date of this call, and there are no guarantees of future performance. Actual results may differ materially from the results expressed or implied in these statements as a result of risks, uncertainties, and other factors, including but not limited to the factors set forth in the company's filings with the Securities and Exchange Commission that can be found on the company's website or at sec.gov. Main Street Capital Corporation assumes no obligation to update any of these statements unless required by law.

During today's call, management will discuss non-GAAP financial measures including distributable net investment income, or DNII. DNII is net investment income, or NII, as determined in accordance with U.S. generally accepted accounting principles, or GAAP, excluding the impact of non-cash compensation expenses. Management believes that presenting DNII and the related per-share amount are useful and appropriate supplemental disclosures for analyzing Main Street Capital Corporation's financial performance, since non-cash compensation expenses do not result in a net cash impact to Main Street upon settlement. Refer to yesterday's press release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures.

Two additional key performance indicators that management will be discussing on this call are net asset value, or NAV, and return on equity, or ROE. NAV is defined as total assets minus total liabilities and is also reported on a per-share basis. Main Street defines ROE as the net increase in net assets resulting from operations, divided by the average quarterly NAV. Please note that certain information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. I will now turn the call over to Main Street's CEO, Dwayne Hyzak.

Dwayne Hyzak: Thanks, Zach. Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call. We hope that everyone is doing well. On today's call, we will provide you with our key quarterly updates. We will also be providing a few updates on our performance for the full year. Following our comments, we will be happy to take your questions. We are extremely pleased with our continued strong performance in the fourth quarter, which closed another great year for Main Street Capital Corporation.

Our strong performance resulted in a return on equity of 17.7% for the fourth quarter and 17.1% for the full year, strong levels of DNII per share, a new record NAV per share for the fourteenth consecutive quarter, and extremely strong investment activity in our unique lower middle market investment strategy, resulting in an annual record for gross lower middle market investments. We believe that these continued strong results demonstrate the sustainable strength of our overall platform, the benefits of our differentiated and diversified investment strategies, the unique contributions of our asset management business, and the continued strength and quality of our portfolio companies, particularly our existing lower middle market portfolio companies.

We remain confident that our unique investment income and value creation drivers, together with our cost-efficient operations and conservative capital structure, allow us to continue to deliver superior results for our shareholders in the future. Our favorable results in the fourth quarter combined with our positive outlook for the first quarter resulted in our most recent dividend announcements, which I will discuss in more detail later. Our NAV per share increased in the quarter primarily due to the impact of significant net fair value increases in both our lower middle market and private loan investment portfolios, including the benefits of material net realized gains, which Ryan will discuss in more detail.

The continued favorable performance of the majority of our lower middle market portfolio companies resulted in another quarter of strong dividend income contributions and significant net fair value appreciation in our lower middle market equity investments. Based upon our current views of these investments, and feedback from our portfolio company management teams, we expect the strong contributions to continue.

Consistent with my comments over the last few quarters, and as David will discuss in more detail, we are pleased to have exited our investments in one high-performing lower middle market portfolio company, Mystic Logistics, in the fourth quarter, and our investments in another high-performing company, KBK Industries, in 2026, in both cases resulting in material realized gains in addition to significant dividends received over the life of our equity investments.

We believe that these investments serve as yet another great example of our highly unique lower middle market investment strategy, which delivered significant benefits for both Main Street Capital Corporation and our management team partners, including significant dividend income, fair value appreciation, and realized gains, resulting in best-in-class returns on our equity investments, in addition to the highly attractive interest income on our debt investments. Even after these recent realizations, we continue to see significant interest from potential buyers in several of our lower middle market portfolio companies, which we expect will lead to favorable realizations over the next few quarters and which we believe further highlights the strength and quality of our portfolio companies and their exceptional leadership teams.

We are also excited about the new and follow-on investments we made in our lower middle market strategy during the quarter, which included the addition of five new portfolio companies and a net increase in lower middle market investments of $253,000,000, representing our highest level of quarterly lower middle market net investment activity since 2021. Consistent with our prior guidance, private loan investment activity in the fourth quarter returned to our expected normal level of quarterly activity and generated a net increase of $109,000,000 in our private loan portfolio.

In addition to the favorable investment realizations in our lower middle market portfolio, we also completed successful exits of two private loan portfolio company equity investments in the fourth quarter, both at meaningful premiums to our third quarter fair values. David will discuss our investment activity in more detail. Given our conservative capital structure and strong liquidity position, we remain very well positioned to continue the growth of our investment portfolio for the foreseeable future, and we are excited about the current opportunities we are seeing. We also continue to produce positive results in our asset management business.

