• Monroe Capital Corporation BDC Announces Fourth Quarter and Full Year 2023 Results

    Source: Nasdaq GlobeNewswire / 11 Mar 2024 15:25:58   America/Chicago

    CHICAGO, March 11, 2024 (GLOBE NEWSWIRE) -- Monroe Capital Corporation (Nasdaq: MRCC) (“Monroe”) today announced its financial results for the fourth quarter and full year ended December 31, 2023.

    Except where the context suggests otherwise, the terms “Monroe,” “we,” “us,” “our,” and “Company” refer to Monroe Capital Corporation.

    Fourth Quarter 2023 Financial Highlights

    • Net Investment Income of $5.3 million, or $0.24 per share
    • Adjusted Net Investment Income (a non-GAAP measure described below) of $5.6 million, or $0.26 per share
    • Net increase in net assets resulting from operations of $1.6 million, or $0.07 per share
    • Net Asset Value (“NAV”) of $203.7 million, or $9.40 per share
    • Paid quarterly dividend of $0.25 per share on December 29, 2023
    • Current annual cash dividend yield to shareholders of approximately 13.4% (1)

    Full Year 2023 Financial Highlights

    • Net Investment Income of $23.2 million, or $1.07 per share
    • Adjusted Net Investment Income (a non-GAAP measure described below) of $24.1 million, or $1.11 per share
    • Net increase in net assets resulting from operations of $0.4 million, or $0.02 per share

    Chief Executive Officer Theodore L. Koenig commented, “We are pleased to report that our Adjusted Net Investment Income covered our dividend for the 15th consecutive quarter. As we look ahead in 2024, our focus continues to be on portfolio credit quality while capitalizing on the current market dynamics in order to generate strong risk-adjusted returns for our stockholders.”

    Monroe Capital Corporation is a business development company affiliate of the award-winning private credit investment firm and lender, Monroe Capital LLC.

    ______________________________________________________________________
    (1) Based on an annualized dividend and closing share price as of March 8, 2024.

    Management Commentary

    Adjusted Net Investment Income totaled $5.6 million or $0.26 per share for the quarter ended December 31, 2023. This compares with $5.5 million or $0.25 per share for the quarter ended September 30, 2023. The slight increase in Adjusted Net Investment Income during the quarter is driven by a combination of factors, including a comparatively smaller reversal of previously accrued fee income and reductions in interest expense as a result of lower leverage during the quarter. These increases were partially offset by a decrease in interest income as a result of a decrease in average invested assets. See Non-GAAP Financial Measure – Adjusted Net Investment Income discussion below.

    NAV decreased by $0.18 per share, or 1.9%, to $203.7 million or $9.40 per share as of December 31, 2023, compared to $207.6 million or $9.58 per share as of September 30, 2023. The decrease in NAV this quarter was primarily the result of net unrealized losses on the portfolio attributable to a few specific legacy portfolio companies that continued to be affected by macroeconomic and idiosyncratic challenges which impacted financial performance.

    During the quarter, MRCC’s debt-to-equity leverage decreased from 1.60 times debt-to-equity to 1.49 times debt-to-equity. The decrease in leverage was primarily driven by an increase in proceeds from sales and paydowns received during the quarter which were used to paydown the revolving credit facility. We continue to focus on managing our investment portfolio and selectively redeploying capital resulting from repayments.

    Selected Financial Highlights
    (in thousands, except per share data)

     December 31, 2023 September 30, 2023
    Consolidated Statements of Assets and Liabilities data:(audited) (unaudited)
    Investments, at fair value$488,386  $518,284 
    Total assets 513,186   542,536 
    Total net assets 203,724   207,555 
    Net asset value per share 9.40   9.58 


     For the Quarters Ended
     December 31, 2023 September 30, 2023
    Consolidated Statements of Operations data:(unaudited)
    Net investment income$5,278  $5,420 
    Adjusted net investment income (2) 5,589   5,515 
    Net gain (loss) (3,694)  (5,656)
    Net increase (decrease) in net assets resulting from operations 1,584   (236)
        
    Per share data:   
    Net investment income$0.24  $0.25 
    Adjusted net investment income (2) 0.26   0.25 
    Net gain (loss) (0.17)  (0.26)
    Net increase (decrease) in net assets resulting from operations 0.07   (0.01)

    ______________________________________________________________________
    (2) See Non-GAAP Financial Measure – Adjusted Net Investment Income below for a detailed description of this non-GAAP measure and a reconciliation from net investment income to Adjusted Net Investment Income. The Company uses this non-GAAP financial measure internally in analyzing financial results and believes that this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends for the Company.

