Q2 2025 Main Street Capital Corp Earnings Call

Speaker #3: Greetings. Welcome to Main Street Capital's second quarter earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Speaker #3: If anyone's required operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan.

Speaker #3: Please, Mr. Vaughan, proceed.

Speaker #4: Thank you, operator. And good morning, everyone. Thank you for joining us for Main Street Capital Corporation, second 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.

Speaker #4: Also participating in the Q&A portion of the call is Nick Mazur, Managing Director and Head of Main Street's Private Credit Investment Group. Main Street issued a press release yesterday afternoon that details the Q2 2025 financial and operating results.

Speaker #4: This 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 August 15th.

Speaker #4: 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.

Speaker #4: Please note that information reported on this call speaks only as of today, August 8th, 2025, and therefore, you are advised that at any time sensitive information may no longer be accurate at the time of any replay listening or transcript reading.

Speaker #4: Today's call will contain forward-looking statements. Many 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.

Speaker #4: These ements are based on management's estimates, assumptions, and projections as of the date of this call, and there are no guarantees of future performance.

Speaker #4: 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 change Commission.

Speaker #4: Which can be found on the company's website or at sec.gov. Main Street assumes no obligation to update any of these statements unless required by law.

Speaker #4: 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.

Speaker #4: Excluding the impact of non-cash compensation expenses, management believes that presenting DNII and the related per-share amount provides useful and appropriate supplemental disclosures for analyzing Main Street's financial performance, since non-cash compensation expenses do not result in a net cash impact to Main Street upon settlement.

Speaker #4: Please refer to yesterday's press release for a ciliation 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.

Speaker #4: NAV is defined as total assets minus total liabilities and is also recorded on a per-share basis. Main Street defines ROE as the net increase in net assets resulting from operations divided by average quarterly NAV.

Speaker #4: Please note that information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified.

Speaker #4: And now I'll turn the call over to Main Street CEO, Dwayne Hyzak.

Speaker #5: Thanks, Zach. Good morning, everyone, and thank you for joining us. We appreciate your participation on this morning's call. We hope that everyone's doing well.

Speaker #5: On today's call, David, Ryan, and I will provide you with our key quarterly updates after which we'll be happy to take your estions. We are pleased with our performance in the second quarter, which resulted in another quarter of strong operating results, highlighted by an annualized return on equity of 17.1%, DNII per share that continued to exceed the dividends paid to our areholders, a new record for NAV per share for the 12th consecutive quarter, and our largest realized gain in Main Street's history.

Speaker #5: We believe that continued strong results demonstrate the sustainable strength of our all platform, the benefits of our differentiated and diversified investment strategies, the unique contributions of our asset management business, and the continued underlying strength and quality of our portfolio companies, particularly those in our highly unique lower middle market investment strategy.

Speaker #5: We remain confident that our unique investment income and value creation drivers, together with our cost-efficient operations and conservative capital structure, will ow us to continue to deliver superior results for our areholders in the future.

Speaker #5: Our favorable results for the second quarter combined with our current expectations for the third quarter resulted in our recommendations to our board directors for our most recent dividend announcements which I will discuss in more detail later.

Speaker #5: Our NAV per share increased this quarter primarily due to the impact of net fair value increases in our asset management business and our lower middle market investment portfolio, as well as the accretive impact of our equity issuances in the quarter, which Ryan will discuss in more detail.

Speaker #5: The majority of our lower middle market portfolio companies continued their favorable performance, resulting in another quarter of strong dividend income contributions and continued net fair value appreciation in our lower middle market equity investments.

Speaker #5: As I discussed on our call last quarter and as David will discuss in more detail, we are pleased to have closed the partial exit of our investments in Heritage Vet Partners in the second quarter among the company's majority recapitalization with a new financial sponsor, resulting in the largest realized gain in Main Street's history, and at a meaningful premium to our March 31st fair value.

Speaker #5: As noted in prior quarters, we have experienced underperformance in certain of our private loan portfolio companies, particularly those with direct consumer discretionary spending exposure. This is having a negative impact on the contributions from our private loan portfolio.

