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MAIN Reports Less Than Good News

|About: Main Street Capital (MAIN)

There is something unusual in the Main Street Capital (MAIN) numbers - less than good news.

(1) NAV declined from Q1-19's $24.41 to Q2-19's $24.17.

(2) NII declined from Q4-18's $0.6878/share to Q1-19's $0.6383/share to Q2-19's $0.6300/share.

(3) Non-accruals at cost went from 3.6% in Q1-19 to 4.4% this quarter.

(4) Non-accruals at fair value went from 0.9% in Q1-19 to 1.5% this quarter.

(5) The weighted average yield on all three portfolios (Lower middle market, middle market and private) declined. The decline was tiny - but a decline is going in the wrong direction.

A right sized and right direction response to the earnings release STRONGLY tends to follow the direction and size of the NAV change. The NAV change is a fall of one percent.

Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Realized & Unrealized Gains -1.363 4.979 -32.578 34.446 15.939 -3.437 23.957 5.441 12.310 5.922 21.311 12.096 5.036 -12.615 -22.659 -10.430 10.125 11.642 -6.452 -0.356 10.147 8.160
Realized & Unrealized Gains/share -$0.0217 $0.0805 -$0.5324 $0.5665 $0.2664 -$0.0584 $0.4107 $0.0953 $0.2192 $0.1074 $0.3985 $0.2299 $0.0979 -$0.2496 -$0.4511 -$0.2084 $0.2030 $0.2526 -$0.1434 -$0.0079 $0.2295 $0.2045

Main Street Capital Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Interest income 47.222 47.320 46.875 46.651 44.265 39.612 44.594 39.814 39.065 38.463 37.508 35.580 33.419 32.182 34.322 34.167 32.777 30.067 29.030 27.669 27.929 25.734
Dividend income 12.763 12.496 10.450 8.510 13.368 13.831 9.506 10.088 8.128 6.982 7.088 9.730 7.735 7.629 6.913 6.939 5.278 5.136 6.824 5.935 5.432 4.044
Fee income 1.308 1.549 1.955 3.402 1.924 2.499 1.697 1.844 3.078 2.444 2.235 1.284 1.711 2.064 2.118 1.273 3.011 1.602 2.638 2.627 1.286 0.791
Total investment income 61.293 61.365 59.280 58.263 59.869 55.942 55.797 51.786 50.271 47.889 46.830 46.594 42.865 41.875 43.353 42.379 41.066 36.805 38.757 36.231 34.647 30.569
TII - fee (calc of PWAY) 59.985 59.816 57.325 54.861 57.947 53.443 54.100 49.942 47.193 45.445 44.596 45.310 41.154 39.811 41.235 41.106 38.055 35.203 35.854 33.604 33.361 29.778
Adjusted PWAY number 9.57% 9.58% 9.34% 9.04% 9.80% 9.23% 9.97% 9.21% 9.09% 9.19% 8.93% 9.44% 8.72% 8.75% 9.16% 8.81% 8.50% 8.06% 9.12% 8.98% 9.31% 9.02%

MAIN provides a PWAY per portfolio component type. The above spreadsheets allows me to compute a total portfolio PWAY.

