Greetings and welcome to the Main Street Capital Corporation’s Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Vaughan. Please go ahead.

Thank you, operator and good morning everyone. Thank you for joining us for Main Street Capital Corporation’s third quarter 2022 earnings conference call. Joining me today with prepared comments are Dwayne Hyzak, Chief Executive Officer; David Magdol, President and Chief Investment Officer; and Jesse Morris, Chief Financial Officer and Chief Operating Officer. Also participating for the Q&A portion of the call is Nick Meserve, Managing Director and Head of the Private Credit Investment Group. Main Street issued a press release yesterday afternoon that details the company’s third quarter financial and operating results. 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 November 11. 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, November 4, 2022 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. 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. These 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, 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. During today’s call, management will discuss non-GAAP financial measures, including distributable net investment income. Please refer to yesterday’s press release for a reconciliation of these measures to the most directly comparable GAAP financial measures. Certain information discussed on this call, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. Now, I will turn the call over to Main Street’s CEO, Dwayne Hyzak.

Thanks, Zach. Good morning, everyone and thank you for joining us today. We appreciate everyone’s participation on this morning’s call. We hope that everyone is doing well. On today’s call, I will provide my usual updates regarding our performance in the quarter, while also providing updates on our asset management activities. Our recent declarations of another supplemental dividend payable in December and an increase to our monthly dividends for the first quarter of 2023, our expectations for dividends going forward, our recent investment activities and current investment pipeline and several other noteworthy updates. Following my comments, David and Jesse will provide additional comments regarding our investment strategy, investment portfolio, financial results, capital structure and leverage, the impact of rising interest rates in our third quarter and future net investment income and our expectations for the fourth quarter, after which we will be happy to take your questions. We are very pleased with Main Street’s strong third quarter results, which include another quarter with records for net investment income per share and distributable net investment income, or DNII per share and with our results exceeding the net investment income per share records we set or matched over each of the prior four quarters. These positive results included contributions from each of our core investment strategies. And as a result of our strong performance, DNII per share exceeded our regular monthly dividends by 36%. We continue to be pleased with the performance of our lower middle-market portfolio companies which resulted in another quarter of fair value appreciation in the equity investments in this portfolio. We are also excited about the follow-on investments we made in existing lower middle-market portfolio companies during the third quarter to support the growth strategies of these companies and the new platform investments we have made to-date in…

Thanks Dwayne and good morning, everyone. As Dwayne highlighted in his remarks, we believe our strong third quarter financial results continue to demonstrate the strength of Main Street’s platform, our differentiated investment approach and our unique operating model. We are pleased to report that the overall operating performance for most of our portfolio companies continued to be positive, which contributed to our attractive third quarter financial results at Main Street. Another contributor to our strong results during the quarter was our robust lower middle market and private loan investment activity. In addition, we’ve seen repayment activity for both our lower middle market and private loan portfolio slowed significantly over the last few quarters, a trend which continued in the third quarter. Significance of these net investment activities in the quarter positively impacted our investment income. As it relates to the current investment environment, we are excited about the opportunity to thoughtfully deploy capital. As availability of debt financing has declined and the relating borrowing costs have increased for prospective purchasers of businesses, we are increasingly hearing from intermediaries and others that purchase price multiples have moderated as private equity and strategic acquirers can no longer rely on inexpensive readily available debt capital to achieve their expected leverage returns. This change to available leverage has created an environment similar to what we’ve seen in the past, whereby Main Street has been able to put capital to work at attractive risk-adjusted return profiles. For our lower middle market businesses, our ability to speak for the entire capital structure puts us in an enviable position as compared to private equity investors who need to raise debt capital on a deal-by-deal basis. In our private loan business, we are seeing attractive opportunities with lower LTVs and higher yields. In the past, during times of…

Thank you, David, and good morning, everyone. Our total investment income in the third quarter increased by $21.6 million or 28% over the same period in 2021 and $13.2 million or 15.4% over the second quarter of 2022 to a total of $98.4 million. Interest income increased by $24.6 million from a year ago and $11 million over the second quarter, which was a direct result of the continued growth in our portfolio of debt investments and the impact of higher market index interest rates on our floating rate debt investments. We estimate that the increase in market index rates drove about quarter of the increase over the same period a year ago and a little over half of the increase in interest income over the second quarter. Dividend income was $3.6 million lower than the same period a year ago. This decrease was driven by a comparison to meaningful levels of less consistent non-recurring dividends received in the third quarter of 2021. Further supporting the overall strength of our third quarter results, the combined impact of certain income items including dividends, accelerated OID and prepayment fees that are considered less consistent or non-recurring in the quarter decreased by $8 million or about $0.12 per share when compared to a year ago and was $3.9 million or $0.06 per share below the average of the prior four quarters. Expenses for the quarter increased by $8.5 million over the prior year, largely driven by increases of $6.5 million in interest expense and $1.6 million compensation-related expenses partially offset by an increase of $0.6 million in expenses allocated to the External Investment Manager. Our operating expenses to assets ratio was 1.5% for the quarter on an annualized basis. This continues to be amongst the lowest in our industry. Our external investment manager…

[Operator Instructions] First question comes from Kenneth Lee with RBC Capital Markets. Please go ahead.

Hey. Good morning and thanks for taking my question. I just want to dig into a little bit more on the lower middle market portfolio and specifically wondering if you could just talk a little bit more about what drove the unrealized gains in the quarter and more specifically the appreciation in the equity investments in the portfolio. Thanks.

Sure. Thanks Ken. So, I would say that in the low-middle market, there is nothing that I would say is unusual or special this quarter. We had a number of companies that continue to perform well and also de-lever or improve their capital structure, both of which impact our valuations to the positive. We always have a number of companies that are up in the quarter and a number of companies that are going to be down just based upon their performance of their operating results. In this quarter, we just had more of the companies that were up, had bigger changes up than the companies that had depreciation and have netted into that increase we had across the lower-middle market portfolio from an unrealized depreciation standpoint.

Got it. And one follow-up, if I may. I think you mentioned there could be some opportunities around follow-on investments within the lower-middle market portfolio. Just curious whether you could see a pickup in such opportunities even in this current macro environment? I just want to get a better sense of that. Thanks.

Sure. Thanks again, Ken. I would tell you, you have heard us say this before. I think all things being equal. We have the opinion or the view that our existing lower-middle market companies are very, very strong companies. We typically have good long-term relationships with those companies and their management teams. So, if we have the opportunity to complete follow-on investments to support their growth or other activities that they have at the portfolio company level, we really favor those investments more so than anything else. And if you look at our activities in the third quarter, the vast majority of our investment activity in the third quarter was in existing portfolio of companies where we supported growth of those companies specifically two companies that completed large acquisitions. And when you look at our current pipeline, one of the things we are very excited about is that a healthy portion of that pipeline would also be follow-on investments in existing companies. We have four companies that we are working on now that if things go as planned, you could see us complete additional investments in those companies. So, we are excited about that just like we always have been and always welcome the opportunity for additional investments in our existing companies.

Great. Very helpful. Thanks again.

Thank you, Ken.

Thank you. I would now like to turn the call over to management for closing remarks. End of Q&A:

Thank you again to everyone for joining us today. We look forward to talking to everyone again in a few months in February when we cover our fourth quarter results. And last thing is, go Astros [ph].

Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines, and have a wonderful day.