Monroe Capital Corporation (Nasdaq: MRCC) (“Monroe”) today
announced its financial results for the second quarter ended June
30, 2023.
Except where the context suggests otherwise, the terms “Monroe,”
“we,” “us,” “our,” and “Company” refer to Monroe Capital
Corporation.
Second Quarter 2023 Financial Highlights
- Net Investment
Income of $5.9 million, or $0.27 per share
- Adjusted Net
Investment Income (a non-GAAP measure described below) of $6.1
million, or $0.28 per share
- Net decrease in net assets resulting from operations of $4.3
million, or $0.20 per share
- Net Asset Value
(“NAV”) of $213.2 million, or $9.84 per share
- Paid quarterly
dividend of $0.25 per share on June 30, 2023
- Current annual cash
dividend yield to shareholders of approximately 11.7%(1)
Chief Executive Officer Theodore L. Koenig
commented, “We are pleased to report another quarter where Adjusted
Net Investment Income exceeded our dividend. We continue to believe
that tighter credit conditions as well as volatility in the bank
and syndicated markets offer compelling value in the current direct
lending environment. As we look ahead into the second half of 2023,
we will focus on 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 August 8, 2023.
Management Commentary
Adjusted Net Investment Income totaled $6.1 million or $0.28 per
share for the quarter ended June 30, 2023. This compares with $6.9
million or $0.32 per share for the quarter ended March 31, 2023.
While the average portfolio yield increased during the quarter
ended June 30, 2023 as a result of the rising rate environment,
this increase in average portfolio yield was offset by lower
average portfolio balances, lower fee income and prepayment gains
and the one-time reversal of previously accrued interest income
associated with the realization of an investment during the
quarter. See Non-GAAP Financial Measure – Adjusted Net Investment
Income discussion below.
NAV decreased by $0.45 per share, or 4.4%, to $213.2 million or
$9.84 per share as of June 30, 2023, compared to $223.0 million or
$10.29 per share as of March 31, 2023. Our NAV this quarter was
primarily affected by market conditions, which negatively impacted
realizations on two specific legacy investments in the
brick-and-mortar retail space, where we have only nominal remaining
exposure. Additionally, the fundamental performance of a couple
specific portfolio companies still held in the portfolio and the
Company’s investment in MRCC Senior Loan Fund I, LLC (“SLF”)
contributed to the NAV decline. The decrease in value at the SLF
was driven by unrealized mark-to-market losses on SLF’s
investments, which are loans to traditional upper middle-market
borrowers. The SLF has continued to experience higher volatility in
mark-to-market valuations.
During the quarter, MRCC’s debt-to-equity leverage increased
from 1.49 times debt-to-equity to 1.54 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) |
|
|
June 30, 2023 |
|
March 31, 2023 |
|
Consolidated Statements of Assets and Liabilities
data: |
(unaudited) |
|
|
|
|
|
|
Investments, at fair value |
$ |
515,407 |
|
|
$ |
532,100 |
|
|
Total
assets |
$ |
545,892 |
|
|
$ |
559,465 |
|
|
Total net
assets |
$ |
213,208 |
|
|
$ |
222,961 |
|
|
Net asset
value per share |
$ |
9.84 |
|
|
$ |
10.29 |
|
|
|
|
|
|
|
|
For the quarter ended |
|
|
June 30, 2023 |
|
March 31, 2023 |
|
Consolidated Statements of Operations data: |
(unaudited) |
|
|
|
|
|
|
Net
investment income |
$ |
5,924 |
|
|
$ |
6,627 |
|
|
Adjusted net
investment income(2) |
$ |
6,091 |
|
|
$ |
6,860 |
|
|
Net gain
(loss) |
$ |
(10,260 |
) |
|
$ |
(3,268 |
) |
|
Net increase
(decrease) in net assets resulting from operations |
$ |
(4,336 |
) |
|
$ |
3,359 |
|
|
|
|
|
|
|
Per share
data: |
|
|
|
|
Net
investment income |
$ |
0.27 |
|
|
$ |
0.31 |
|
|
Adjusted net
investment income(2) |
$ |
0.28 |
|
|
$ |
0.32 |
|
|
Net gain
(loss) |
$ |
(0.47 |
) |
|
$ |
(0.15 |
) |
|
Net increase
(decrease) in net assets resulting from operations |
$ |
(0.20 |
) |
|
$ |
0.16 |
|
|
|
|
|
|
|
______
(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 99 portfolio
companies, with a total fair value of $515.4 million as of June 30,
2023, as compared to debt and equity investments in 102 portfolio
companies, with a total fair value of $532.1 million, as of March
31, 2023. The Company’s portfolio consists primarily of first lien
loans, representing 83.3% of the portfolio as of June 30, 2023, and
83.7% of the portfolio as of March 31, 2023. As of June 30, 2023,
the weighted average contractual and effective yield on the
Company’s debt and preferred equity investments was 12.2% and
12.2%, respectively, as compared to the weighted average
contractual and effective yield of 11.5% and 11.6%, respectively,
as of March 31, 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 June 30, 2023, 1.3% of the
Company’s total investments at fair value were on non-accrual as
compared to 0.4% as of March 31, 2023.