Main Street Capital Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Total investment income 61.293 61.365 59.280 58.263 59.869 55.942 55.797 51.786 50.271 47.889 46.830 46.599 42.902 42.006 43.353 42.379 41.308 37.179 38.757 36.351 34.877 30.776 33.393
Net investment income 39.617 39.491 42.083 38.075 39.512 36.975 37.483 34.029 32.693 31.166 30.432 30.557 27.648 27.164 28.520 27.861 27.201 23.491 26.329 24.877 23.578 20.739 22.831
Investments @ fair value 2.508 2.497 2.454 2.427 2.364 2.314 2.171 2.170 2.077 1.979 1.997 1.920 1.888 1.819 1.800 1.867 1.790 1.747 1.572 1.497 1.433 1.320 1.299
Wt Av Share Count 62.880 61.865 61.187 60.807 59.829 58.852 58.327 57.109 56.167 55.125 53.473 52.613 51.441 50.550 50.229 50.037 49.883 46.080 44.992 44.911 44.217 39.899 39.762
TII/share $0.9748 $0.9919 $0.9688 $0.9582 $1.0007 $0.9506 $0.9566 $0.9068 $0.8950 $0.8687 $0.8758 $0.8857 $0.8340 $0.8318 $0.8631 $0.8470 $0.8281 $0.8068 $0.8614 $0.8094 $0.7888 $0.7713 $0.8398
NII/share $0.6300 $0.6383 $0.6878 $0.6262 $0.6604 $0.6283 $0.6426 $0.5959 $0.5821 $0.5654 $0.5691 $0.5808 $0.5375 $0.5374 $0.5678 0.5568 $0.5453 $0.5098 $0.5852 $0.5539 $0.5332 $0.5198 $0.5742
NAV/share $24.17 $24.41 $24.09 $24.69 $23.96 $23.67 $23.53 $23.02 $22.62 $22.44 $22.10 $21.62 $21.11 $21.18 $21.24 $21.79 $21.84 $21.87 $20.85 $21.08 $21.03 $20.14 $19.89
Wt Av Yield - LMM 12.1% 12.2% 12.3% 12.2% 12.0% 12.1% 12.0% 11.9% 12.0% 12.2% 12.5% 12.5% 12.4% 12.4% 12.2% 12.3% 12.8% 13.1% 13.2% 13.5% 14.9% 15.1% 14.7%
Wt Av Yield - MM 9.4% 9.5% 9.6% 9.4% 9.0% 9.2% 9.0% 8.7% 8.8% 8.6% 8.5% 8.4% 8.4% 8.1% 8.0% 8.0% 7.9% 7.9% 7.8% 7.5% 7.5% 7.6% 7.8%
Wt Av Yield - Private 10.2% 10.5% 10.4% 10.1% 9.2% 9.4% 9.2% 9.3% 9.5% 9.6% 9.6% 9.6% 9.7% 9.6% 9.5% 9.5% 9.8% 9.9% 10.1% 10.4% 11.3% 11.1% 11.3%
Yield - 4 times TII/Inv 9.78% 9.83% 9.66% 9.60% 10.13% 9.67% 10.28% 9.55% 9.68% 9.68% 9.38% 9.71% 9.09% 9.23% 9.66% 9.08% 9.23% 8.51% 9.86% 9.71% 9.74% 9.33% 10.28%
Non-accruals @ cost 4.4% 3.6% 3.9% 3.5% 3.5% 3.3% 2.3% 2.7% 2.6% 2.7% 3.0% 2.8% 3.7% 3.7% 0.4% 0.2% 0.3% 1.2% 1.7% 1.2% 1.2% 2.0% 2.3%
Non-accruals @ fair value 1.5% 0.9% 1.3% 1.2% 1.2% 0.8% 0.2% 0.4% 0.2% 0.2% 0.6% 0.4% 0.5% 0.5% 3.7% 3.0% 3.1% 3.9% 4.7% 3.9% 3.5% 4.6% 4.7%

The NII and NAV trends are still positive - but they are less positive than before.

Main Street Capital Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14 Q1-14
Debt 1,040,867 1,001.994 996.146 944.559 953.714 770.076 797.171 886.761 820.822 793.010 848.258 809.135 839.334 795.461 780.398 835.344 511.963 653.284 706.604 600.511 557.761 539.921
Debt/share 16.5532 16.3581 16.2804 15.5337 15.9407 13.0850 13.6673 15.5275 14.6139 14.3857 15.8633 15.3790 16.3164 15.7361 15.5368 16.6945 10.2633 14.1772 15.7334 13.3771 12.6142 13.5352
Debt/share to NAV 68.49% 67.01% 67.58% 62.92% 66.53% 55.28% 58.08% 67.45% 64.61% 64.11% 78.78% 71.13% 77.29% 74.30% 73.15% 76.62% 46.99% 64.82% 75.46% 63.43% 59.98% 67.21%
Interest expense 12.329 11.916 11.511 10.884 10.833 10.265 9.659 9.420 8.793 8.608 8.619 8.573 8.255 8.182 8.360 8.302 7.657 7.796 6.876 5.954 5.473 5.286
Interest expense/share 0.1961 0.1926 0.1881 0.1790 0.1811 0.1744 0.1656 0.1649 0.1565 0.1561 0.1612 0.1629 0.1605 0.1619 0.1664 0.1659 0.1535 0.1692 0.1528 0.1326 0.1238 0.1325
Interest expense/TII 20.11% 19.42% 19.42% 18.68% 18.09% 18.35% 17.31% 18.19% 17.49% 17.97% 18.40% 18.40% 19.24% 19.48% 19.28% 19.59% 20.59% 20.97% 17.74% 16.38% 15.69% 17.17%
Annualized Int exp/Debt 4.74% 4.76% 4.62% 4.61% 4.54% 5.33% 4.85% 4.25% 4.28% 4.34% 4.06% 4.24% 3.93% 4.11% 4.28% 3.98% 5.98% 4.77% 3.89% 3.97% 3.92% 3.92%
PWAY - Int exp/Debt 483 bps 482 bps 472 bps 443 bps 526 bps 390 bps 512 bps 496 bps 481 bps 485 bps 532 bps 547 bps 516 bps 512 bps 538 bps 510 bps 325 bps 374 bps 597 bps 574 bps 582 bps 541 bps

The cost of debt is still low. The amount of leverage is still low.

Disclosure: I am/we are long MAIN.