The funds we advise through our external investment manager continued to experience favorable performance in the fourth quarter, resulting in significant incentive fee income for our asset management business and, together with our recurring base management fees, a significant contribution to our net investment income. We remain excited about our plans for the external funds that we manage as we execute our investment strategies, and we are optimistic about the future performance of the funds and the attractive returns we are providing to the investors of each fund and about our strategy for growing our asset management business within our internally managed structure.

As part of these efforts, we remain focused on growing the investment portfolio of MSC Income Fund, a publicly traded BDC advised by our external investment manager which is solely focused on the private loan investment strategy with respect to new portfolio company investments. The result of the increase to its regulatory debt capacity became effective in January 2026, and the fund maintained significant capacity to add additional debt to fund the future growth of its investment portfolio. MSC Income's fourth quarter and full-year 2025 financial results conference call will be held later this morning for those who would like additional details.

Based upon our results for the fourth quarter, combined with our favorable outlook in each of our primary investment strategies and for our asset management business, earlier this week our board declared a supplemental dividend of $0.30 per share payable in March, representing our eighteenth consecutive quarterly supplemental dividend, and regular monthly dividends for 2026 of $0.26 per share. These second quarter regular monthly dividends represent a 4% increase over the regular monthly dividends paid in 2025.

The supplemental dividend for March is a result of our strong performance in the fourth quarter and will result in total supplemental dividends paid during the trailing twelve-month period of $1.20 per share, representing an additional 39% paid to our shareholders in excess of our regular monthly dividends. We currently expect to recommend that our board continue to declare future supplemental dividends to the extent DNII before taxes significantly exceeds our regular monthly dividends paid or we generate net realized gains, and we maintain a stable to positive NAV in future quarters. Based upon our expectations for continued favorable performance in the first quarter, we currently anticipate proposing an additional significant supplemental dividend payable in June 2026.

Now turning to our current investment pipeline. As of today, I would characterize our lower middle market investment pipeline as above average. Consistent with our experience in prior periods of broad economic uncertainty, we believe that our ability to provide unique and flexible financing solutions to lower middle market companies and their owners and management teams and our differentiated long-term to permanent holding periods represent an even more attractive solution to the needs of many lower middle market companies given the current economic environment, and we are confident in our expectations for strong lower middle market investment activity in the first quarter.

In addition, we continue to have an increased number of existing portfolio companies that are actively executing acquisition growth strategies that we anticipate will provide attractive follow-on investment opportunities for us in the near-term future and significant value creation opportunities for these portfolio companies in the longer-term future, consistent with the successes we have demonstrated and experienced with other portfolio companies. To date in the first quarter of 2026, we have made follow-on investments in four high-performing lower middle market portfolio companies to support strategic acquisitions, for a total of over $45,000,000 in incremental investments in those portfolio companies.

We also continue to be pleased with the performance of our private credit team and the significant growth they have provided for our private loan portfolio and our asset management business over the last few years, and as of today, I would characterize our private loan investment pipeline as above average. With that, I will turn the call over to David.

David Magdol: Thanks, Dwayne, and good morning, everyone. Each year-end provides a good opportunity to look back at our history and highlight the results of our unique and diversified investment strategies and discuss how these strategies have enabled us to deliver highly attractive returns to our shareholders over the last nineteen years. Since our IPO in 2007, we have increased our monthly dividends per share by 136%, and we have declared cumulative total dividends to our shareholders of more than $49 per share, or approximately 3.3 times our IPO share price of $15.

Our total return to shareholders since our IPO, calculated using our stock price as of yesterday's close and assuming reinvestment of all dividends received since our IPO, was 17 times money invested. This compares very favorably to the 5.3 times money invested for the S&P 500 over the same period of time and is significantly higher when compared to most public companies.

As we have previously discussed, we believe the primary drivers of our long-term success have been and will continue to be our focus on making both debt and equity investments in the underserved, highly attractive lower middle market; our private credit investment activities for the benefit of our stakeholders and for the clients of our asset management business; our internally managed structure, which allows us to maintain a highly efficient and industry-leading operating structure; and the strong alignment of interest between our employees and our shareholders as a result of our team's meaningful stock ownership.