    Portfolio Review

    The Company had debt and equity investments in 96 portfolio companies, with a total fair value of $488.4 million as of December 31, 2023, as compared to debt and equity investments in 99 portfolio companies, with a total fair value of $518.3 million, as of September 30, 2023. The Company’s portfolio consists primarily of first lien loans, representing 82.4% of the portfolio as of December 31, 2023, and 82.9% of the portfolio as of September 30, 2023. As of December 31, 2023, the weighted average contractual and effective yield on the Company’s debt and preferred equity investments was 12.1% and 12.1%, respectively, as compared to the weighted average contractual and effective yield of 12.4% and 12.5%, respectively, as of September 30, 2023. Portfolio yield is calculated only on the portion of the portfolio that has a contractual coupon and therefore does not account for dividends on equity investments (other than preferred equity). As of December 31, 2023, 1.5% of the Company’s total investments at fair value were on non-accrual as compared to 1.2% as of September 30, 2023.

    Financial Review

    Results of Operations: Fourth Quarter 2023

    Net investment income for the quarter ended December 31, 2023 totaled $5.3 million, or $0.24 per share, compared to $5.4 million, or $0.25 per share, for the quarter ended September 30, 2023. Adjusted Net Investment Income was $5.6 million, or $0.26 per share, for the quarter ended December 31, 2023, compared to $5.5 million, or $0.25 per share, for the quarter ended September 30, 2023. Investment income for the quarter ended December 31, 2023 totaled $15.5 million, compared to $15.6 million for the quarter ended September 30, 2023. Both quarters included an impact for the reversal of previously accrued fee income associated with the Company’s former loan investment in IT Global Holdings, LLC (“IT Global”), $0.5 million for the quarter ended December 31, 2023 and $1.1 million for the quarter ended September 30, 2023. The Company has no remaining fee income accrued associated with IT Global. Excluding the impact of these fee income reversals, investment income decreased by $0.7 million, primarily as a result of the decrease in the size of the Company’s average investment portfolio during the quarter. Total expenses for the quarter ended December 31, 2023 totaled $10.2 million, consistent with $10.2 million for the quarter ended September 30, 2023. A decline in interest and other debt financing expenses driven by a reduction in the Company’s average leverage level was offset by an increase in income taxes, including excise taxes, primarily associated with blocker entities that hold certain of the Company’s equity investments.

    Net gain (loss) was ($3.7) million for the quarter ended December 31, 2023, compared to ($5.7) million for the quarter ended September 30, 2023. This net loss for the quarter ended December 31, 2023 was primarily attributable to unrealized mark-to-market losses of a few specific legacy portfolio companies.

    Net increase (decrease) in net assets resulting from operations was $1.6 million, or $0.07 per share, for the quarter ended December 31, 2023, compared to ($0.2) million, or ($0.01) per share, for the quarter ended September 30, 2023.

