मिडकॅप फाइनेंशियल (MFIC) अर्निंग्स कॉल ट्रांसक्रिप्ट

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<h2>Date</h2>
<p>Friday, Feb. 27, 2026 at 8:30 a.m. ET</p>
<h2>Call participants</h2>
<ul>
<li>Chief Executive Officer — Tanner Powell</li>
<li>President — Ted McNulty</li>
<li>Chief Financial Officer — Kenneth Seifert</li>
<li>Executive Chairman — Howard Widra</li>
<li>Senior Advisor — Gregory Hunt</li>
<li>Investor Relations Manager — Elizabeth Besen</li>
</ul>
<h2>Takeaways</h2>
<ul>
<li>Net Investment Income (NII) Per Share -- $0.39 for the quarter.</li>
<li>GAAP Net Loss Per Share -- $0.14, including $0.04 of one-time financing expenses; $0.10 excluding these items.</li>
<li>Net Asset Value (NAV) Per Share -- $14.18 at quarter end, a decrease of 3.3% from the prior quarter, attributed mainly to older vintage investments.</li>
<li>Total Investment Commitments -- $141 million across 26 transactions this quarter.</li>
<li>Net Funded Activity -- +$25 million, including $7.5 million repaid by Merx.</li>
<li>Merx Portfolio Exposure -- $103 million at fair value at period end, comprising 3% of total portfolio value; subsequent $22 million repaid post quarter, for $29.5 million total.</li>
<li>New Stock Repurchase Authorization -- $100 million approved and expected to be “utilize[d] aggressively,” with $107.9 million in total capacity remaining.</li>
<li>Shares Repurchased -- 1.1 million shares bought back at an average 18% discount to NAV, costing $12.9 million and generating $0.03 per share of NAV accretion.</li>
<li>Quarterly Dividend Declared -- $0.31 per share, adjusted “to reflect changes to base rates and other factors.”</li>
<li>Total Investment Income -- $78.4 million, down $4.2 million or 5.1% from previous quarter, mainly due to lower base rates, higher non-accruals, and asset spread compression.</li>
<li>Portfolio Fair Value -- $3.17 billion invested across 247 companies in 46 industries at quarter end.</li>
<li>Direct Origination Portfolio Composition -- 99% first lien loans and 92% backed by financial sponsors by fair value.</li>
<li>Weighted Average Yield at Cost (Direct Origination) -- 10% during the quarter, down from 10.3% prior quarter, with the drop attributed to rate and spread compression as well as higher non-accruals.</li>
<li>Software Exposure -- 11.4% of total portfolio at fair value, entirely first lien, diversified over 29 borrowers, with a low average loan-to-value of 32%.</li>
<li>Non-Accrual Investments -- 2.6% of portfolio at fair value, down from 3.1% prior quarter, with three new names (Bird Rides, Banner Solutions, Renovo) placed on non-accrual and two companies restored to accrual status.</li>
<li>Average Borrower Net Leverage -- 5.29x, unchanged sequentially; portfolio interest coverage ratio improved from 2.2x to 2.3x due to lower base rates and some earnings growth.</li>
<li>Cost of Debt -- 5.95% during the quarter, improved from 6.37% last quarter following refinancing.</li>
<li>Net Leverage -- 1.45x at period end; total principal debt was $2.0 billion and net assets stood at $1.31 billion.</li>
<li>PIK Income Proportion -- 4.8% of total investment income, roughly stable quarter over quarter.</li>
</ul>
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<h2>Risks</h2>
<ul>
<li>Portfolio NAV declined by 3.3% driven mainly by vintage investments from 2022 and prior, with CEO Powell noting, “The decline in NAV is primarily driven by a handful of investments, predominantly from 2022 and earlier vintages.”</li>
<li>Asset spread compression, lower base rates, and higher non-accruals contributed to a $4.2 million (5.1%) drop in total investment income, which CFO Seifert said was “largely driven by lower interest income resulting from decreased base rates, new non-accrual positions, and continued asset spread compression.”</li>
<li>Three new non-accruals (Bird Rides, Banner Solutions, Renovo) accounted for about 36% of the quarter’s total net loss.</li>
<li>Dividend was reduced, with Powell stating, “it was prudent to adjust the dividend,” citing the effects of falling base rates and tighter market spreads on earnings power.</li>
</ul>
<h2>Summary</h2>
<p>MidCap Financial Investment Corporation (<a href="/quote/nasdaq/mfic/">MFIC</a> 8.12%) reported a quarter marked by reduced investment income, compressed asset spreads, and several legacy investment losses impacting net asset value. Management announced an expanded $100 million share repurchase program and emphasized aggressive execution at significant NAV discounts. Portfolio composition remains heavily weighted toward first lien, sponsor-backed loans across a granular and diversified base, while software exposure is limited and largely protected by covenants and low leverage. Three new non-accruals drove a significant share of the quarter’s net loss, while sequential leverage and interest coverage ratios held steady or improved slightly.</p>