Financial Review
Net Investment Income for the quarter ended June 30, 2023
totaled $5.9 million, or $0.27 per share, compared to $6.6 million,
or $0.31 per share, for the quarter ended March 31, 2023. Adjusted
Net Investment Income was $6.1 million, or $0.28 per share, for the
quarter ended June 30, 2023, compared to $6.9 million, or $0.32 per
share, for the quarter ended March 31, 2023. Investment income for
the quarter ended June 30, 2023 totaled $16.3 million, compared to
$16.8 million for the quarter ended March 31, 2023. The $0.5
million decrease in investment income was primarily the result of a
decrease in fee income and prepayment gains during the quarter and
the one-time reversal of previously accrued interest income
associated with the realization of an investment during the
quarter. The increase in the average portfolio yield resulting from
the rising rate environment was offset by lower average portfolio
balances. Total expenses for the quarter ended June 30, 2023
totaled $10.4 million, compared to $10.2 million for the quarter
ended March 31, 2023. The $0.2 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.
Net gain (loss) was ($10.3) million for the quarter ended June
30, 2023, compared to ($3.3) million for the quarter ended March
31, 2023. Net realized and unrealized gains (losses) on investments
were ($10.2) million for the quarter. This net loss was primarily
attributable to net losses on the disposition of two portfolio
company investments which resulted in net losses of $7.4 million
during the quarter. Additionally, unrealized mark-to-market losses
related to fundamental performance of a couple of specific
portfolio companies still held in the portfolio and unrealized
mark-to-market losses on SLF contributed to the net losses on
investments for the quarter. Other net gains (losses) totaled
($0.1) million for the quarter ended June 30, 2023.
Net increase (decrease) in net assets resulting from operations
was ($4.3) million, or ($0.20) per share, for the quarter ended
June 30, 2023, compared to $3.4 million, or $0.16, for the quarter
ended March 31, 2023.
Liquidity and Capital Resources
At June 30, 2023, the Company had $12.3 million in cash, $197.4
million of debt outstanding on its revolving credit facility and
$130.0 million of debt outstanding on its 2026 Notes. As of June
30, 2023, the Company had approximately $57.6 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 June
30, 2023, the Company had made net capital contributions of $42.7
million in SLF with a fair value of $34.5 million, as compared to
net capital contributions of $42.7 million in SLF with a fair value
of $35.8 million at March 31, 2023. During the quarter ended June
30, 2023, the Company received an income distribution from SLF of
$0.9 million, consistent with the $0.9 million received during the
quarter ended March 31, 2023. 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 decreased in value by 2.0% during
the quarter, from 93.5% of amortized cost as of March 31, 2023, to
91.5% of amortized cost as of June 30, 2023.
As of June 30, 2023, SLF had total assets of $176.9 million
(including investments at fair value of $168.2 million), total
liabilities of $107.8 million (including borrowings under the
$110.0 million secured revolving credit facility with Capital One,
N.A. (the “SLF Credit Facility”) of $107.9 million) and total
members’ capital of $69.1 million. 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 SLF Credit Facility of $115.7 million) and
total members’ capital of $71.5 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 |
|
June 30, 2023 |
|
March 31, 2023 |
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per Share Amount |
|
(in thousands,
except per share data) |
|
|
|
|
|
|
|
|
Net investment income |
$ |
5,924 |
|
$ |
0.27 |
|
$ |
6,627 |
|
$ |
0.31 |
Net capital
gains incentive fee |
|
- |
|
|
- |
|
|
- |
|
|
- |
Income
taxes, including excise taxes |
|
167 |
|
|
0.01 |
|
|
233 |
|
|
0.01 |
Adjusted Net
Investment Income |
$ |
6,091 |
|
$ |
0.28 |
|
$ |
6,860 |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
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.
