Monroe Capital Corporation (Nasdaq: MRCC) (“Monroe”) today
announced its financial results for the first quarter ended March
31, 2023.
Except where the context suggests otherwise, the terms “Monroe,”
“we,” “us,” “our,” and “Company” refer to Monroe Capital
Corporation.
First Quarter 2023 Financial Highlights
- Net Investment
Income of $6.6 million, or $0.31 per share
- Adjusted Net
Investment Income (a non-GAAP measure described below) of $6.9
million, or $0.32 per share
- Net increase in net assets resulting from operations of $3.4
million, or $0.16 per share
- Net Asset Value
(“NAV”) of $223.0 million, or $10.29 per share
- Paid quarterly
dividend of $0.25 per share on March 31, 2023
- Current annual cash
dividend yield to shareholders of approximately 13.8%(1)
Chief Executive Officer Theodore L. Koenig commented, “We are
pleased to report a strong start to 2023 with Adjusted Net
Investment Income of $0.32 per share in the first quarter. We
believe that tighter credit conditions and the recent banking
disruptions present a unique opportunity for us to capitalize on
the current market environment, where deal terms, pricing and
structures are more favorable. Our ability to provide certainty of
execution and flexible capital solutions to leading growth
orientated middle market companies allows us to redeploy capital
into attractive investment opportunities. As always, we continue to
be focused on maintaining portfolio credit quality while maximizing
Adjusted Net Investment Income and generating strong risk-adjusted
returns for our shareholders.”
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 May 9, 2023.
Management Commentary
Adjusted Net Investment Income totaled $6.9 million or $0.32 per
share for the quarter ended March 31, 2023. This compares with $5.6
million or $0.26 per share for the quarter ended December 31, 2022.
This increase in Adjusted Net Investment Income is primarily the
result of increases in effective rates on the portfolio from the
rising interest rate environment. See Non-GAAP Financial Measure –
Adjusted Net Investment Income discussion below.
NAV decreased by $0.10 per share, or 1.0%, to $223.0 million or
$10.29 per share as of March 31, 2023, compared to $225.0 million
or $10.39 per share as of December 31, 2022. The NAV decrease of
$0.10 per share was primarily the result of net unrealized losses
on the portfolio that were primarily attributable to a couple
specific portfolio companies that saw declining financial
performance resulting from larger economic factors, including the
rising interest rate environment and inflationary impacts on
consumer spending.
MRCC’s debt-to-equity leverage remained unchanged from December
31, 2022 at 1.49 times debt-to equity. 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)
|
March 31, 2023 |
|
December 31, 2022 |
Consolidated Statements of Assets and Liabilities
data: |
(unaudited) |
|
|
Investments, at fair value |
$ |
532,100 |
|
|
$ |
541,040 |
|
Total
assets |
$ |
559,465 |
|
|
$ |
564,995 |
|
Total net
assets |
$ |
222,961 |
|
|
$ |
225,019 |
|
Net asset
value per share |
$ |
10.29 |
|
|
$ |
10.39 |
|
|
|
|
|
|
|
|
|
|
For the quarter ended |
|
March 31, 2023 |
|
December 31, 2022 |
Consolidated Statements of Operations data: |
(unaudited) |
Net
investment income |
$ |
6,627 |
|
|
$ |
5,520 |
|
Adjusted net
investment income (2) |
$ |
6,860 |
|
|
$ |
5,636 |
|
Net gain
(loss) |
$ |
(3,268 |
) |
|
$ |
(1,040 |
) |
Net increase
(decrease) in net assets resulting from operations |
$ |
3,359 |
|
|
$ |
4,480 |
|
|
|
|
|
Per share
data: |
|
|
|
Net
investment income |
$ |
0.31 |
|
|
$ |
0.25 |
|
Adjusted net
investment income (2) |
$ |
0.32 |
|
|
$ |
0.26 |
|
Net gain
(loss) |
$ |
(0.15 |
) |
|
$ |
(0.05 |
) |
Net increase
(decrease) in net assets resulting from operations |
$ |
0.16 |
|
|
$ |
0.21 |
|
|
|
|
|
__________________
(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 102 portfolio
companies, with a total fair value of $532.1 million as of March
31, 2023, as compared to debt and equity investments in 105
portfolio companies, with a total fair value of $541.0 million, as
of December 31, 2022. The Company’s portfolio consists primarily of
first lien loans, representing 83.7% of the portfolio as of March
31, 2023, and 84.0% of the portfolio as of December 31, 2022. As of
March 31, 2023, the weighted average contractual and effective
yield on the Company’s debt and preferred equity investments was
11.5% and 11.6%, respectively, as compared to the weighted average
contractual and effective yield of 11.0% and 11.0%, respectively,
as of December 31, 2022. 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 March 31, 2023, 0.4% of the
Company’s total investments at fair value were on non-accrual as
compared to 0.5% as of December 31, 2022.
