Main Street Capital Corporation (NYSE:MAIN) Q2 2025 Earnings Call Transcript

Main Street Capital Corporation (NYSE:MAIN) Q2 2025 Earnings Call Transcript August 8, 2025

Operator: Greetings. Welcome to Main Street Capital’s Second 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, Mr. Vaughan, proceed.

Zach Vaughan: Thank you, operator, and good morning, everyone. Thank you for joining us for Main Street Capital Corporation’s 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. Also participating in the Q&A portion of the call is Nick 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 second 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 August 15.

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, August 8, 2025, and therefore, you are advised that any 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, 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 noncash compensation expenses. Management believes that presenting DNII and the related per share amount are useful and appropriate supplemental disclosures for analyzing Main Street’s financial performance since noncash compensation expenses do not result in a net cash impact to Main Street upon settlement.

Please 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 average quarterly NAV. 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. And now I’ll turn the call over to Main Street’s CEO, Dwayne Hyzak.

Dwayne Louis 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, David, Ryan and I will provide you with our key quarterly updates, after which we’ll be happy to take your questions. 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 shareholders, a new record for NAV per share for the 12th consecutive quarter and our largest realized gain in Main Street’s history. We believe 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 underlying strength and quality of our portfolio companies, particularly those in our highly unique lower middle market investment strategy.

We remain confident that our unique investment income and value creation drivers, together with our cost-efficient operations and conservative capital structure will allow us to continue to deliver superior results for our shareholders in the future. Our favorable results for the second quarter, combined with our current expectations for the third quarter resulted in our recommendations to our Board of Directors for 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 net fair value increases in our asset management business and our lower middle market investment portfolio and the accretive impact of our equity issuances in the quarter, which Ryan will discuss in more detail.

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. 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 31 fair value. 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, and this is having a negative impact on the contributions from our private loan portfolio.

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. 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. David will discuss our investment 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.

We have also continued to produce positive results in our asset management business. The funds we advised through our external investment manager continued to experience favorable performance in the second quarter, resulting in significant incentive fee income for our asset management business for the 11th consecutive quarter 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 and our largest asset management business client through the increased 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. In addition to deploying the fund’s current liquidity into new private loan investments, we also continue to focus on maximizing the benefits of the fund’s legacy lower middle market investment portfolio. 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.

Based upon our results for the second quarter, combined with our current 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 September, representing our 16th consecutive quarterly supplemental dividend and regular monthly dividends for the fourth quarter of 2025 of $0.255 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. 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.

We currently expect to recommend 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. Based upon our expectations for continued favorable performance in the third quarter, we currently anticipate proposing an additional significant supplemental dividend payable in December 2025. 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 the unique and flexible financing solutions that we 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 market 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.

In addition, we have an increased 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 experienced with other 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. 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.

With that, I will turn the call over to David.

David L. Magdol: Thanks, Dwayne, and good morning, 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. We are pleased to report that the overall operating performance for most of our portfolio companies continues to be positive, which contributed to our attractive second quarter financial results. 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. As we have previously discussed, we believe that one of the primary drivers of our long-term success has been and will continue to be our focus on investing in both debt and equity investments in the underserved lower middle market.

Most notably and uniquely, our lower middle market strategy provides attractive leverage points and yields on our first lien debt investments, while also creating a true partnership with the management teams of our portfolio companies through our flexible equity ownership positions. In short, we believe that this approach provides significant downside protection through our first lien debt investments, while still providing the benefits of alignment and significant upside potential with our equity investments. 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 received from the equity investments in our lower middle market strategy.

As a result of our lower middle market equity investments in the fourth quarter of 2024 and the second quarter of 2025, we were able to generate approximately $109 million of realized gains from the exit of our equity investments in 2 lower middle market portfolio companies. These 2 realizations included a $53.7 million realized gain on Pearl Meyer, which represent an annualized internal rate of return of 69% and a 7.7x money invested in our equity investment and a $55.5 million realized gain in Heritage Vet Partners, which represented an annualized internal rate of return of 72% and a 10x money invested in our equity investment. Realized gains like these provide an offset against the inevitable credit losses that will be experienced when investing primarily in noninvestment-grade debt, consistent with the debt investments executed by other BDCs and private credit funds.