Speaker #5: We continue to actively monitor these investments and are working with the portfolio companies to achieve the best possible outcome for each investment. Now turning to our investment activity, we are excited about the new and follow-on investments we made in our lower middle market portfolio companies during the quarter, which resulted in a net increase in lower middle market investments of $108 million.

Speaker #5: Our private loan investment activity in the quarter was slower than our expected normal quarterly activity, primarily due to lower overall levels of private equity, industry investment activity, resulting in a net decrease in private loan investments of $35 million.

Speaker #5: David will discuss our estment activity for the quarter in more detail. Given our conservative capital structure and strong liquidity position, we remain very well positioned to continue the future growth of our investment portfolio, and we are excited about the current opportunities we are seeing particularly those in our lower middle market investment strategy.

Speaker #5: We have also continued to produce positive results in our asset management business. The funds we advised through our external investment manager continue to experience favorable performance in the second quarter, resulting in significant infinity income for our asset management business for the 11th consecutive quarter, and together with our urring base management fees, a significant contribution to our net investment income.

Speaker #5: 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 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.

Speaker #5: 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, and our largest asset management business client.

Speaker #5: Through the reased current liquidity and path to additional debt capacity obtained through the fund's successful listing on the New York Stock Exchange and the related equity offering in January.

Speaker #5: In addition to deploying the fund's current liquidity into new private loan investments, we also continue focus on maximizing benefits of the fund's legacy lower middle market investment portfolio.

Speaker #5: We remain excited about the opportunity for significant future benefits to both the fund's shareholders and our asset management business, as the fund executes its growth plans.

Speaker #5: Based upon our results for the second quarter, combined with our outlook in each of our primary investment strategies and for our asset management business, earlier this week our board declared a supplemental dividend of 30 cents per share payable in September, representing our 16th consecutive quarterly supplemental dividend.

Speaker #5: And regular monthly dividends for the fourth quarter 2025 of 25 and a half cents per share. The fourth quarter regular monthly dividends are payable in each of October, November, and December, and represent a 4% increase from the regular monthly dividends paid in the fourth quarter of 2024.

Speaker #5: The supplemental dividend for September is a result of our strong performance in the second quarter, and will result in total supplemental dividends paid during the trailing 12-month period of $1.20 per share, representing an additional 40% paid to our shareholders in excess of our regular monthly dividends.

Speaker #5: We currently expect to commend that our board continue to declare future supplemental dividends to the extent DNII significantly exceeds our regular monthly dividends paid in future quarters, and we maintain a stable to positive NAV.

Speaker #5: Based upon our expectations for continued favorable performance in the third quarter, we currently anticipate proposing an additional significant supplemental dividend payable in December of 2025.

Speaker #5: Now turning to our current investment pipeline, as of today, our characterize our lower middle market investment pipeline as above average. Consistent with our experience in prior periods of broad economic uncertainty, we believe that the unique and flexible financing solutions that can provide 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 ket companies in the current economic environment, and we are confident in our expectations for strong lower middle market investment activity over the remainder of 2025.

Speaker #5: In addition, we have an reased number of existing portfolio companies that are actively executing on acquisition growth strategies that we hope 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've ienced with other portfolio companies.

Speaker #5: 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.

Speaker #5: As of today, given the continued slower overall private equity industry investment activities, I would characterize our private loan investment pipeline as slightly below average.

Speaker #5: With that, I will turn the call over to David. Thanks, Dwayne, and good ning, everyone. As Dwayne highlighted in his remarks, we believe that our strong second quarter financial results continue to demonstrate the strength of Main Street's platform, our differentiated investment approach, and our unique operating model.

Speaker #5: We are pleased to report that the overall operating performance over most of our portfolio companies continues to be positive, which contributed to our attractive second quarter financial results.

Speaker #5: Despite the continued heightened level of concern and uncertainty in the overall economy, we remain confident in the ability of our portfolio companies to continue to navigate in the current climate.

Speaker #5: As we have previously discussed, we believe one of the primary drivers of our long-term success has been and will continue to be our focus on investing both debt and equity investments in the underserved lower middle market.

Speaker #5: Most notably and uniquely, our lower middle market strategy provides attractive leverage points and yields on our first-line debt investments while also creating a true partnership with the management teams of our portfolio companies through our flexible equity ownership positions.