Most notably and uniquely, our lower middle market strategy provides attractive leverage points and income yields on our first lien debt investments while also creating a true partnership with the management teams and other equity owners of our portfolio companies through our flexible and highly aligned equity ownership structures. This approach provides us significant downside protection through our first lien debt investments and preferred equity positions while still providing the benefits of significant upside potential through these equity investments.

Main Street Capital Corporation's long-term historical track record of investing in the lower middle market, coupled with the fact that this continues to be a large addressable and underserved market, gives us confidence that we will be able to continue to find attractive new investment opportunities in our primary investment strategy. Our ability to provide highly customized capital solutions for the predominantly family-owned businesses that exist in the lower middle market has been and continues to be our primary differentiator.

In 2025, Main Street Capital Corporation invested over $700,000,000 in our lower middle market strategy, which represents the largest year of lower middle market originations in our firm's history. $482,000,000 of this capital was deployed in 13 new lower middle market platform companies, with the remaining $219,000,000 predominantly representing follow-on investments in existing seasoned and well-performing lower middle market companies. Our follow-on investments are typically used to support multiple objectives, including growth capital and organic expansion opportunities, acquisitions, and recapitalizations. Most importantly, these follow-on investments are made in support of proven management teams that we believe represent significantly lower investment risk when compared to investments in new portfolio companies.

Since we are significant equity owners in our lower middle market companies, we also benefit from participating alongside these proven operators as they strive to achieve meaningful equity value creation. As we have stated in the past, as our lower middle market companies perform over time, they naturally deleverage with free cash flow generated from operations. This allows us, along with our lower middle market portfolio management team partners, to benefit from a larger portion of the company's free cash flow after debt service, which can be available for distributions to the equity owners.

Given the strength and quality of our lower middle market portfolio and the long-term to permanent holding period for many of our companies, we expect dividend income to continue to be a significant contributor to our results in 2026 and in the future. Additionally, this deleveraging, coupled with the strong underlying operating results of our lower middle market portfolio companies, allowed us to achieve $150,000,000 in net fair value appreciation in 2025 from our lower middle market portfolio. In 2025, we also achieved $77,000,000 in net realized gains in our lower middle market portfolio, including the largest realized gain in our firm's history.

The benefit from realized gains in our lower middle market equity investments is unique to our strategy and provides the opportunity to offset losses, which will occur when investing in non-investment-grade asset classes. As our lower middle market equity investments perform, they also provide the opportunity for unrealized appreciation, which allows us to continue to grow our NAV per share. A great example of a lower middle market equity investment that highlights the benefits of our unique investment strategy was our investment in Mystic Logistics, which we exited in the fourth quarter. This exit resulted in a realized gain of $24,000,000.

In addition to this realized gain, Mystic Logistics also distributed total dividends to us of $22,000,000 over the life of our investment. The last important area I would like to cover regarding our 2025 accomplishments are the contributions we received from our private loan investment strategy. We believe that our private loan investment strategy provides a very attractive risk-adjusted return profile for us and for the clients of our asset management business as we execute on our strategic objective to continue to grow our asset management business.

Despite a challenging investment environment for most of the year due to slower-than-expected private equity industry activity, we completed gross investments of approximately $672,000,000 in our private loan strategy, and at year-end, our private loan portfolio represented 43% of our total investments at cost. As a reminder, in our private loan strategy, we are primarily a lender to private equity-backed businesses. We also occasionally make small equity investments in our private loan portfolio companies. In the fourth quarter, we recognized a significant realized gain of $34,000,000 in our investment in Purge Right. This exit provides evidence of the potential benefits of our private loan equity co-investment strategy.

As of December 31, we had investments in 189 portfolio companies spanning across numerous industries and end markets. Our largest portfolio company, excluding the external investment manager, represented only 5.2% of our total investment income for the year and only 3.3% of our total investment portfolio fair value at year-end. The majority of our portfolio investments represented less than 1% of our income and our assets. Now turning to our investment activity in the fourth quarter, we made total investments in our lower middle market portfolio of $300,000,000, including investments of $241,000,000 in five new lower middle market portfolio companies, which after aggregate investment activity resulted in a net increase in our lower middle market portfolio of $253,000,000.

During the quarter, we also completed $231,000,000 of total private loan investments, which after aggregate investment activity resulted in a net increase in our private loan portfolio of $109,000,000. At year-end, we had investments in 92 companies in our lower middle market portfolio, representing $3,100,000,000 of fair value, which is 26% above our cost basis, and investments in 86 companies in our private loan portfolio, representing $2,000,000,000 of fair value. The total investment portfolio at fair value at year-end was 17% above our cost basis. Additional details on our investment portfolio at year-end are included in the press release that we issued yesterday.