Based upon our historical experience in 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. 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. Both Pearl Meyer and Heritage Vet Partners executed multiple value-creating acquisitions, almost exclusively with additional debt capital that we provided. Similar to our experiences with Pearl Meyer 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.

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

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. We are pleased to report that in the second quarter, we continued to receive the benefit of significant dividends from our lower middle market equity investments. 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 to continue to be a significant contributor to our results in the future.

Now turning to the overall composition and results of our investment portfolio as of June 30. We continue to maintain a highly diversified portfolio with investments in 187 companies spanning across numerous industries and end markets. Our largest portfolio companies, excluding the external investment manager, represented only 3.9% of our total investment income for the trailing 12-month period and 3.7% of our total investment portfolio fair value at quarter end. The majority of our portfolio investments represented less than 1% of our income and our assets. Our investment activity in the second quarter included total investments in our lower middle market portfolio of approximately $209 million, including total investments of $110 million in 3 new lower middle market portfolio companies, which after aggregate repayments on debt investments and return of invested equity capital resulted in a net increase in our lower middle market portfolio of $108 million.

Driven by the capabilities and relationships of our private credit team, we also made $189 million 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. 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. We had investments in 87 companies in our private loan portfolio, representing $1.9 billion of fair value. The total investment portfolio at fair value at quarter end was 17% above our related cost basis. 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 at quarter 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 Robert Nelson: Thank you, 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. Our total investment income for the second quarter was $144 million, increasing by $11.8 million or 8.9% over the second quarter of 2024 and by $6.9 million or 5.1% from the first quarter of 2025. Interest income increased by $800,000 from a year ago and by $2.8 million from the first quarter of 2025. The increase from 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 nonaccrual status, 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.

Dividend income increased by $11.2 million when compared to a year ago, including a $3 million increase in unusual or nonrecurring dividends and increased by $1.8 million from the first quarter, including a $4.2 million increase in unusual or nonrecurring dividends. The increases in dividend income are primarily the result of the continued underlying positive performance of our lower middle market portfolio companies. Fee income decreased by $200,000 from a year ago and by $2.3 million from the first quarter. The increase from the first quarter was primarily due to higher closing fees on new and follow-on investments and an increase from exit prepayment and amendment fees from investment activity. Fee income considered nonrecurring decreased by $700,000 from a year ago and increased by $200,000 from the first quarter of 2025.

Second quarter included elevated levels of income considered less consistent or nonrecurring 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. In the aggregate, these items totaled $8.1 million and were $4.8 million or $0.05 per share higher compared to the average of the prior 4 quarters. $3 million or $0.03 higher than the second quarter of 2024 and $5.7 million or $0.06 higher than the first quarter of 2025. Our operating expenses increased by $5.8 million over the second quarter of 2024 and increased by $3.4 million 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.

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, 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. 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. 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.

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. Our investment manager ended the 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. This increase was primarily driven by net fair value appreciation in our external investment manager and our lower middle market investment portfolio, partially offset by net fair value depreciation in our private loan investment portfolio. 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 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. Net fair value depreciation in our private loan portfolio was driven by specific portfolio company performance, partially offset by decreases in market spreads. We recognized net realized gains of $52.4 million in the quarter. The realized gains recognized were primarily a result of a full exit of a lower middle market investment, as discussed by Dwayne and David. Partial exits of other 2 portfolio investments and the exit of 1 private loan investment, 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 nonaccrual status, comprising approximately 2.1% of the total investment portfolio at fair value and approximately 5% at cost. NAV increased by $0.27 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. Our regulatory debt-to-equity leverage calculated as total debt, excluding our SBIC debentures divided by net asset value was 0.65x and our regulatory asset coverage ratio was 2.53x, and these ratios continue to be more conservative than our long-term target ranges of 0.8x to 0.9x and 2.25x to 2.1x, respectively. Given our current liquidity position and recent investment activity, we were less active during the second quarter in our ATM program, raising net proceeds of $10.7 million from equity issuances.

