Executive Summary

Q2 delivered stable NII/share of $0.35 on total investment income (TII) of $35.6M, annualized ROE of 9.0%, and NAV/share of $15.33; regular and supplemental dividends totaling $0.36/share were declared for Q3 2025, with the supplemental funded from undistributed taxable income .
Modest YoY revenue growth (+5%) and a 22% YoY increase in NII benefited from lower interest expense and reduced base management fees; however, the net increase in net assets from operations declined YoY due to net unrealized depreciation and lower fair value gains versus prior year .
Versus S&P Global consensus, MSIF slightly missed on EPS (NII/share) and revenue as floating-rate yields softened with lower SOFR and non-accruals ticked up versus 2024; expense tailwinds partly offset these headwinds . Q2 2025 EPS (NII/share) $0.35 vs $0.386*; revenue $35.6M vs $36.0M*.
Balance sheet remains conservative with debt-to-equity of 0.75x (below target) and liquidity of $183.7M, supporting continued portfolio expansion; dual listing on NYSE Texas announced post-quarter adds visibility but no change to primary NYSE listing .

What Went Well and What Went Wrong

What Went Well
- Expense discipline: Total expenses (net of waivers) fell 6.4% YoY driven by lower interest expense (lower SOFR, tighter spreads) and reduced base management fees post-advisory amendment .
- Income mix: Dividend income rose 24% YoY (LMM and private loan portfolio contributions), supporting a 5% YoY TII increase despite lower floating-rate yields .
- Portfolio positioning and message: “We are pleased with the Fund’s performance…with the potential for increased net investment income and dividends as we work to expand the Fund’s investment portfolio over the next several quarters.” — CEO Dwayne L. Hyzak .
What Went Wrong
- Net asset growth vs PY: Net increase in net assets from operations declined to $16.3M from $18.1M YoY, primarily due to lower net fair value gains (unrealized depreciation and accounting reversals) versus the prior year .
- Credit/yield headwinds: Lower benchmark rates pressured floating-rate loan yields, and an increase in investments on non-accrual status weighed on interest income growth .
- NAV/share drifted modestly: NAV/share dipped sequentially to $15.33 (from $15.35) as net unrealized depreciation offset realized gains .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Total Investment Income ($M)	$33.46	$33.23	$35.64
Net Investment Income ($M)	$14.23	$16.79	$16.31
NII per Share ($)	$0.35	$0.38	$0.35
Net Increase in Net Assets from Operations ($M)	$20.46	$15.88	$16.29
Net Inc. in Net Assets per Share ($)	$0.51	$0.36	$0.35
NAV per Share ($)	$15.53	$15.35	$15.33
ROE (annualized)	13.2%	9.5%	9.0%

Actuals vs S&P Global consensus (Q2 2025):

Metric	Actual	Consensus	Surprise
Revenue ($M)	$35.64	$35.99*	-$0.35M (≈-1.0%)*
EPS (NII/share, $)	$0.35	$0.386*	-$0.036 (≈-9.3%)*

Note: *Values retrieved from S&P Global.

Segment and portfolio mix (fair value):

Mix at FV	Q4 2024	Q1 2025	Q2 2025
Private Loan	58%	61%	60%
LMM	37%	35%	37%
Middle Market	3%	2%	2%
Other	2%	2%	1%

Key KPIs:

KPI	Q4 2024	Q1 2025	Q2 2025
Non-accruals (% FV / % Cost)	1.5% / 5.6%	2.8% / 6.1%	2.6% / 6.3%
Liquidity ($M)	$77.7	$163.5	$183.7
Debt-to-Equity	N/A	0.79x	0.75x
Private Loan Yield (WA)	12.0%	11.6%	11.5%
LMM Yield (WA)	13.0%	13.1%	13.1%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Regular Dividend per Share	Q3 2025	$0.35 for Q2 payout	$0.35 declared, payable Oct 31, 2025	Maintained
Supplemental Dividend per Share	Q3 2025	$0.01 for Q2 payout	$0.01 declared, payable Oct 31, 2025; paid from undistributed taxable income	Maintained
Leverage Target	2025	0.85x–0.95x target range (post-IPO redeployment)	Below range at 0.75x with intent to expand portfolio; regulatory leverage capacity doubles Jan 29, 2026	Maintained near-term, structural increase in 2026