Financial Review
Net Investment Income for the quarter ended March 31, 2023
totaled $6.6 million, or $0.31 per share, compared to $5.5 million,
or $0.25 per share, for the quarter ended December 31, 2022.
Adjusted Net Investment Income was $6.9 million, or $0.32 per
share, for the quarter ended March 31, 2023, compared to $5.6
million, or $0.26 per share, for the quarter ended December 31,
2022. Investment income for the quarter ended March 31, 2023
totaled $16.8 million, compared to $15.2 million for the quarter
ended December 31, 2022. The $1.6 million increase in investment
income was primarily as a result of an increase in portfolio yield.
Total expenses for the quarter ended March 31, 2023 totaled $10.2
million, compared to $9.6 million for the quarter ended December
31, 2022. The $0.6 million increase in expenses during the quarter
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 associated with the
increase in net investment income.
Net gain (loss) was ($3.3) million for the quarter ended March
31, 2023, compared to ($1.0) million for the quarter ended December
31, 2022. Net realized and unrealized gains (losses) on investments
were ($3.5) million for the quarter. The net losses during the
quarter were primarily attributable to fundamental performance of a
couple specific portfolio companies. Other net gains (losses)
totaled $0.2 million for the quarter ended March 31, 2023,
comprised primarily of net unrealized gains on foreign currency
forward contracts used to hedge currency exposure on investments
denominated in foreign currency.
Net increase (decrease) in net assets resulting from operations
was $3.4 million, or $0.16 per share, for the quarter ended March
31, 2023, compared to $4.5 million, or $0.21, for the quarter ended
December 31, 2022.
Liquidity and Capital Resources
At March 31, 2023, the Company had $6.9 million in cash, $202.8
million of debt outstanding on its revolving credit facility and
$130.0 million of debt outstanding on its 2026 Notes. As of March
31, 2023, the Company had approximately $52.2 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
March 31, 2023, the Company had made net capital contributions of
$42.7 million in SLF with a fair value of $35.8 million, as
compared to net capital contributions of $42.7 million in SLF with
a fair value of $35.5 million at December 31, 2022. During the
quarter ended March 31, 2023, the Company received an income
distribution from SLF of $0.9 million, consistent with the $0.9
million received during the quarter ended December 31, 2022. The
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. The SLF’s portfolio
was valued at 93.5% of amortized cost at March 31, 2023, consistent
with December 31, 2022.
As of March 31, 2023, SLF had total assets of $187.0 million
(including investments at fair value of $178.2 million), total
liabilities of $115.5 million (including borrowings under the
$175.0 million secured revolving credit facility with Capital One,
N.A. (the “SLF Credit Facility”) of $115.7 million) and total
members’ capital of $71.5 million. As of December 31, 2022, SLF had
total assets of $192.8 million (including investments at fair value
of $183.2 million), total liabilities of $121.8 million (including
borrowings under the SLF Credit Facility of $122.2 million) and
total members’ capital of $71.0 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 table provides a reconciliation from net
investment income (the most comparable GAAP measure) to Adjusted
Net Investment Income for the periods presented:
|
For the quarter ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per Share Amount |
|
(in thousands,
except per share data) |
Net investment income |
$ |
6,627 |
|
$ |
0.31 |
|
$ |
5,520 |
|
$ |
0.25 |
Net capital
gains incentive fee |
|
- |
|
|
- |
|
|
- |
|
|
- |
Income
taxes, including excise taxes |
|
233 |
|
|
0.01 |
|
|
116 |
|
|
0.01 |
Adjusted Net
Investment Income |
$ |
6,860 |
|
$ |
0.32 |
|
$ |
5,636 |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
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.
First Quarter 2023 Financial Results Conference
Call
The Company will host a webcast and conference call to discuss
these operating and financial results on Thursday, May 11, 2023 at
11:00 am 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 #
1734277.