Speaker #5: In short, we believe that this approach provides significant downside protection through our first-line debt investments, while still providing the benefits of alignment and significant upside potential with our equity investments.

Speaker #5: Each quarter, we try to highlight different key aspects of our investment strategy and differentiated approach that allow us to consistently produce best-in-class results. For today's call, I'm going to spend some time discussing the benefits we receive from the equity investments in our lower middle ket strategy.

Speaker #5: As a result of our lower middle market equity investments in the fourth quarter 2024 and the second quarter 2025, we were able to generate approximately $109 million of realized gains from the exits of our equity investments in two lower middle market portfolio companies.

Speaker #5: These two realizations included a 53.7 million dollar realized gain on Pearl-Myer, which represents an annualized internal rate return of 69% and a 7.7 times money invested on our equity investment.

Speaker #5: And a 55.5 million dollar realized gain in Heritage Vet Partners, which represented an annualized internal rate return of 72% and a 10 times money invested in our equity investment.

Speaker #5: Realized gains like these provide an offset against the inevitable credit losses that will be experienced when investing primarily in non-investment-grade debt, consistent with the debt investments executed by other BDCs and private credit funds.

Speaker #5: Based upon our historical experience and current portfolio, our expectation is that our future net realized gains on lower middle market equity investments will exceed the expected credit losses, which may be which may result from our current investment strategies.

Speaker #5: Another advantage of having equity ownership positions in our lower middle market portfolio companies is our ability to provide additional growth capital to our companies as they find opportunities to expand both organically and through acquisitions.

Speaker #5: Both Pearl-Myer and Heritage Vet Partners executed multiple value-creating acquisitions almost exclusively with additional debt capital that we provided. Similar to our experiences with Pearl-Myer and Heritage Vet Partners, a meaningful portion of our lower middle market portfolio companies also provide us the opportunity to invest additional capital in our highest-performing proven portfolio companies as they work to grow through acquisitions or other growth strategies.

Speaker #5: As a result of these follow-on investments, both we and our portfolio company management team partners are able to benefit from the significant value creation achieved by these acquisitions.

Speaker #5: We have multiple examples in which we have greatly increased our initial investment sizes in our highest-performing lower middle market portfolio companies, and we look forward to continuing to execute this as part of our strategy in the future.

Speaker #5: In addition to the benefits received from net realized gains and net unrealized appreciation, we also benefit from dividends received from our lower middle market equity investments.

Speaker #5: As we have stated in the past, as our lower middle market portfolio companies perform over time, they naturally deleverage with free cash flow generated from operations which provides the opportunity for those companies to pay dividends to their equity owners.

Speaker #5: Additionally, our stated long-term to permanent holding period for many of our lower middle market portfolio companies enhances our ability to benefit from the long-term free cash flow generation and resulting dividends received from these companies.

Speaker #5: We are pleased to report that in the second quarter, we continue to receive the benefit of significant dividends from our lower middle ket equity investments.

Speaker #5: While our dividend income can be lumpy on a quarter-to-quarter basis, given changes in our portfolio companies' cash flow and capital allocation decisions, given the strength and quality of our existing lower middle market investment portfolio, we expect dividend income continue to be a significant contributor to our results in the ure.

Speaker #5: Now turning to the overall composition of results of our investment portfolio as of June 30th, we continue to maintain a highly diversified portfolio with investments in 187 companies spanning across numerous industries and markets.

Speaker #5: Our largest portfolio companies excluding the external investment manager represented only 3.9% of our total investment income for trailing 12-month period and 3.7% of our total investment portfolio fair value a quarter end.

Speaker #5: The majority of our portfolio investments represented less than 1% of our income and our assets. Our investment activity in second quarter included total investments in our lower middle market portfolio of approximately $209 million dollars, including total investments of $110 million dollars in three new lower middle market portfolio companies.

Speaker #5: Which, after aggregate repayments on debt investments and return of invested equity capital, resulted in a net increase in ur lower middle market portfolio of $108 million.

Speaker #5: Driven by the capabilities and relationships of our private credit team, we also made $189 million dollars in total private loan investments which, after aggregate repayments and other private loan investment activities, resulted in a net decrease in our private loan portfolio of $35 million.