    Results of Operations: Full Year 2023

    Net investment income for the year ended December 31, 2023 totaled $23.2 million, or $1.07 per share, compared to $22.2 million, or $1.02 per share, for the year ended December 31, 2022. Adjusted Net Investment Income was $24.1 million, or $1.11 per share, for the year ended December 31, 2023, compared to $23.6 million, or $1.09 per share, for the year ended December 31, 2022. Investment income for the year ended December 31, 2023 totaled $64.3 million, compared to $56.6 million for the year ended December 31, 2022. The increase in investment income compared to prior year was primarily the result of an increase interest income, partially offset by a decrease in fee income. Investment income for the year ended December 31, 2023 included the reversal of $1.6 million of previously accrued fee income associated with the Company’s former loan investment in IT Global and the year ended December 31, 2022 included the one-time benefit of $2.0 million in previously unrecorded interest income associated with the repayment of the Company’s former loan investment in Curion Holdings, LLC (“Curion”). Excluding these two non-recurring items, investment income increased $11.3 million, primarily as a result of an increase in interest income due to the increases in effective rates on the portfolio from the rising interest rate environment. Total expenses, net of incentive fee and management fee waivers, for the year ended December 31, 2023 totaled $41.0 million, compared to $34.4 million for the year ended December 31, 2022. The $6.6 million increase in expenses during the year was primarily driven by an increase in interest and other debt financing expenses, resulting from the rising interest rate environment, and an increase in incentive fees driven by stronger pre-incentive fee net investment income performance.

    Net gain (loss) was ($22.9) million for the year ended December 31, 2023, compared to ($25.0) million for the year ended December 31, 2022. Net realized and unrealized gains (losses) on investments were ($23.0) million for the year ended December 31, 2023. This net loss was primarily attributable to unrealized mark-to-market losses of a few specific legacy portfolio companies that continue to be affected by macroeconomic and idiosyncratic challenges and the Company’s investment in MRCC Senior Loan Fund I, LLC (“SLF”). The decrease in value at the SLF was driven by net losses on the SLF’s investments, which are loans to traditional upper middle-market borrowers.

    Net increase (decrease) in net assets resulting from operations was $0.4 million, or $0.02 per share, for the year ended December 31, 2023, compared to ($2.8) million, or ($0.13) per share, for the year ended December 31, 2022.

    Liquidity and Capital Resources

    At December 31, 2023, the Company had $5.0 million in cash and cash equivalents, $174.1 million of debt outstanding on its revolving credit facility and $130.0 million of debt outstanding on its 2026 Notes. As of December 31, 2023, the Company had approximately $80.9 million available for additional borrowings on its revolving credit facility, subject to borrowing base availability.

    MRCC Senior Loan Fund

    SLF is a joint venture with Life Insurance Company of the Southwest (“LSW”), an affiliate of National Life Insurance Company. SLF invests primarily in senior secured loans to middle market companies in the United States. The Company and LSW have each committed $50.0 million of capital to the joint venture. As of December 31, 2023, the Company had made net capital contributions of $42.7 million in SLF with a fair value of $33.1 million, as compared to net capital contributions of $42.7 million in SLF with a fair value of $33.3 million at September 30, 2023. During the quarter ended December 31, 2023, the Company received dividend income from SLF of $0.9 million, consistent with the $0.9 million received during the quarter ended September 30, 2023. SLF’s underlying investments are loans to middle-market borrowers that are generally larger than the rest of MRCC’s portfolio which is focused on lower middle-market companies. SLF’s average mark on the underlying investment portfolio increased by 1.5% during the quarter, from 89.4% of amortized cost as of September 30, 2023, to 90.9% of amortized cost as of December 31, 2023, primarily as a result of the realization of a debt position during the quarter.

    As of December 31, 2023, SLF had total assets of $148.4 million (including investments at fair value of $139.9 million), total liabilities of $82.2 million (including borrowings under the $110.0 million secured revolving credit facility with Capital One, N.A. (the “SLF Credit Facility”) of $82.0 million) and total members’ capital of $66.2 million. As of September 30, 2023, SLF had total assets of $158.7 million (including investments at fair value of $148.2 million), total liabilities of $92.1 million (including borrowings under the SLF Credit Facility of $92.1 million) and total members’ capital of $66.6 million.