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-Q for the quarter ended March 31, 2023 to be
filed with the SEC (www.sec.gov) on May 10, 2023.
|
|
|
|
|
MONROE
CAPITAL CORPORATION |
CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES |
(in
thousands, except per share data) |
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
|
|
(unaudited) |
|
|
ASSETS |
|
|
|
Investments, at fair value: |
|
|
|
|
Non-controlled/non-affiliate company investments |
$ |
407,445 |
|
|
$ |
418,913 |
|
|
Non-controlled affiliate company investments |
|
88,892 |
|
|
|
86,618 |
|
|
Controlled
affiliate company investments |
|
35,763 |
|
|
|
35,509 |
|
|
Total investments, at fair value (amortized cost of: $574,555, and
$579,307, respectively) |
|
532,100 |
|
|
|
541,040 |
|
Cash |
|
6,929 |
|
|
|
5,450 |
|
Unrealized gain on foreign currency forward contracts |
|
1,687 |
|
|
|
1,507 |
|
Interest and dividend receivable |
|
18,089 |
|
|
|
16,457 |
|
Other assets |
|
660 |
|
|
|
541 |
|
Total
assets |
|
559,465 |
|
|
|
564,995 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
Debt: |
|
|
|
|
Revolving
credit facility |
|
202,800 |
|
|
|
204,600 |
|
|
2026
Notes |
|
130,000 |
|
|
|
130,000 |
|
|
Total debt |
|
332,800 |
|
|
|
334,600 |
|
|
Less:
Unamortized deferred financing costs |
|
(4,190 |
) |
|
|
(4,486 |
) |
|
Total debt, less unamortized deferred
financing costs |
|
328,610 |
|
|
|
330,114 |
|
Interest payable |
|
1,669 |
|
|
|
3,041 |
|
Management fees payable |
|
2,200 |
|
|
|
2,221 |
|
Incentive fees payable |
|
1,657 |
|
|
|
1,380 |
|
Accounts payable and accrued expenses |
|
2,333 |
|
|
|
3,220 |
|
Directors' fees payable |
|
35 |
|
|
|
- |
|
Total
liabilities |
|
336,504 |
|
|
|
339,976 |
|
Net
assets |
$ |
222,961 |
|
|
$ |
225,019 |
|
|
|
|
|
|
ANALYSIS OF
NET ASSETS |
|
|
|
Common stock, $0.001 par value, 100,000 shares authorized, 21,666
and 21,666 shares |
|
|
|
issued and outstanding,
respectively |
$ |
22 |
|
|
$ |
22 |
|
Capital in excess of par value |
|
298,700 |
|
|
|
298,700 |
|
Accumulated undistributed (overdistributed) earnings |
|
(75,761 |
) |
|
|
(73,703 |
) |
Total
net assets |
$ |
222,961 |
|
|
$ |
225,019 |
|
Net asset value per share |
$ |
10.29 |
|
|
$ |
10.39 |
|
|
|
|
|
|
MONROE
CAPITAL CORPORATION |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
|
|
|
|
|
For the quarter ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
(unaudited) |
Investment income: |
|
|
|
Non-controlled/non-affiliate company investments: |
|
|
|
Interest income |
$ |
11,710 |
|
|
$ |
9,721 |
|
Payment-in-kind interest income |
|
885 |
|
|
|
970 |
|
Dividend income |
|
146 |
|
|
|
105 |
|
Fee income |
|
310 |
|
|
|
776 |
|
Total investment income from non-controlled/non-affiliate company
investments |
|
13,051 |
|
|
|
11,572 |
|
Non-controlled affiliate company investments: |
|
|
|
Interest income |
|
1,417 |
|
|
|
1,383 |
|
Payment-in-kind interest income |
|
1,387 |
|
|
|
1,261 |
|
Dividend income |
|
49 |
|
|
|
48 |
|
Total investment income from non-controlled affiliate company
investments |
|
2,853 |
|
|
|
2,692 |
|
Controlled affiliate company investments: |
|
|
|
Dividend income |
|
900 |
|
|
|
900 |
|
Total investment income from controlled affiliate company
investments |
|
900 |
|
|
|
900 |
|
Total
investment income |
|
16,804 |
|
|
|
15,164 |
|
|
|
|
|
Operating expenses: |
|
|
|
Interest and other debt financing expenses |
|
5,514 |
|
|
|
5,119 |
|
Base management fees |
|
2,200 |
|
|
|
2,221 |
|
Incentive fees |
|
1,657 |
|
|
|
1,380 |
|
Professional fees |
|
128 |
|
|
|
154 |
|
Administrative service fees |
|
255 |
|
|
|
255 |
|
General and administrative expenses |
|
155 |
|
|
|
360 |
|
Directors' fees |
|
35 |
|
|
|
39 |
|
Total operating expenses |
|
9,944 |
|
|
|
9,528 |
|
Net investment income before income taxes |
|
6,860 |
|
|
|
5,636 |
|
Income taxes, including excise taxes |
|
233 |
|
|
|
116 |
|