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
Leverage	Below target post-IPO; target 0.85–0.95; capacity to expand in 2026	0.75x D/E; below target with ample liquidity to grow	Stable, gradual redeployment
Dividend policy	Regular + supplemental; aim for total dividends ≈ NII/share; supplemental flexes with NII	$0.35 regular + $0.01 supplemental declared; supplemental funded from UTI	Maintained policy
Macro/tariffs	Monitoring tariff risk; comfortable with exposure	Not highlighted in Q2 PR	Less emphasis in Q2
Yields/spreads	SOFR declines reduced yields; spreads stable to modest widening expected	Floating-rate yields down; interest expense also down with lower SOFR/spreads	Mixed: lower yields, lower funding costs
Credit quality	Non-accruals increased vs 2024 YE	Non-accruals 2.6% FV / 6.3% cost	Slight improvement vs Q1 FV
Portfolio mix shift	Focus on private loans; LMM only follow-ons	Portfolio ~60% private loan; ongoing deployment	Continuing shift to private loans

Management Commentary

“We are pleased with the Fund’s performance in the second quarter…with the potential for increased net investment income and dividends as we work to expand the Fund’s investment portfolio over the next several quarters.” — Dwayne L. Hyzak, CEO .
Expense tailwinds: Interest expense declined YoY on lower SOFR and tighter credit facility spreads; base management fees declined under the amended advisory agreement effective with the NYSE listing .
Portfolio construction: 99.9% of debt investments first lien in both private loan and LMM portfolios; weighted-average yields of 11.5% (private loan) and 13.1% (LMM) .

Q&A Highlights

Q2 2025 call transcript was not available at time of review; below themes reflect Q1 2025 Q&A context.
- Leverage path: Target 0.85x–0.95x; expect to stay below high end until early 2026 when regulatory leverage capacity doubles; deployment pace tied to market activity .
- M&A/investment pipeline: Expect pent-up demand to drive activity upon macro resolution; pipeline characterized as average with follow-ons prominent .
- Spreads/yields: Spreads stabilized; potential widening amid uncertainty; yields pressured by lower SOFR .
- Dividend income variability: LMM dividends a swing factor; expected to remain supportive near term based on underlying performance and capital allocation .
- Middle market wind-down: Realized losses concentrated in long-standing underperformers; exposure now de minimis; future outcomes may be lumpy but largely reflected in prior fair value marks .

Estimates Context

Q2 2025 actuals vs S&P Global consensus: revenue $35.64M vs $35.99M* (≈-1.0%); EPS (NII/share) $0.35 vs $0.386* (≈-9.3%). Slight misses likely reflect lower floating-rate asset yields (SOFR declines), some non-accrual pressure, and reduced less-consistent income categories, partially offset by lower interest expense and fees .
Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

Core earnings resilient: NII/share held at $0.35 with YoY expense tailwinds, supporting continued regular + supplemental dividends; supplemental for Q3 funded from undistributed taxable income .
Minor miss vs consensus: Small top-line and EPS (NII/share) shortfall driven by macro rate headwinds and modest credit friction; sequential NAV/share essentially flat, indicating contained valuation impacts .
Ample dry powder: $183.7M liquidity and 0.75x D/E (below target) position MSIF to expand its private loan book as market activity normalizes; regulatory leverage capacity doubles in Jan 2026, offering a clear growth catalyst .
Portfolio quality/mix: 99.9% first-lien debt across private loan/LMM, with WA yields of 11.5%/13.1%; non-accruals manageable at 2.6% FV and improved vs Q1 FV .
Dividend visibility: Policy to align total dividends with NII/share remains intact; expect continued use of supplemental dividends to fine-tune payout relative to earnings run-rate .
Watch items: Floating-rate yield compression from lower SOFR, pace of deployment into new loans, and trajectory of non-accruals; expense benefits and spread dynamics are partial offsets .
Potential catalysts: Portfolio growth toward target leverage, incremental deal flow as M&A improves, and structural leverage expansion in 2026; dual listing on NYSE Texas adds visibility with no change to primary listing .

Sources: Q2 2025 results and details ; Q2 dividend PR ; Q2 private loan activity PR ; Q2 earnings schedule PR ; Q1 2025 results PR ; Q1 2025 earnings call transcript ; Q4 2024 results PR ; 8‑K furnishing Q2 PR .

MSC INCOME FUND, INC. (MSIF)·Q2 2025 Earnings Summary