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 with 2 near-term debt maturities of $150 million and $500 million in December 2025 and July 2026, respectively. 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. We expect to continue to operate throughout the year at leverage levels more conservative than our target — our long-term targets.

Coming back to our operating results. DNII per share for the quarter of $1.06 exceeded DNII per share for the second quarter of last year by $0.03 and exceeded the DNII per share for the first quarter by $0.04. 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. With that, I will now turn the call over to the operator so we can take any questions.

Operator: [Operator Instructions] Our first question is from Robert Dodd with Raymond James.

Q&A Session

Robert James Dodd: Congrats on the quarter and the performance in the lower middle market portfolio, but I want to focus on the private loan. So I mean, it shrank this quarter. Can you give me an — I mean was that a reduction in deal flow? Or was it kind of an increase in — I mean, obviously, you originated a lot, but had a lot of repayments, right? So I mean — so are the trends like deal flows slowing or you are seeing less attractive opportunities and that’s the driver behind it shrinking a little bit? I mean any color you can give me there?

Dwayne Louis Hyzak: Sure, Robert. Thanks for the comments there. I’ll give a couple of comments. I’ll let Nick, who, as you know, leads our private credit team, let him add on. But I’d say it was a combination of both. 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 new investment or origination activity and follow-ons were on a combined basis lower than what we would want them to be. And I think I said in my comments, we’re still viewing the pipeline as slightly below average. So we haven’t seen that change significantly. But you also had in the quarter, higher- than-expected repayments. So it’s a combination of the 2.

In terms of quality, I think we still view the quality of the investments as being very, very attractive, terms, conditions, leverage, the type of companies, I think were positive across the board, but there’s just less of it out there in the marketplace, but I’ll let Nick add on or give additional color.

Nicholas T. Meserve: Yes, I’d agree with Dwayne. The only thing I would add is we probably missed on pricing a little bit in the second quarter. And so pricing has probably come in, call it, 25 to 50 basis points in ’25, and we were probably a little bit wide on a few deals we would have liked to have won and held our pricing and those deals went away from us. If we lowered them down, call it, 25 to 50 basis points, we might have won those deals and the net origination would have been much higher for 2Q.

Robert James Dodd: Okay. Got it. I appreciate that color. Then on the comments, where you have seen some underperformance within the portfolio. And I think basically, it boils down to like consumer businesses seeming to struggle a little bit more than others, which makes a lot of sense. But I mean, is there any theme within that? Like is it particular types of consumer business? Obviously, I can look through the portfolio later. But also like is that making you more inclined to maybe avoid some consumer businesses for additional deployments? Or how are you thinking about that?

Dwayne Louis Hyzak: Yes, Robert, I would say that we have been expecting or sensing some weakness really probably for the last 2 years. I have to think back to how long we’ve been making that commentary. So I’d say on the new investment side, we have been risk off on companies that have direct significant consumer exposure. So I think we’ve been doing that. I think we just have some longer-term legacy investments that had more consumer exposure that have continued to struggle. I would say that in the current quarter, when you look at the nonaccrual movement, it was not just consumer. We also had another company that’s outside of the consumer space that had some underperformance that resulted in that company being put on nonaccrual status.

But I still think when you look at the nonaccruals as a whole, there still is more of a concentration in the consumer side. And I think if we were to pick where the consumer is feeling more pain, it’s the lower end of the consumer. I think we’ve been saying that for a while. That continues to be the case today. Overall, I think there’s parts of the consumer segment that continue to hold up pretty well on the upper end, but you’re definitely, from our perspective, at least seeing continued pain at the lower end, and you 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 seeing more separation between the companies that are performing really, really well versus the companies that are performing below expectations.

And I think that’s a trend we’ve seen for the last couple of quarters, and I think we continue to see it in the current quarter. So I just think you’re seeing more bifurcation across the portfolio. Some of that is just attributable to the quality of the strength of the management teams and their operations. Some of it also is just kind of how impacted are those companies by some of the uncertainty in the marketplace.