With that, I will turn the call over to Ryan to cover our financial results, capital structure, and liquidity position.

Ryan Nelson: Thank you, David. To echo Dwayne's and David's comments, we are very pleased with our strong operating results for the fourth quarter, which included several quarterly records and capped a year in which Main Street Capital Corporation achieved a record in NAV per share. Our total investment income for the fourth quarter was $145,500,000, increasing by $5,100,000, or 3.6%, over the fourth quarter of 2024 and increasing by $5,700,000, or 4.1%, from the third quarter of 2025.

Our positive performance for the first three quarters continued in the fourth quarter and culminated in a year with favorable total investment income highlighted by strong levels of dividend and fee income, which again demonstrate the continued strength of our differentiated and asset management strategies. Interest income decreased by $7,200,000 from a year ago and by $500,000 from the third quarter of 2025.

The decrease from the prior year was principally attributable to a larger negative impact from investments on non-accrual status and a decrease in interest rates, primarily resulting from decreases in benchmark index rates on our floating rate debt investments and other decreases in interest rates on existing debt investments, partially offset by the impact of the growth of the investment portfolio.

The decrease from the prior quarter was principally attributable to a decrease in interest rates, primarily resulting from decreases in benchmark index rates on floating rate debt investments and other decreases in interest rates on existing debt investments and a larger negative impact from investments on non-accrual status, partially offset by the impact of the growth of the investment portfolio. Dividend income increased by $11,400,000 when compared to a year ago, including a $4,500,000 increase in unusual or nonrecurring dividends, and increased by $4,600,000 from the third quarter, including a $200,000 increase in unusual or nonrecurring dividends.

The increases in dividend income for both comparable periods are primarily a result of the continued underlying positive performance of our lower middle market portfolio companies and their capital allocation decisions. Fee income increased by $900,000 from a year ago and by $1,600,000 from the third quarter. The increases in fee income are primarily due to higher closing fees on new and follow-on investments, partially offset by a decrease in fee income from the refinancing and prepayment of debt investments and other investment activity. Fee income considered nonrecurring decreased by $700,000 from a year ago and by $100,000 from the third quarter of 2025.

The fourth quarter included increased levels of income considered less consistent or nonrecurring in nature in comparison to the comparable periods, primarily related to dividends from our equity investments. In the aggregate, these items totaled $7,600,000 and were $3,900,000, or $0.04 per share, higher than the fourth quarter of 2024 and $3,400,000, or $0.04 per share, higher than the third quarter of 2025. Our operating expenses increased by $1,400,000 over the fourth quarter of 2024 and by $1,100,000 from the third quarter.

The increase in operating expenses from the prior year was largely driven by increases in cash compensation-related expenses, share-based compensation expense, and general and administrative expenses, partially offset by a decrease in interest expense and an increase in expenses allocated to the external investment manager.

The decrease in interest expense from a year ago was primarily driven by a decrease in the weighted average interest rate on our unsecured debt obligations, resulting from the issuance of the August 2028 notes, the early repayment of the December 2025 notes, and a decrease in the weighted average interest rate on our credit facilities resulting from decreases in benchmark index interest rates and decreases in the applicable margin rates resulting from the amendments of our credit facilities in April 2025.

The ratio of our total operating expenses, excluding interest expense, as a percentage of our average total assets, was 1.4% for the quarter on an annualized basis and 1.3% for the year, and continues to be among the lowest in our industry. Our external investment manager contributed $9,300,000 to our net investment income during the fourth quarter and $34,600,000 for the year, representing a slight increase over the prior year and the third quarter. Our investment manager earned $4,200,000 in incentive fees during the fourth quarter and $14,500,000 for the year. The investment manager ended the quarter with total assets under management of $1,700,000,000.

During the quarter, we recorded net fair value appreciation, including net realized gains and net unrealized depreciation on the investment portfolio, of $42,500,000. This increase was primarily driven by net fair value appreciation in our lower middle market, private loan, and other portfolio investments, partially offset by net fair value depreciation in our middle market investments and our external investment manager. The net fair value appreciation in our lower middle market portfolio was largely driven by the continued positive performance of certain portfolio companies. The net fair value appreciation in our private loan portfolio was primarily driven by several specific portfolio companies and decreases in market spreads.