Second Quarter 2023 Financial Results Conference
Call
The Company will host a webcast and conference call to discuss
these operating and financial results on Thursday, August 10, 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 #
2857464.
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 June 30, 2023 to be
filed with the SEC (www.sec.gov) on August 9, 2023.
MONROE
CAPITAL CORPORATION |
CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES |
(in
thousands, except per share data) |
|
|
|
|
|
|
|
June 30, 2023 |
|
March 31, 2023 |
|
|
(unaudited) |
ASSETS |
|
|
|
Investments, at fair value: |
|
|
|
|
Non-controlled/non-affiliate company investments |
$ |
396,816 |
|
|
$ |
407,445 |
|
|
Non-controlled affiliate company investments |
|
84,046 |
|
|
|
88,892 |
|
|
Controlled affiliate company investments |
|
34,545 |
|
|
|
35,763 |
|
|
Total investments, at fair value (amortized cost of: $528,235 and
$574,555, respectively) |
|
515,407 |
|
|
|
532,100 |
|
Cash |
|
12,301 |
|
|
|
6,929 |
|
Unrealized gain on foreign currency forward contracts |
|
- |
|
|
|
1,687 |
|
Interest and dividend receivable |
|
17,616 |
|
|
|
18,089 |
|
Other assets |
|
568 |
|
|
|
660 |
|
Total assets |
|
545,892 |
|
|
|
559,465 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
Debt: |
|
|
|
|
Revolving credit facility |
|
197,400 |
|
|
|
202,800 |
|
|
2026 Notes |
|
130,000 |
|
|
|
130,000 |
|
|
Total debt |
|
327,400 |
|
|
|
332,800 |
|
|
Less: Unamortized deferred financing costs |
|
(3,896 |
) |
|
|
(4,190 |
) |
|
Total debt, less unamortized deferred financing costs |
|
323,504 |
|
|
|
328,610 |
|
Interest payable |
|
3,090 |
|
|
|
1,669 |
|
Management fees payable |
|
2,163 |
|
|
|
2,200 |
|
Incentive fees payable |
|
1,481 |
|
|
|
1,657 |
|
Accounts payable and accrued expenses |
|
2,446 |
|
|
|
2,333 |
|
Directors' fees payable |
|
- |
|
|
|
35 |
|
Total liabilities |
|
332,684 |
|
|
|
336,504 |
|
Net assets |
$ |
213,208 |
|
|
$ |
222,961 |
|
|
|
|
|
|
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 |
|
(85,514 |
) |
|
|
(75,761 |
) |
Total net assets |
$ |
213,208 |
|
|
$ |
222,961 |
|
Net asset value per share |
$ |
9.84 |
|
|
$ |
10.29 |
|
|
|
|
|
|
MONROE
CAPITAL CORPORATION |
|
CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
(in
thousands, except per share data) |
|
|
|
|
|
|
|
For the quarter ended |
|
|
June 30, 2023 |
|
March 31, 2023 |
|
|
(unaudited) |
|
Investment income: |
|
|
|
|
Non-controlled/non-affiliate company investments: |
|
|
|
|
Interest income |
$ |
11,214 |
|
|
$ |
11,710 |
|
|
Payment-in-kind interest income |
|
706 |
|
|
|
885 |
|
|
Dividend income |
|
106 |
|
|
|
146 |
|
|
Fee income |
|
170 |
|
|
|
310 |
|
|
Total investment income from non-controlled/non-affiliate company
investments |
|
12,196 |
|
|
|
13,051 |
|
|
Non-controlled affiliate company investments: |
|
|
|
|
Interest income |
|
1,415 |
|
|
|
1,417 |
|
|
Payment-in-kind interest income |
|
1,785 |
|
|
|
1,387 |
|
|
Dividend income |
|
51 |
|
|
|
49 |
|
|
Total investment income from non-controlled affiliate company
investments |
|
3,251 |
|
|
|
2,853 |
|
|
Controlled affiliate company investments: |
|
|
|
|
Dividend income |
|
900 |
|
|
|
900 |
|
|
Total investment income from controlled affiliate company
investments |
|
900 |
|
|
|
900 |
|
|
Total investment income |
|
16,347 |
|
|
|
16,804 |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Interest and other debt financing expenses |