Speaker #5: At the end of the second quarter, our lower middle market portfolio included investments in 88 companies representing $2.7 billion of fair value, which was 27% above our related cost basis.

Speaker #5: We had investments in 87 companies in our private loan portfolio representing 1.9 billion dollars of fair value. The total investment portfolio at fair value a quarter end was 17% above our related cost basis.

Speaker #5: In summary, Main Street's investment portfolio continues to perform at a high level and deliver on our long-term goals. Additional details on our investment portfolio quarter end are included in press release that we issued yesterday.

Speaker #5: With that, I will turn the call over to Ryan to cover our financial results, capital structure, and liquidity position.

Speaker #6: Thank ou, David. To echo Dwayne's and David's comments, we are pleased with our operating results for the second quarter, which included favorable levels of NII per share and DNII per share, and another increase in NAV per share.

Speaker #6: Our total investment income for the second quarter was $144 million dollars, increasing by 11.8 million dollars or 8.9% over the second quarter of 2024, and by 6.9 million dollars or 5.1% from the first quarter 2025.

Speaker #6: Interest income increased by $800,000 from a year ago and by $2.8 million in the first quarter of 2025. The increase from the prior year and prior quarter were both driven primarily by the impact of increased net investment activity, partially offset by an increase in investments on non-accrual status.

Speaker #6: With the increase from prior year also partially offset by a decrease in interest rates on our floating rate debt investments, primarily resulting from decreases in benchmark index rates.

Speaker #6: Dividend income increased by 11.2 million dollars when compared to a year ago, including a $3 million dollar increase in unusual or non-recurring dividends and increased by 1.8 million dollars from the first quarter, including a 4.2 million dollar increase in unusual or non-recurring dividends.

Speaker #6: The increases in dividend income are primarily the result of the continued underlying positive performance of our lower middle market portfolio companies. B income decreased by $200,000 from a year ago and by $2.3 million from the first quarter.

Speaker #6: The increase from the first quarter primarily due to higher closing fees on new and follow-on investments and an increase from exit repayment and amendment fees from investment activity.

Speaker #6: B income considered non-recurring decreased by $700,000 from a year ago and increased by $200,000 from the first quarter of 2025. The second quarter included elevated levels of income considered less consistent or non-recurring in nature, in comparison to the comparable periods, including dividends from our equity investments and accelerated prepayment, repricing, and other activity related to our debt investments.

Speaker #6: In the aggregate, these items totaled $8.1 million dollars and were 4.8 million dollars or 5 cents per share higher compared to the average of the prior four quarters.

Speaker #6: $3 million dollars or 3 cents higher than the second quarter of 2024, and 5.7 million dollars or 6 cents higher than the first quarter of 2025.

Speaker #6: Our operating expenses increased by 5.8 million dollars over the second quarter of 2024 and increased by 3.4 million dollars from the first quarter. The increases in operating expense from the prior year and from the first quarter of 2025 were largely driven by increases in interest expense, cash compensated related expenses, general and administrative expenses, and share-based compensation expense.

Speaker #6: The increase in interest expense from a year ago was primarily driven by an increase in average borrowings to fund the growth of our investment portfolio and an increase in the weighted average rate on our unsecured debt obligations.

Speaker #6: Partially offset by a decrease in the weighted average interest rate on our credit facilities resulting from decreases in the benchmark index rates and a decrease in the applicable margin rates related to the amendments of our credit facilities in April 2025.

Speaker #6: The increase in interest expense from the first quarter was primarily driven by an increase in average borrowings to fund the growth of our investment portfolio.

Speaker #6: 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 trailing 12-month period, and continues to be among the lowest in our industry.

Speaker #6: Our external investment manager contributed $8.7 million to our net investment income during the first quarter, a decrease of $500,000 from the same quarter a year ago, and an increase of $900,000 from the first quarter of 2025.

Speaker #6: Our investment manager ended quarter with total assets under management of $1.6 billion. During the quarter, we recorded net fair value appreciation including net realized gains and net unrealized appreciation, on the investment portfolio of 33.5 million dollars.

Speaker #6: This increase was primarily driven by net fair value appreciation and our external investment manager and our lower middle market investment portfolio, partially offset by net fair value depreciation and our private loan investment portfolio.