The net fair value depreciation of our external investment manager was primarily driven by decreases in the valuation multiples of publicly traded peers, which we use as one of the benchmarks for valuation purposes, partially offset by increased incentive fee income and increased base management fee income. We recognized net realized gains of $50,800,000 in the quarter. Additional details on our net realized gain activity are included in the press release we issued yesterday. We ended the fourth quarter with investments on non-accrual status comprising approximately 1% of the total investment portfolio at fair value and approximately 3.3% at cost.

Net asset value, or NAV, increased by $0.55 per share over the third quarter and by $1.068 per share, or 5.3%, when compared to a year ago, to a record NAV per share of $33.33 at year-end. Our regulatory debt-to-equity leverage, calculated as total debt excluding our SBIC debentures divided by NAV, was 0.71 times, and our regulatory asset coverage was 2.41 times, and these ratios continue to be more conservative than our long-term target ranges of 0.8 to 0.9 times and 2.25 to 2.1 times, respectively. Given our current liquidity position, we continued to be less active during the fourth quarter in our ATM program, raising net proceeds of $8,700,000 from equity issuances.

In February, we expanded the total commitments under our corporate facility by $30,000,000 to $1,175,000,000. This increase was a result of a new lender relationship, which further expanded our lender group under the corporate facility. After giving effect to the capital activities in 2025 and this February, we enter 2026 with strong liquidity, including cash and unused capacity under our credit facilities totaling over $1,200,000,000, with a near-term debt maturity of $500,000,000 in July 2026.

We continue to believe that our conservative leverage, strong liquidity, and continued access to capital are significant strengths that have proven to benefit us historically and have us well positioned for the future, allowing us to continue to execute our attractive investment strategies despite the current market uncertainty. Because of the market uncertainty, we expect to continue to operate over the next few quarters at leverage levels more conservative than our long-term targets.

Coming back to our operating results, as a result of our strong performance for the quarter and year, DNII before taxes per share for the quarter of $1.11 was $0.03 higher per share than the fourth quarter of last year and $0.04 per share higher than the third quarter. Looking forward, we expect first quarter 2026 DNII before taxes of at least $1.04 per share, with the potential for upside driven by portfolio investment activities during the quarter. With that, I will now turn the call over to the operator so we can take any questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment while we poll for a question. Our first question comes from the line of Robert Dodd with Raymond James. Please proceed with your question.

Robert Dodd: Hi, guys, and congratulations on the quarter. I want to ask about the activity level, obviously a really high level of activity in the fourth quarter. Then the pipeline is still above average. I think you said you are seeing a very strong Q1 as well. Is this just a timing event, that things just happen to be coinciding for the back end of last year and the beginning of this year, or do you think this is a step change in activity and that could persist in terms of more of the type of retirement plan, etcetera? Do you feel this is a shift up or a bump in activity, if that makes sense?

Dwayne Hyzak: Sure. Good morning, Robert, and thank you for the question. I will probably give two answers here, and I will let David and Nick then add on if they have any additional comments they want to add. If you look at the lower middle market side first, I would say we have been intentional for the last couple of years about trying to grow our activities in the lower middle market. That includes growing our team. We have been trying to grow our people.

We have a number of individuals that have been at Main Street for a long period of time executing our consistent lower middle market investment strategy, and we have had a couple of individuals now be promoted to Managing Director. That has happened really over the last eight to eighteen months. I think you are seeing the benefit of having additional people focused on that consistent strategy. That is part of it. I think we have also done some things internally just to try and do a better job at executing, and I think that has also had a benefit.

It is really hard to pinpoint how much benefit, but I am confident it has had a benefit from an execution standpoint. We have also always said we think our lower middle market investment strategy should be attractive at all times to individual owner-operators or families that own a business. When you look at the last couple of years, and it continues to be the case today with the uncertainty in the economy, I would think that our offering would be even more attractive, and I think we are seeing that as well.

If you are an individual owner-operator that is looking to get liquidity, it is probably still not the perfect time to sell your business given the uncertainty that is out there. It is a great time to bring on an institutional partner like Main Street Capital Corporation with the best-in-class track record that has extreme flexibility from an investment standpoint to help you get some liquidity and then help you grow your business and execute your plan going forward. Those are the three things I would point to on the lower middle market side.