|
5,790 |
|
|
|
5,514 |
|
|
Base management fees |
|
2,163 |
|
|
|
2,200 |
|
|
Incentive fees |
|
1,481 |
|
|
|
1,657 |
|
|
Professional fees |
|
224 |
|
|
|
128 |
|
|
Administrative service fees |
|
224 |
|
|
|
255 |
|
|
General and administrative expenses |
|
334 |
|
|
|
155 |
|
|
Directors' fees |
|
40 |
|
|
|
35 |
|
|
Total operating expenses |
|
10,256 |
|
|
|
9,944 |
|
|
Net investment income before income taxes |
|
6,091 |
|
|
|
6,860 |
|
|
Income taxes, including excise taxes |
|
167 |
|
|
|
233 |
|
|
Net investment income |
|
5,924 |
|
|
|
6,627 |
|
|
|
|
|
|
|
Net
gain (loss): |
|
|
|
|
Net realized gain (loss): |
|
|
|
|
Non-controlled/non-affiliate company investments |
|
(39,790 |
) |
|
|
706 |
|
|
Foreign currency forward contracts |
|
1,719 |
|
|
|
37 |
|
|
Foreign currency and other transactions |
|
(128 |
) |
|
|
(3 |
) |
|
Net realized gain (loss) |
|
(38,199 |
) |
|
|
740 |
|
|
|
|
|
|
|
Net change in unrealized gain (loss): |
|
|
|
|
Non-controlled/non-affiliate company investments |
|
31,354 |
|
|
|
(3,417 |
) |
|
Non-controlled affiliate company investments |
|
(509 |
) |
|
|
(1,025 |
) |
|
Controlled affiliate company investments |
|
(1,218 |
) |
|
|
254 |
|
|
Foreign currency forward contracts |
|
(1,687 |
) |
|
|
180 |
|
|
Foreign currency and other transactions |
|
(1 |
) |
|
|
- |
|
|
Net change in unrealized gain (loss) |
|
27,939 |
|
|
|
(4,008 |
) |
|
|
|
|
|
|
Net gain (loss) |
|
(10,260 |
) |
|
|
(3,268 |
) |
|
|
|
|
|
|
Net increase (decrease) in net assets resulting from
operations |
$ |
(4,336 |
) |
|
$ |
3,359 |
|
|
|
|
|
|
|
Per
common share data: |
|
|
|
|
Net
investment income per share - basic and diluted |
$ |
0.27 |
|
|
$ |
0.31 |
|
|
Net increase
(decrease) in net assets resulting from operations per share -
basic and diluted |
$ |
(0.20 |
) |
|
$ |
0.16 |
|
|
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 |
|
June 30, 2023 |
|
March 31, 2023 |
|
(unaudited) |
|
|
|
|
Interest income |
$ |
12,225 |
|
$ |
12,524 |
Payment-in-kind interest income |
|
2,491 |
|
|
2,272 |
Dividend
income |
|
1,057 |
|
|
1,095 |
Fee
income |
|
170 |
|
|
310 |
Prepayment
gain (loss) |
|
106 |
|
|
243 |
Accretion of
discounts and amortization of premiums |
|
298 |
|
|
360 |
Total investment income |
$ |
16,347 |
|
$ |
16,804 |
|
|
|
|
The composition of the Company’s interest expense
and other debt financing expenses was as follows (in
thousands): |
|
|
|
|
|
For the quarter ended |
|
June 30, 2023 |
|
March 31, 2023 |
|
(unaudited) |
|
|
|
|
Interest
expense - revolving credit facility |
$ |
3,909 |
|
$ |
3,638 |
Interest
expense - 2026 Notes |
|
1,555 |
|
|
1,555 |
Amortization
of deferred financing costs |
|
326 |
|
|
321 |
Total interest and other debt financing
expenses |
$ |
5,790 |
|
$ |
5,514 |
|
|
|
|
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, 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 Lower
Mid-Market Lender of the Decade, 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 |
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Investor Contact: |
Mick Solimene |
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Chief Investment Officer and
Chief Financial Officer |
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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 |
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