<ul>
<li>Chairman Widra stated, “we will continue to consider everything with an eye towards just making sure that the shareholders get the full value that we feel like they are entitled to in whatever form we can get it to them,” indicating openness to further strategic alternatives in response to persistent stock discounts.</li>
<li>Software portfolio average leverage and covenant penetration were highlighted by management as key differentiators versus the broader market.</li>
<li>Maturing asset vintages and sector-specific idiosyncratic problems underlie current credit stresses, as highlighted in management’s response to investor Q&amp;A.</li>
<li>Leadership expects the remaining stock buyback capacity to be fully deployed by late May if current trends continue.</li>
</ul>
<h2>Industry glossary</h2>
<ul>
<li>PIK: Payment-in-Kind; a loan feature where interest is paid in additional securities rather than cash.</li>
<li>Non-Accrual: A loan status indicating the borrower is not making scheduled interest or principal payments, triggering a suspension of income accrual on such investments.</li>
<li>First Lien: The most senior secured debt in a borrower’s capital structure, with priority claim on collateral in a default.</li>
<li>Direct Origination: Lending activity where loans are sourced and structured directly by the asset manager rather than purchased in the secondary market.</li>
</ul>
<h2>Full Conference Call Transcript</h2>
<p>Operator: Good morning, everyone. Welcome to the earnings conference call for the period ended December 31, 2025 for MidCap Financial Investment Corporation. At this time, all participants have been placed in a listen-only mode. The call will be open for a question-and-answer session following the speaker's prepared remarks. If you would like to ask a question at that time, please press star one on your telephone. If you would like to withdraw your question, press star two. I will now turn the call over to Ms. Elizabeth Besen, Investor Relations Manager for MidCap Financial Investment Corporation. Please go ahead, ma'am.</p>
<p>Elizabeth Besen: Thank you, operator, and thank you everyone for joining us today. We appreciate your interest in MidCap Financial Investment Corporation. Speaking on today's call are Tanner Powell, Chief Executive Officer, Ted McNulty, President, and Kenneth Seifert, Chief Financial Officer. Howard Widra, Executive Chairman, and Gregory Hunt, our former CFO, who currently serves as a Senior Advisor, are on the call and available for the Q&amp;A portion of today's call. I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of MidCap Financial Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our press release.</p>
<p>I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast, which may include forward-looking statements. You should refer to our most recent filings with the SEC for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our SEC filings, please visit either the SEC's website at www.sec.gov or our website at www.midcapfinancialic.com.</p>
<p>I would also like to remind everyone that we posted a supplemental financial information package on our website, which contains information about the portfolio as well as the company's financial performance. Throughout today's call, we will refer to MidCap Financial Investment Corporation as MidCap Financial Investment Corporation, and we will use MidCap Financial to refer to the lender headquartered in Bethesda, Maryland. At this time, I would like to turn the call over to Tanner Powell, MidCap Financial Investment Corporation's Chief Executive Officer.</p>
<p>Tanner Powell: Thank you, Elizabeth. Good morning, everyone, and thank you for joining us for MidCap Financial Investment Corporation's fourth quarter and year-end earnings conference call. Yesterday, after market close, we issued our press release and filed our annual Form 10-K for the period ended December 31, 2025. I will begin today's call with an overview of MidCap Financial Investment Corporation's fourth quarter results, followed by a discussion of our share repurchase activity, including the board's increased authorization, as well as our dividend announcement. Following that, I will hand the call over to Ted, who will walk through our investment activity for the quarter and provide a portfolio update, including a review of our software exposure.</p>
<p>Kenny will review our financial results in detail.</p>