Speaker #6: The net fair value appreciation of our external investment manager was primarily driven by increases in the valuation multiples of publicly traded peers, which we use as one of the benchmarks for valuation purposes.

Speaker #6: And by increased fee income. The net fair value appreciation in our lower middle market portfolio was largely driven by the continued positive performance of certain of our portfolio companies.

Speaker #6: The net fair value depreciation in our private loan portfolio was driven by specific portfolio company performance, partially offset by decreases in market spreads. We recognize net realized gains of 52.4 million dollars in the quarter.

Speaker #6: The realized gains recognized were primarily a of a full exit of a lower middle market investment as discussed by Dwayne and David. Partial exits of other two portfolio investments, and the exit of one private loan investment.

Speaker #6: Partially offset by realized losses on the full exit of a private loan investment and the restructure of a private loan investment, we ended the second quarter with investments on non-accrual status comprising approximately 2.1% of the total investment portfolio at fair value and approximately 5% at cost.

Speaker #6: NAV increased by 27 cents per share over the first quarter and by 2.50 per share or 8.4% when compared to a year ago, to a record NAV per share of $32.30 at quarter end.

Speaker #6: Our regulatory debt-to-equity leverage calculated as total debt excluding our SBIC to ures divided by net asset value was 0.65 times and our atory asset coverage ratio was 2.53 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.

Speaker #6: Given our current liquidity position and a recent investment activity, we were less active during the second quarter and our ATM program raising net proceeds of 10.7 million dollars from equity issuances.

Speaker #6: After giving effect to the capital activities in the second quarter of 2025, we entered the third quarter of 2025 with strong liquidity including cash and availability under our credit facilities totaling over $1.3 billion dollars with two near-term debt maturities of $150 million dollars and $500 million dollars in December 2025 and July 2026, respectively.

Speaker #6: We continue to believe that our conservative leverage, strong liquidity, and continued access to capital are significant strengths that are proven to benefit us historically, and have us well positioned for future, allowing us to continue to execute our attractive investment strategies despite the current market uncertainty.

Speaker #6: We expect to continue to operate throughout year at leverage levels more conservative than our target our long-term targets. Coming back to our operating results results, DNII per share for the quarter of $1.06 exceeded DNII per share for the second quarter of last year, by 3 cents, and exceeded the DNII per share for the first quarter by 4 cents.

Speaker #6: Looking forward, we expect third quarter of 2025 DNII per share of at least $1 with the potential for upside driven by portfolio investment activities during the quarter.

Speaker #6: With that, I will now turn the call over to the operator so we can take any questions.

Speaker #7: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker #7: You may press star two if you would like to remove our question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #7: One moment while we pull for questions. Our first question is from Robert Dodd with Raymond James. Please proceed.

Speaker #8: hi, guys. Good morning. congrats for the quarter and, and the performance in the lower middle market portfolio, but I want to focus for a second on, on the private loan.

Speaker #8: so, I an, it, it shrank this, this quarter. can you give me that again? I mean, was that was that a, a reduction in deal flow or was it kind an increase in, in reje I mean, obviously, you originated a lot but had a lot of repayments, right?

Speaker #8: So, I mean, is this a, you know, so is, is are the trends like, you know, deal flow slowing or, or you are seeing less attractive opportunities and that's the driver but behind it shrinking a little bit?

Speaker #8: I mean, any, any color you can give me there?

Speaker #9: Sure, Robert. G-good morning and thanks for the, for the comments there. I'll, I'll give

Speaker #8: Good morning.

Speaker #9: couple of comments. I'll Nick, who as you know, know leads our private credit team, let, let him add on. but I'd say it was a it was a combination of, of both.

Speaker #9: the investment activity which we think is largely attributable just to the overall private equity industry still being slow given the uncertainty in the economy, the, the new investment or origination activity and, and follow-ons, we're, we're on a combined basis lower than what we would want them to be.

Speaker #9: and I think I, I said in my comments, you know, we're, we're still viewing the pipeline as slightly below average. We haven't we haven't

Speaker #8: Mm-hmm.

Speaker #9: en that change significantly, but you also had in the quarter, you know, higher than expected repayments. So 's a combination of the two. in terms of quality, I think we still view the quality of the investments, as being very, very attractive, you know, terms, conditions, leverage, you know, the type of companies, I think we're itive across the board.