Robert James Dodd: Got it. Got it. I appreciate that. And if I can one more and kind of flipping to lower middle market. I mean you’ve now — to your point, I think you’ve set 2 records in the last roughly 9 months, I think, for exit gains with Pearl Meyer and Heritage. I mean, would you say that the gain opportunity is cycle near term, right? Are we in an elevated period where you could maybe expect more gains? I mean not identifying individual assets, obviously? Or do you think that’s going to be moderated for a little bit before some of your younger assets age into the point where the gains are potentially there? Any thoughts on that?

Dwayne Louis Hyzak: Sure, Robert. I’ll give you a couple of comments. One is we think we have a very mature portfolio. We think one of our biggest benefits, as you’ve heard us say repeatedly, is our — as a public company having permanent capital, we can and will be a long-term permanent investor. So we have a very mature portfolio when you look at the existing lower middle market assets. Clearly, both Pearl Meyer and Heritage Vet were fantastic companies, fantastic management teams. And between us and our partners at the management team level, we had great transaction outcomes there. Despite that, I think as we sit here today, I think we still have a number of companies that are having some inbound interest and having discussions about potential exits that could lead to additional realizations over the next 3 to 9 months.

You never know exactly what’s going to happen. But I do think you could see some additional realized gain exit activities in the near term. And I would say what we’re seeing in the marketplace is when you take a very high-quality company like Pearl Meyer and Heritage Vet Partners to market, because there is a lack of overall deal flow, those premium assets get premium pricing. So I think we’ve seen that in the marketplace with these 2 recent transactions. And I think if we’re successful with any of the potential realization activities that we’re having discussions on with the lower middle market portfolio companies, I think you would see a premium outcome. But obviously, a lot of things have to happen to get there, but we continue to see some kind of elevated or more than normal activity on the exit or realization side.

Operator: [Operator Instructions] Our next question is from Arren Cyganovich with Truist Securities.

Arren Saul Cyganovich: Congratulations on those realizations. The commentary about private loan pipe being below average, I guess, mixed with the 20 to 50 basis points of spread tightening that came in. 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.

Dwayne Louis Hyzak: I’ll let Nick kind of add on to his comments from earlier.

Nicholas T. Meserve: Yes. I think the deal activity being a little softer is really just M&A being down on the private equity side. We’ve seen that for the past probably 2 or 3 years. I think — every quarter, every year, we expect that to pick back up again as private equity is natural deal makers and they want to spend their new funds, and it just hasn’t come to fruition yet. We still expect that in the next 6, 12 months. But so far this year, we’ve not seen it. Spreads coming in, I think it’s somewhat related to slightly less deal flow, pushing a little more competition for everyone to find paper to spend on new deals.

Arren Saul Cyganovich: Got it. Okay. That makes sense. And then, Ryan, you had mentioned there’s a couple of debt maturities coming up over the next year. Maybe you could talk a little bit about what your funding options are for those.

Ryan Robert Nelson: Sure. As we mentioned in the prepared remarks, we do have ample liquidity as we look to the back half of the year. Outside of that, we also will be looking at the market and what pricing is in the debt market over the back half of the year. I think we have the benefit of not having to execute in a — if pricing isn’t favorable given where we are from a liquidity perspective. But also, we’ll also be thinking about our $500 million maturity next July and ways to kind of derisk that with capital market activities through the end of the year.

Dwayne Louis Hyzak: I think just adding on to that, I think you’ve always heard us say this, but we view our capital structure and liquidity position to be 2 of our significant strengths. One, we should be able to have 100% control over that side of what we execute. So to Ryan’s point, I think if the market is available, we’re going to continue to look at it and be opportunistic when we can and really focus on maintaining just what we think is a very, very attractive, very conservative capital structure and significant liquidity. So that continues to be a key focus for us on our capital structure side.

Operator: 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.

Dwayne Louis Hyzak: We just want to say thank you again to everyone for joining us this morning. We appreciate the continued support of our shareholders, and we look forward to talking again after our earnings release for the third quarter. Thank you.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.