Net investment income |
|
6,627 |
|
|
|
5,520 |
|
|
|
|
|
Net
gain (loss): |
|
|
|
Net realized gain (loss): |
|
|
|
Non-controlled/non-affiliate company investments |
|
706 |
|
|
|
620 |
|
Foreign currency forward contracts |
|
37 |
|
|
|
50 |
|
Foreign currency and other transactions |
|
(3 |
) |
|
|
2 |
|
Net realized gain (loss) |
|
740 |
|
|
|
672 |
|
|
|
|
|
Net change in unrealized gain (loss): |
|
|
|
Non-controlled/non-affiliate company investments |
|
(3,417 |
) |
|
|
(6 |
) |
Non-controlled affiliate company investments |
|
(1,025 |
) |
|
|
106 |
|
Controlled affiliate company investments |
|
254 |
|
|
|
(1,035 |
) |
Foreign currency forward contracts |
|
180 |
|
|
|
(777 |
) |
Net change in unrealized gain (loss) |
|
(4,008 |
) |
|
|
(1,712 |
) |
|
|
|
|
Net gain (loss) |
|
(3,268 |
) |
|
|
(1,040 |
) |
|
|
|
|
Net increase (decrease) in net assets resulting from
operations |
$ |
3,359 |
|
|
$ |
4,480 |
|
|
|
|
|
Per
common share data: |
|
|
|
Net
investment income per share - basic and diluted |
$ |
0.31 |
|
|
$ |
0.25 |
|
Net increase
(decrease) in net assets resulting from operations per share -
basic and diluted |
$ |
0.16 |
|
|
$ |
0.21 |
|
Weighted
average common shares outstanding - basic and diluted |
|
21,666 |
|
|
|
21,666 |
|
|
|
|
|
Additional Supplemental Information:
The composition of the Company’s investment income was as
follows (in thousands):
|
For the quarter ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
(unaudited) |
|
|
|
|
Interest income |
$ |
12,524 |
|
$ |
10,847 |
Payment-in-kind interest income |
|
2,272 |
|
|
2,231 |
Dividend
income |
|
1,095 |
|
|
1,053 |
Fee
income |
|
310 |
|
|
776 |
Prepayment
gain (loss) |
|
243 |
|
|
45 |
Accretion of
discounts and amortization of premiums |
|
360 |
|
|
212 |
Total investment income |
$ |
16,804 |
|
$ |
15,164 |
The composition of the Company’s interest expense and other debt
financing expenses was as follows (in thousands):
|
For the quarter ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
(unaudited) |
|
|
|
|
Interest expense - revolving credit facility |
$ |
3,638 |
|
$ |
3,051 |
Interest
expense - 2026 Notes |
|
1,555 |
|
|
1,555 |
Amortization
of deferred financing costs |
|
321 |
|
|
513 |
Total interest and other debt financing
expenses |
$ |
5,514 |
|
$ |
5,119 |
|
|
|
|
ABOUT MONROE CAPITAL CORPORATIONMonroe 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 LLCMonroe Capital LLC
(“Monroe”) is a premier boutique asset management firm specializing
in private credit markets across various strategies, including
direct lending, asset-based lending, specialty finance,
opportunistic, real estate, structured credit, 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
offices in Atlanta, Boston, Los Angeles, Miami, Naples, New York,
San Francisco, and Seoul.
Monroe has been recognized by both its peers and investors with
various awards including Private Debt Investor as the 2022 Lower
Mid-Market Lender of the Year, 2022 CLO Manager of the Year,
Americas; 2022 Best Performance in Private Debt – Mid Cap by Korean
Economic Daily; Global M&A Network as the 2022 Small
Mid-Markets Lender of the Year, Americas; 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 |
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(312) 598-8401 |
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Email: msolimene@monroecap.com |
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Media Contact: |
Daniel Abramson |
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BackBay Communications |
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(857) 305-8441 |
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Email: daniel.abramson@backbaycommunications.com |
Monroe Capital (NASDAQ:MRCC)
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Monroe Capital (NASDAQ:MRCC)
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From May 2023 to May 2024