On the private loan side, or private credit side, I would say our team continues to do a really good job there, but I do think some of that is more just the market, the overall investment activity for private equity firms. We saw it building halfway through the third quarter. Obviously, that momentum did not come to fruition until the fourth quarter, but I think we saw it in the fourth quarter, and we have continued to see good activity in the first quarter. I would say there, it is our team doing a good job, but also just the market becoming more active.

I will let David add anything on lower middle market or Nick on the private credit side if they have additional comments.

David Magdol: I think you covered most all of it, Dwayne. The only thing I would add is that we are really pleased with the growth of our number of teams that we have seen in the lower middle market. I will say Q4 was a particularly strong originations quarter, and in the future, we hope to be able to continue momentum at above-average rates. I would not say that Q4 is necessarily indicative of our view towards our expectations going forward on the lower middle market originations side. It was particularly strong.

Nicholas T. Meserve: On the private credit side, I would echo Dwayne's comment that it is really the market volume that has driven the changes from early 2025 to the third and fourth quarters and the first quarter so far this year.

Dwayne Hyzak: Robert, as I thought about comments earlier, the one other thing I would add is just the follow-ons. We talk about it all the time, both lower middle market and private credit/private loan. We have seen consistent activity there. We find those investments, those opportunities, very attractive because we already know the team. We know the company. It is likely, in both cases, lower middle market and private loan or private credit, delevered from our original entry point.

If we can have opportunities to fund follow-on investments for acquisitions or other growth activities in both our existing lower middle market and private credit/private loan portfolio companies, we find those really attractive, and we have seen that occur both in Q4 and Q1, and we are hopeful it will continue to occur in 2026.

Robert Dodd: Got it. Got it. In an attempt to back you into a corner a little bit more on this topic, at what point does this new level become the new average? David said you expect it to remain above average for a while. If it is above average for a while, it is the new average. It is like Lake Wobegon where everybody is around average. At what point do you think you recalibrate that this is the new normal rather than it is just that those teams and everything have reset the normal? You have set the average rather than it being above average, so to speak.

Dwayne Hyzak: I would again focus this comment more on the lower middle market side, Robert, than the private loan side. If we are adding people, and we are promoting MDs, we should have a different expectation. I do think, when you look at it, I think David was just referencing that Q4 was a really, really active quarter. As we add MDs and teams, if we are not having more investments and a bigger portfolio, we should not be adding MDs and teams. When you see us completing those activities, one is the individual's ability to do it, but there is an expectation that we have growth and performance as well.

I do think that from that standpoint, not a massive step change, but over time we are adding those individuals and those teams for a reason.

Robert Dodd: Got it. Got it. Thank you. One more if I can. On software, since it is a topic, you do not have a lot of exposure, mid-single digits. What is the view on that? Obviously, there might be a different view of what you are willing to do on the software side in the lower middle market versus on the private loan side because those can be quite different types of businesses where there is software. What is your view of your exposure and your outlook regarding software in the different segments?

Dwayne Hyzak: I will give my comments, and then maybe Nick can add on the private credit side if he has other comments. I would reiterate what you said. We do not have significant software exposure at all. As you have always heard us say, both on the lower middle market side and private credit, we are value-based investors. We love basic industries. A lot of people do not find that attractive. I think in today's environment, it is probably pretty attractive. We have always found it to be very attractive. We do not chase stuff that has high valuations.

As a result, if you look at areas that we are underweight, software and healthcare would be two areas that we would be underweight. I would say we go into this situation with limited exposure. When you look at the individual names there, as you would expect us to, as any other investment manager would be, you are paying a lot of attention to what is going on there. As we sit here today, we feel good about the exposure. Obviously, you have to take AI into consideration, not just at Main Street Capital Corporation, but much more so at the portfolio company.

We are confident in those management teams and their business models, and as we sit here today, we feel pretty good about the exposure. Nick, if you have anything you want to add on the private credit side?

Nicholas T. Meserve: Historically, we have not done a lot. On a go-forward basis too, it is finding the right deals that we like. High-growth or high ARR deals, that is really not where we are going to focus. We have focused on cash flow software deals on the few that we do. I think going forward, we will see even more of that. It will be more focused on the infrastructure side versus, say, a growth SaaS or software model.

Robert Dodd: Got it. Thank you.

Operator: Thank you. Our next question comes from the line of Brian McKenna with Citizens. Please proceed with your question.