Speaker #9: but there's just less of it out there in the in the marketplace. But I'll let Nick, you know, add on or give additional color.

Speaker #10: Yeah, I'd agree with Dwayne. Like, the only thing would add is we probably missed on pricing a little bit in the second quarter. and so pricing has probably come in, you know, call it 25 to 50 basis points in the in '25.

Speaker #10: And we were probably a little bit wide on a few deals that we would've liked to have won. and held our pricing and, and those deals went away us.

Speaker #10: If we'd lowered down, you know, call it 25 to 50 basis points, we might've those deals and, and the net origination would've been much higher for, for 2Q.

Speaker #8: Okay. Got it. I appreciate that color. On then on the, the, the, the comments that we went, where you've, you've, you have seen some underperformance on, on in within the portfolio, and I ink basically it boils down to, like, consumer businesses, seeming, seeming to, to, to, to struggle a little bit more than others, which, which makes, a lot of sense.

Speaker #8: But, I mean, is there any, you ow, any theme within that? Like, you know, is it particular types of consumer business? Obviously, I can look through the portfolio later.

Speaker #8: But also, like, is that making you more inclined to, to maybe, you know, avoid some consumer businesses for, for additional deployments or, or, or how are you thinking about that?

Speaker #9: Yeah, Robert. I would say that we, we have been expecting or sensing some weakness really probably for the last two years. I'd have to think back to how long we've been, making that commentary.

Speaker #9: So, I'd say on the new investment side, you know, we had been risk-off on companies that have direct significant consumer exposure. So, I think we've been doing that.

Speaker #9: I, I think we just have some, you know, longer-term legacy investments that had more consumer exposure. that have continued to struggle. I, I would say that in the current quarter, when you look at the non-accrual movement, it was not just consumer.

Speaker #9: You know, we, we also had another company that's outside of the consumer space that had some underperformance that resulted in that company being put on non-accrual status.

Speaker #9: But I still think when you look at the non-accruals as a whole, there still is more of a concentration in the consumer side. And I think if we were to pick, you ow, where the consumer is feeling more pain, it's the lower end of the consumer.

Speaker #9: I think we've been saying that for a while. That continues to. to be the case

Speaker #8: Mm-hmm.

Speaker #9: today. You know, overall, I think, ou know, there's parts of the consumer segment that continue to hold up pretty well in the upper end, but you're, you're itely from our pective, at least seeing, you know, continued pain, you know, at the lower end.

Speaker #9: And ou see that in our companies. The other comment I would provide is, when you look at the portfolio as a whole, I do think in the current environment, you're probably eing more separation between the companies that are performing really, ally well.

Speaker #9: versus the companies that are, you know, performing, you know, below expectations. And I, and think that's a trend we've en, for the last couple of quarters, and I think we continue to see it in the current quarter.

Speaker #9: So I just think you're seeing more bifurcation across the portfolio. Some of that is some of that's just attributable to the quality or the strength of the management teams and their operations.

Speaker #9: some of it also is just, you know, kind of how impacted are those companies by, by some of the uncertainty in the marketplace.

Speaker #8: Got it. Got it. I appreciate that. And, in fact, kind of one more point, and kind of flipping to lower middle market. I mean, you've narrowed it to your point.

Speaker #8: I think ou've two records in the last roughly nine months, I think. for, for exit gains with Pearl-Myer and, and Heritage. I mean, would, would you say, you know, the, the, the, the, the gain opportunity is, is, is cycle, near-term, right?

Speaker #8: you know, are we, are we in an elevated period where you could maybe expect more gains? I mean, I'm identifying individual assets, obviously. or do you think that's going to be moderated for a little bit before some of your, your, your, your younger assets age into the point where the gains are, are, are potentially there?

Speaker #8: Any, any thoughts on it?

Speaker #9: Sure, Robert. I'll, 'll get a couple of comments. One is we, we think we have a very mature portfolio. You know, we, we think one of our biggest benefits, as you've heard us say repeatedly, is our as a public company having permanent capital.

Speaker #9: We can and will be a long-term to permanent investor. So we have a very mature portfolio when you look at the existing lower middle market assets.