<p>Net investment income, or NII, per share for the quarter was $0.39. GAAP net loss per share for the quarter was $0.14. This figure includes approximately $0.04 of one-time financing-related expenses. When excluding these one-time costs, GAAP net loss per share was $0.10 for the quarter. NAV per share was $14.18 at the end of December, down 3.3% compared to the prior quarter. The decline in NAV is primarily driven by a handful of investments, predominantly from 2022 and earlier vintages. Despite the loss for this quarter, we believe our focus on first lien positions, our cautious usage of PIK, and low software exposure keep us well-positioned.</p>
<p>Additionally, recent paydowns from Merx and the full repayment of a position on non-accrual demonstrate our ability to maximize recoveries on challenged credits.</p>
<p>During the December quarter, MidCap Financial Investment Corporation made $141 million of new commitments across 26 transactions. Net funded activity for the quarter was positive $25 million, which included a $7.5 million repayment from Merx. At the end of December, MidCap Financial Investment Corporation's investment in Merx totaled approximately $103 million at fair value, representing 3% of the portfolio fair value. Close going to quarter end in February, Merx repaid an additional $22 million to MidCap Financial Investment Corporation for a total amount of $29.5 million. Let me remind you about what remains in Merx. MidCap Financial Investment Corporation's remaining investment in Merx consists of four aircraft, plus the value associated with Merx's servicing platform.</p>
<p>Merx earns income through its servicing activities from Navigator, Apollo's dedicated aircraft leasing fund, which currently owns 38 aircraft. Having deployed its equity commitments, Navigator is in the harvest period; as such, the fund is opportunistically monetizing assets to optimize fund level returns. Merx receives a remarketing fee on each aircraft sale. At the end of December, the servicing business represented approximately 29% of the total value of Merx. The servicing component of Merx will naturally decline as servicing income is received.</p>
<p>Apollo's long-standing commitment has been to deliver positive outcomes in all instances where we manage investor capital. With respect to the public vehicles we manage across different asset classes, we have been active in evaluating potential strategies and options with the objective of maximizing realizable value for stockholders. During the fourth quarter, the market presented us with what we viewed as an attractive opportunity to repurchase our stock at a significant discount to NAV. We repurchased approximately 1.1 million shares at an average discount of 18% for an aggregate cost of $12.9 million, generating approximately $0.03 per share of NAV accretion.</p>
<p>At these trading levels, we continue to believe allocating capital towards stock repurchases is more accretive than deploying capital into new investments. Accordingly, the board has authorized a new $100 million stock repurchase plan, which we expect to utilize aggressively in combination with a 10b5-1 trading plan to capitalize on what we believe is a compelling opportunity for our stockholders. This is in addition to our existing share repurchase authorization, of which approximately $7.9 million of repurchase capacity remains. Accordingly, MidCap Financial Investment Corporation now has $107.9 million available for stock repurchase. If the current discount continues and the trading volumes remain in their current range, we anticipate fully utilizing our current authorization by late May.</p>
<p>Importantly, we believe MidCap Financial Investment Corporation's investment portfolio is extremely well-positioned, consisting of primarily true first lien loans with granular position sizes and limited tech and software expenditures. We remain convinced that the current market price does not appropriately reflect the intrinsic value of MidCap Financial Investment Corporation's high quality investment portfolio. We do not anticipate these stock repurchases will result in any material increase in our net leverage, given our visibility into expected repayments.</p>
<p>Moving to the dividend. In light of the changes to base rates and other factors, we have reassessed the long-term earning power of the company, and the board has concluded that it was prudent to adjust the dividend. Accordingly, on February 25, 2026, our board of directors declared a quarterly dividend of $0.31 per share for stockholders of record as of March 10, 2026, payable on March 26, 2026. With that, I will now turn this call over to Ted.</p>
<p>Ted McNulty: Thank you, Tanner. Good morning, everyone. I am going to spend a few moments reviewing our fo