Brian McKenna: Great. Thanks. Good morning, guys. What continues to stand out to me is the resiliency of your ROE. I think there are a number of things driving this, but when you look at the underlying drivers and trends across your business today that ultimately impact the trajectory of returns from here, how do all these look today relative to a year ago? I am trying to think through some of the puts and takes in the current operating environment and what this means for the intermediate-term outlook for ROEs.

Dwayne Hyzak: Morning, Brian, and thanks for the question. We feel good about where we are today. If you look at 2025 versus 2024, your ROE came down some year-over-year. When you look at the current environment, two things will impact our ROE going forward on the private credit/private loan side. Both your floating index rates and spreads have some impact. That is marginal, but that does have a negative impact or a headwind. On the lower middle market side, the overall economy will be a big driver of where our ROE shakes out both in terms of dividend income and fair value appreciation. Our companies, as you have heard us say in the past, we think they are really good companies.

Even more importantly, we think our management teams that we get to partner with at the lower middle market are exceptional. We are confident that no matter what happens in the overall environment, they are going to outperform what is happening in the overall economy. If the overall economy takes a step back, we are going to have some impact from that as well. Overall, we still feel really good about where we sit. The other thing I would say, and this is maybe less significant, but if you have significant growth, particularly in the lower middle market, those investments are not going to be creating the same ROE day one. It is a new investment. It has not delevered.

It has not grown. As you have more growth, just naturally, the new investment is going to be contributing a lower ROE than an investment that has been in the portfolio for five or ten years. That would be another thing. Overall, though, I think we feel really good about the expectations for ROE across the platform, and then specifically in lower middle market and private credit. The other benefit we have, which you know, is that we have a very efficient operating structure, which allows us to have additional benefits as we grow our portfolio from an OpEx standpoint and what that does to ROE. Those are the comments I will give you, Brian.

Brian McKenna: That is great. Thanks, Dwayne. Clearly you are operating from a position of strength here at a time when most others across the industry are playing quite a bit of defense. Your balance sheet is rock solid. You have a ton of excess capital and liquidity to keep growing and investing across the business despite what happens in the broader macro and capital markets. Periods of volatility are always driven by different things, but history often rhymes. Given your two-decade track record managing the business, what are some of the past experiences you are leaning on today to make sure you prudently manage the business through the current environment? It sounds like pipelines are strong across the board.

From a deployment perspective, where are you really looking to lean in from a sector or mix perspective?

Dwayne Hyzak: A couple of comments. From a sector mix, I think we feel really good about both the lower middle market and private loan/private credit businesses and opportunities. I would not say that we are leaning in to one of those more than the other. It is going to be consistent with what we have done in the past. At the individual industry level, you have probably heard us say this before, but we are less focused on an individual industry, and we are more focused on who is the individual that we have the opportunity to partner with on the lower middle market side. We take a very broad-based, industry-agnostic approach.

Once an opportunity comes in, then we are going to figure out if that is an industry and a company product or service that we find attractive. First and foremost, it is about who is the individual, is he or she best in class, and is he or she trying to achieve a transaction goal that fits or aligns with our interest? If we can find that, then we are going to be interested in most industries. I think what you will see us continue to do is just lean on our history. We are value-based investors. We are going to partner with best-in-class managers.

On the capital structure side, we are going to maintain a conservative capital structure and significant liquidity position. Our ability to issue equity under the ATM is huge, as you know, and that is something that we do not use just to maximize issuing equity at a high stock price. We issue equity as we grow the portfolio, particularly on the lower middle market side. We have the tools and the ability to continue to grow the platform, both lower middle market and private loan, and finance it in a way that is very conservative but also very constructive for us and our shareholders.

I do not know if that answers your question, but those are the views I would give. David, if you have anything you want to add, feel free.

David Magdol: I would just add one quick comment, which is that our philosophy over two decades has been to be very thoughtful about the underlying credit that we are investing in on the lower middle market side. We know that we are going to see cycles. We assume that we are going to see cycles. We underwrite to that. On the front end, we are assuming that we are going to be through good and tougher times. We talk about that a lot at our investment committee meetings so that we can get through stressful times without too much disruption.

Brian McKenna: Alright. I will leave it there. Thanks so much.

Dwayne Hyzak: Thanks, Brian.

Operator: Thank you. Our next question comes from the line of Arren Cyganovich with Tuohy Securities. Please proceed with your question.

Arren Cyganovich: Thank you. Good morning. Your comments about expanding MDs and that helping to increase the level of activity that you are seeing. I know that from meeting with you in the past, you have talked about the larger proportion of your MDs, or almost all of them, coming from internally as you grow them. You do not really get them from outside, generally. What is the pipeline of your talent pool, and how are you managing that in this environment? Is it continuing to be pretty steady?