    Non-GAAP Financial Measure – Adjusted Net Investment Income

    On a supplemental basis, the Company discloses Adjusted Net Investment Income (including on a per share basis) which is a financial measure that is calculated and presented on a basis of methodology other than in accordance with generally accepted accounting principles of the United States of America (“non-GAAP”). Adjusted Net Investment Income represents net investment income, excluding the net capital gains incentive fee and income taxes. The Company uses this non-GAAP financial measure internally in analyzing financial results and believes that this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends for the Company. The management agreement with the Company’s advisor provides that a capital gains incentive fee is determined and paid annually with respect to realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized capital losses for such year. Management believes that Adjusted Net Investment Income is a useful indicator of operations exclusive of any net capital gains incentive fee as net investment income does not include gains associated with the capital gains incentive fee.

    The following tables provide a reconciliation from net investment income (the most comparable GAAP measure) to Adjusted Net Investment Income for the periods presented:

     For the Quarters Ended
     December 31, 2023 September 30, 2023
     Amount Per Share
    Amount    		 Amount Per Share
    Amount
     (in thousands, except per share data)
    Net investment income$5,278  $0.24  $5,420  $0.25 
    Net capital gains incentive fee —   —   —   — 
    Income taxes, including excise taxes 311   0.02   95   0.00 
    Adjusted Net Investment Income$5,589  $0.26  $5,515  $0.25 


     For the Years Ended
     December 31, 2023 December 31, 2022
     Amount Per Share
    Amount    		 Amount Per Share
    Amount
     (in thousands, except per share data)
    Net investment income$23,249  $1.07  $22,192  $1.02 
    Net capital gains incentive fee —   —   —   — 
    Income taxes, including excise taxes 806   0.04   1,405   0.07 
    Adjusted Net Investment Income$24,055  $1.11  $23,597  $1.09 
     

    Adjusted Net Investment Income may not be comparable to similar measures presented by other companies, as it is a non-GAAP financial measure that is not based on a comprehensive set of accounting rules or principles and therefore may be defined differently by other companies. In addition, Adjusted Net Investment Income should be considered in addition to, not as a substitute for, or superior to, financial measures determined in accordance with GAAP.

    Fourth Quarter 2023 Financial Results Conference Call

    The Company will host a webcast and conference call to discuss these operating and financial results on Tuesday, March 12, 2024 at 11:00 a.m. ET. The webcast will be hosted on a webcast link located in the Investor Relations section of the Company’s website at http://ir.monroebdc.com/events.cfm. To participate in the conference call, please dial (800) 715-9871 approximately 10 minutes prior to the call. Please reference conference ID # 6675350.

    For those unable to listen to the live broadcast, the webcast will be available for replay on the Company’s website approximately two hours after the event.

    For a more detailed discussion of the financial and other information included in this press release, please also refer to the Company’s Form 10-K for the year ended December 31, 2023 to be filed with the SEC (www.sec.gov) on Monday, March 11, 2024.




    MONROE CAPITAL CORPORATION
    CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
    (in thousands, except per share data)
     
     December 31, 2023 September 30, 2023 December 31, 2022
     (audited) (unaudited) (audited)
    ASSETS     
    Investments, at fair value:     
    Non-controlled/non-affiliate company investments$371,723  $400,117  $418,913 
    Non-controlled affiliate company investments 83,541   84,898   86,618 
    Controlled affiliate company investments 33,122   33,269   35,509 
    Total investments, at fair value (amortized cost of: $510,876, $536,795 and $579,307, respectively) 488,386   518,284   541,040 
    Cash and cash equivalents 4,958   5,324   5,450 
    Unrealized gain on foreign currency forward contracts —   —   1,507 
    Interest and dividend receivable 19,349   18,627   16,457 
    Other assets 493   301   541 
    Total assets 513,186   542,536   564,995 
          
    LIABILITIES     
    Debt:     
    Revolving credit facility 174,100   201,100   204,600 
    2026 Notes 130,000   130,000   130,000 
    Total debt 304,100   331,100   334,600 
    Less: Unamortized deferred financing costs (3,235)  (3,566)  (4,486)
    Total debt, less unamortized deferred financing costs 300,865   327,534   330,114 
    Interest payable 3,078   1,621   3,041 
    Management fees payable 2,100   2,140   2,221 
    Incentive fees payable 1,319   1,355   1,380 
    Accounts payable and accrued expenses 2,100   2,293   3,220 
    Directors' fees payable —   38   - 
    Total liabilities 309,462   334,981   339,976 
    Net assets$203,724  $207,555  $225,019 
          
