Monroe Capital Corporation BDC Announces Second Quarter 2023 Results

Monroe Capital Corporation

CHICAGO, Aug. 09, 2023 (GLOBE NEWSWIRE) -- 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 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 LLC
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 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
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