Dwayne Hyzak: Thanks for the question, Arren. We feel good about it. Our group of Managing Directors, as you said, we have had a few that have gotten promoted here in the last eighteen months or so, so we feel good about those individuals. We also feel really good about the group of Directors and VPs that we have beneath that. The comments I have given were on the lower middle market side. We have had the same thing on the private credit side. We have had two individuals that have been here for a very long time who were promoted recently to Managing Director.

We are seeing the same thing from a talent and capability and experience standpoint on both the lower middle market and private credit. In the case of all those people, they are not people we hire from outside. These are people that have been at Main Street for a long period of time executing to our strategies, which we think are very unique, and executing in the way that we have executed for the last twenty years. We feel really good about the talent pipeline and pool that we have in both lower middle market and private credit.

Arren Cyganovich: Thanks. In terms of the investment pipelines, are there any common threads in terms of industries or areas that seem to be a little bit more active than others?

Dwayne Hyzak: Just like our portfolio and our history, I would say it is pretty diverse and broad. We are not seeing any concentration in one industry or one sector.

Arren Cyganovich: Great. Thank you.

Operator: As a reminder, if anyone has any questions, you may press star 1 on your telephone keypad in order to join the queue. Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.

Doug Harter: Thanks, and good morning. Just following up on your comment that you underwrite to cycles, can you talk about what you are seeing in the underlying performance of your companies and any areas of increased focus as you look at that performance?

Dwayne Hyzak: Thanks for the question, Doug. We feel good about the portfolio as a whole. I would not say we are seeing any sector, industry, or specific area that is seeing more pressure or more underperformance. As we talked about earlier, given AI and the noise around that, anything that has software exposure, we are spending more time there. We have very limited exposure in that area, but we have been spending more time there. Low-end consumer, you have heard us talk about this probably now for three years. That is an area that has been and continues to have some challenges. Over the years, we have taken most of the pain from a fair value standpoint.

We feel pretty good about where we sit today, and those companies overall are doing fine. It is just another area, given our experience for the last couple of years, that continues to get more attention. David or Nick, anything to add on that?

Nicholas T. Meserve: Nothing to add.

Doug Harter: Great. Appreciate that. Thank you, Dwayne.

Dwayne Hyzak: Thanks, Doug.

Operator: Next question comes from the line of Ryan McKenna with Citizens. Please proceed with your question.

Ryan McKenna: All right. Thanks for the follow-up here. Just a couple of quick questions on the RIA. Based on the math that I have done, it looks like the RIA generated about $35,000,000 of NII in 2025, and that is roughly flat compared to 2024. I know there are a couple of near-term drivers for AUM growth. Should this earnings stream start to inflect higher in 2026? Looking at this business more broadly, are there any opportunities to create some additional strategies here? I ask this because your performance across Main Street Capital Corporation is quite differentiated, and I am wondering if you can further leverage this performance at the RIA for some newer strategies.

Dwayne Hyzak: Thanks for the question, Ryan. I do think when you look at our external investment manager, we expect to have growth in the future. We have to have execution, and the market has to be cooperative, but we expect to have an increase in the base management fees there, primarily as MSC Income Fund executes its growth opportunity and strategy. We are expecting some benefit there in 2026. Outside of that, it is going to come down to our ability to grow outside of MSC Income Fund, having another private loan fund or some other strategy that we add to our asset management business. We are looking at opportunities and ways to grow there.

We look forward to hopefully having some news over the next month or so about some of our efforts there. Those efforts and that news probably do not have an immediate impact, but they position us for growth over the longer term. We are working on that. We think it is a phenomenal generator of value to Main Street Capital Corporation. We also think there is a tremendous opportunity for us, given Main Street’s long-term track record and performance and what we think are very happy investors, both on the public company and the private fund side. We, like you, think it is a great business. We look forward to growing it.

We just have to find the best avenue or the right avenue to grow it.

Ryan McKenna: Alright. Thanks, Dwayne.

Operator: Thank you. We have reached the end of the question-and-answer session. Therefore, I will turn the call back over to management for any closing remarks.

Dwayne Hyzak: Thank you again to everyone for joining us this morning. We appreciate the continued support of our shareholders. We look forward to our next call in early May after the release of our results for the first quarter. Thank you.

Operator: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

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