    ANALYSIS OF NET ASSETS     
    Common stock, $0.001 par value, 100,000 shares authorized, 21,666, 21,666 and 21,666 shares issued and outstanding, respectively$22  $22  $22 
    Capital in excess of par value 298,127   298,700   298,700 
    Accumulated undistributed (overdistributed) earnings (94,425)  (91,167)  (73,703)
    Total net assets$203,724  $207,555  $225,019 
    Net asset value per share$9.40  $9.58  $10.39 



    MONROE CAPITAL CORPORATION
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (in thousands, except per share data)
     
     For the Quarters Ended For the Years Ended
     December 31, 2023 September 30, 2023 December 31, 2023 December 31, 2022
     (unaudited) (audited)
    Investment income:       
    Non-controlled/non-affiliate company investments:       
    Interest income$11,459  $11,858  $46,241  $35,751 
    Payment-in-kind interest income 830   649   3,070   3,009 
    Dividend income 67   65   305   372 
    Fee income (323)  (836)  (679)  2,380 
    Total investment income from non-controlled/non-affiliate company investments 12,033   11,736   48,937   41,512 
    Non-controlled affiliate company investments:       
    Interest income 1,134   1,174   5,140   7,585 
    Payment-in-kind interest income 1,384   1,781   6,337   3,680 
    Dividend income 52   52   283   189 
    Total investment income from non-controlled affiliate company investments 2,570   3,007   11,760   11,454 
    Controlled affiliate company investments:       
    Dividend income 900   900   3,600   3,600 
    Total investment income from controlled affiliate company investments 900   900   3,600   3,600 
    Total investment income 15,503   15,643   64,297   56,566 
    Operating expenses:       
    Interest and other debt financing expenses 5,669   5,874   22,847   17,080 
    Base management fees 2,100   2,140   8,603   9,055 
    Incentive fees 1,319   1,355   5,812   4,127 
    Professional fees 178   189   719   894 
    Administrative service fees 233   228   940   1,163 
    General and administrative expenses 381   304   1,174   1,082 
    Directors' fees 34   38   147   148 
    Operating expenses before fee waivers 9,914   10,128   40,242   33,549 
    Base management fee waivers —   —   —   (55)
    Incentive fee waivers —   —   —   (525)
    Total operating expenses, net of fee waivers 9,914   10,128   40,242   32,969 
    Net investment income before income taxes 5,589   5,515   24,055   23,597 
    Income taxes, including excise taxes 311   95   806   1,405 
    Net investment income 5,278   5,420   23,249   22,192 
    Net gain (loss):       
    Net realized gain (loss):       
    Non-controlled/non-affiliate company investments 285   30   (38,769)  (1,129)
    Non-controlled affiliate company investments —   —   —   (1)
    Extinguishment of debt —   —   —   (1,039)
    Foreign currency forward contracts —   —   1,756   119 
    Foreign currency and other transactions —   (4)  (135)  (36)
    Net realized gain (loss) 285   26   (37,148)  (2,086)
    Net change in unrealized gain (loss):       
    Non-controlled/non-affiliate company investments (2,437)  (3,346)  22,154   (12,287)
    Non-controlled affiliate company investments (1,395)  (1,061)  (3,990)  (5,379)
    Controlled affiliate company investments (147)  (1,276)  (2,387)  (6,116)
    Foreign currency forward contracts —   —   (1,507)  726 
    Foreign currency and other transactions —   1   —   164 
    Net change in unrealized gain (loss) (3,979)  (5,682)  14,270   (22,892)
    Net gain (loss) (3,694)  (5,656)  (22,878)  (24,978)
    Net increase (decrease) in net assets resulting from operations$1,584  $(236) $371  $(2,786)
            