Speaker #9: Clearly, both Pearl-Myer and Heritage Vet were, were fantastic companies, fantastic management teams, and between us and our partners at the management team level, you ow, we, we had great, great transaction outcomes there.

Speaker #9: despite that, I think as we sit here ay, I think we still have a number of companies that are, you know, having some inbound interest and having discussions about, potential exits that, you know, that could lead to additional realizations over the next, you know, three to nine months.

Speaker #9: You know, you never know exactly what's going to happen, but I do think you could see some additional realized gain and exit activities in the near term.

Speaker #9: And I would say what we're seeing in the marketplace is when you take a very high-quality company like Pearl-Myer and, and Heritage Vet partners to market, because there is a lack of overall deal flow, those premium assets get premium pricing.

Speaker #9: So I think we've seen that in the marketplace with these two recent transactions, and I think if we're successful with any of the potential realization activities, that are, we're having discussions on with the lower middle market portfolio companies, I think you would see a premium outcome.

Speaker #9: But obviously, a lot things have to happen to get there, but we, we continue to see some, you know, kind of elevated or more than normal activity on the on the exit or realization side.

Speaker #8: Got it. Thank you.

Speaker #9: Thank ou.

Speaker #7: As a reminder, to star one on your telephone keypad, if you would like to ask a question, our next question is from Aaron Saganovich with True Securities.

Speaker #7: Please proceed.

Speaker #11: Thanks. Good morning. congratulations on those realizations. the, the commentary about, private loan piping below average, I guess, mixed with the, 20 to 50 basis points of, spread tightening that, that came in.

Speaker #11: Are those areas that are somewhat interrelated? I would think that if the spread tightening was happening, then you'd probably see more deal activity. maybe just talk a little bit about that.

Speaker #9: Yeah, I'll let, Nick kind of add on to his comments from earlier.

Speaker #10: Yeah. I think the deal activity being a little softer is really just, you know, M&A being down on the private equity side.

Speaker #10: You know, we've, we've seen that for the past, you know, probably two or three years. I ink every, every quarter, every year, we expect that to pick back up again.

Speaker #10: as, you know, ate equity is a natural deal makers, and they want to, you know, spend their new funds. and it just hasn't come to fruition yet.

Speaker #10: We still expect that the next 6 to 12 months, but so far this year, we have not seen it, you ow, spreads coming in, I think, is somewhat related to slightly less deal flow, you know, pushing a little com more competition for everyone to find paper to spend on, on new deals.

Speaker #11: Got it. Okay. That makes sense. and then, Ryan, you, you had mentioned there's a uple of, debt maturities coming up over in the next year.

Speaker #11: maybe you uld talk a little bit about what, your funding options are for those.

Speaker #10: Sure. As we mentioned in the prepared remarks, we do have ample liquidity, you know, as we look to the back half of the year.

Speaker #10: outside of that, w-w-we also, will be looking, you know, the market and what, what pricing is, i-i-in the debt market over the, you ow, over the back half of the year.

Speaker #10: you know, I think we the, the, the benefit of, not having to, to execute in, a, i-if pricing isn't, isn't favorable given where we are, from a quidity perspective.

Speaker #10: but also, you ow, we'll also be thinking our $500 million dollar maturity next July, in, in ways to kind of de-risk that, with capital, capital market activities, through the end of the year.

Speaker #5: Yeah. I think you're just ing on to that. I think you, you, you've al-always heard us say this, we, we view our capital structure and liquidity position to be two of our significant strengths.

Speaker #5: One, we, we should able to have 100% control over that side of what we execute. So to Ryan's point, I think if the, if the market's available, you know, 're going to continue to look at it and be opportunistic when we can.

Speaker #5: and really focus maintaining, you know, just what think is a, you know, a very, very attractive, very conservative capital structure and significant liquidity. So that's that continues to be a, a key focus for on our, our capital structure side.

Speaker #11: Got it. Okay. Thank you.

Speaker #10: Thank you.

Speaker #7: We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing remarks.

Speaker #5: Okay. We just ant to say thank you again to everyone for joining us this morning. We reciate the continued support of our shareholders. And we'll look ward to talking again after our, earnings release for the third quarter.

Speaker #5: Thank ou.