    Per common share data:       
    Net investment income per share - basic and diluted$0.24  $0.25  $1.07  $1.02 
    Net increase (decrease) in net assets resulting from operations per share - basic and diluted$0.07  $(0.01) $0.02  $(0.13)
    Weighted average common shares outstanding - basic and diluted 21,666   21,666   21,666   21,666 



    Additional Supplemental Information:

    The composition of the Company’s investment income was as follows (in thousands):

     For the Quarters Ended For the Years Ended
     December 31, 2023 September 30, 2023 December 31, 2023 December 31, 2022
     (unaudited) (audited)
    Interest income$12,226  $12,804  $49,779  $41,449 
    Payment-in-kind interest income 2,214   2,430   9,407   6,689 
    Dividend income 1,019   1,017   4,188   4,161 
    Fee income (323)  (836)  (679)  2,380 
    Prepayment gain (loss) 175   29   553   803 
    Accretion of discounts and amortization of premiums 192   199   1,049   1,084 
    Total investment income$15,503  $15,643  $64,297  $56,566 


    The composition of the Company’s interest expense and other debt financing expenses was as follows (in thousands):

     For the Quarters Ended For the Years Ended
     December 31, 2023 September 30, 2023 December 31, 2023 December 31, 2022
     (unaudited) (audited)
    Interest expense - revolving credit facility$3,783  $3,989  $15,319  $8,442 
    Interest expense - 2026 Notes 1,555   1,555   6,220   6,220 
    Interest expense - SBA debentures —   —   —   292 
    Amortization of deferred financing costs 331   330   1,308   2,126 
    Total interest and other debt financing expenses$5,669  $5,874  $22,847  $17,080 


    About Monroe Capital Corporation

    Monroe Capital Corporation is a publicly-traded specialty finance company that principally invests in senior, unitranche and junior secured debt and, to a lesser extent, unsecured debt and equity investments in middle-market companies. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation. The Company’s investment activities are managed by its investment adviser, Monroe Capital BDC Advisors, LLC, which is an investment adviser registered under the Investment Advisers Act of 1940, as amended, and an affiliate of Monroe Capital LLC. To learn more about Monroe Capital Corporation, visit www.monroebdc.com.

    About Monroe Capital

    Monroe Capital LLC (“Monroe”) is a premier boutique asset management firm specializing in private credit markets across various strategies, including direct lending, technology finance, venture debt, opportunistic, structured credit, real estate and equity. Since 2004, the firm has been successfully providing capital solutions to clients in the U.S. and Canada. Monroe prides itself on being a value-added and user-friendly partner to business owners, management, and both private equity and independent sponsors. Monroe’s platform offers a wide variety of investment products for both institutional and high net worth investors with a focus on generating high quality “alpha” returns irrespective of business or economic cycles. The firm is headquartered in Chicago and maintains 10 offices throughout the United States and Asia.

    Monroe has been recognized by both its peers and investors with various awards including Private Debt Investor as the 2023 Lower Mid-Market Lender of the Decade, 2023 Lower Mid-Market Lender of the Year, 2023 CLO Manager of the Year, Americas; Inc.’s 2023 Founder-Friendly Investors List; Global M&A Network as the 2023 Lower Mid-Markets Lender of the Year, U.S.A.; DealCatalyst as the 2022 Best CLO Manager of the Year; Korean Economic Daily as the 2022 Best Performance in Private Debt – Mid Cap; Creditflux as the 2021 Best U.S. Direct Lending Fund; and Pension Bridge as the 2020 Private Credit Strategy of the Year. For more information and important disclaimers, please visit www.monroecap.com.

    Forward-Looking Statements

    This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under the Company’s control, and that the Company may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from these estimates and projections of the future. Such statements speak only as of the time when made, and the Company undertakes no obligation to update any such statement now or in the future.

    SOURCE: Monroe Capital Corporation

    Investor Contact:Mick Solimene
     Chief Investment Officer and Chief Financial Officer
     Monroe Capital Corporation
     (312) 598-8401
     Email: msolimene@monroecap.com
      
    Media Contact:Daniel Abramson
     BackBay Communications
     (857) 305-8441
     Email: daniel.abramson@backbaycommunications.com

     


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