Monroe Capital Corporation (Nasdaq: MRCC) (“Monroe”) today
announced its financial results for the third quarter ended
September 30, 2023.
Except where the context suggests otherwise, the terms “Monroe,”
“we,” “us,” “our,” and “Company” refer to Monroe Capital
Corporation.
Third Quarter 2023 Financial Highlights
- Net Investment Income of $5.4 million, or $0.25 per share
- Adjusted Net Investment Income (a non-GAAP measure described
below) of $5.5 million, or $0.25 per share
- Net decrease in net assets resulting from operations of $0.2
million, or $0.01 per share
- Net Asset Value (“NAV”) of $207.6 million, or $9.58 per
share
- Paid quarterly dividend of $0.25 per share on September 29,
2023
- Current annual cash dividend yield to shareholders of
approximately 14.3% (1)
Chief Executive Officer Theodore L. Koenig commented, “We are
pleased to report that for the 14th consecutive quarter, our
Adjusted Net Investment Income once again covered our dividend. We
continue to believe that the current market environment offers
compelling tailwinds and opportunities for direct lenders. As we
look ahead into the end of 2023 and beginning of 2024, we will
continue to 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 November 7, 2023.
Management Commentary
Adjusted Net Investment Income totaled $5.5 million or $0.25 per
share for the quarter ended September 30, 2023. This compares with
$6.1 million or $0.28 per share for the quarter ended June 30,
2023. While the average portfolio yield increased during the
quarter ended September 30, 2023 as a result of the rising rate
environment, this increase in average portfolio yield was offset by
a one-time reversal of previously accrued fee income associated
with a certain investment during the quarter. See Non-GAAP
Financial Measure – Adjusted Net Investment Income discussion
below.
NAV decreased by $0.26 per share, or 2.6%, to $207.6 million or
$9.58 per share as of September 30, 2023, compared to $213.2
million or $9.84 per share as of June 30, 2023. The decrease in NAV
this quarter was primarily the result of net unrealized losses on
the portfolio attributable to a few specific portfolio companies
that were affected by macroeconomic and idiosyncratic challenges,
which impacted financial performance. Additionally, the Company’s
investment in MRCC Senior Loan Fund I, LLC (“SLF”) contributed to
the NAV decline. The decrease in value at SLF was driven by
unrealized mark-to-market losses on SLF’s investments, which are
loans to traditional upper middle-market borrowers. SLF has
continued to experience higher volatility in mark-to-market
valuations.
During the quarter, MRCC’s debt-to-equity leverage increased
from 1.54 times debt-to-equity to 1.60 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)
|
September 30, 2023 |
|
June 30, 2023 |
Consolidated Statements of Assets and Liabilities
data: |
(unaudited) |
|
|
|
|
Investments, at fair value |
$ |
518,284 |
|
|
$ |
515,407 |
|
Total
assets |
|
542,536 |
|
|
|
545,892 |
|
Total net
assets |
|
207,555 |
|
|
|
213,208 |
|
Net asset
value per share |
|
9.58 |
|
|
|
9.84 |
|
|
|
|
|
|
For the quarter ended |
|
September 30, 2023 |
|
June 30, 2023 |
Consolidated Statements of Operations data: |
(unaudited) |
|
|
|
|
Net
investment income |
$ |
5,420 |
|
|
$ |
5,924 |
|
Adjusted net
investment income(2) |
|
5,515 |
|
|
|
6,091 |
|
Net gain
(loss) |
|
(5,656 |
) |
|
|
(10,260 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
(236 |
) |
|
|
(4,336 |
) |
|
|
|
|
Per share
data: |
|
|
|
Net
investment income |
$ |
0.25 |
|
|
$ |
0.27 |
|
Adjusted net
investment income(2) |
|
0.25 |
|
|
|
0.28 |
|
Net gain
(loss) |
|
(0.26 |
) |
|
|
(0.47 |
) |
Net increase
(decrease) in net assets resulting from operations |
|
(0.01 |
) |
|
|
(0.20 |
) |
|
|
|
|
______ (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 $518.3 million as of
September 30, 2023, as compared to debt and equity investments in
99 portfolio companies, with a total fair value of $515.4 million,
as of June 30, 2023. The Company’s portfolio consists primarily of
first lien loans, representing 82.9% of the portfolio as of
September 30, 2023, and 83.3% of the portfolio as of June 30, 2023.
As of September 30, 2023, the weighted average contractual and
effective yield on the Company’s debt and preferred equity
investments was 12.4% and 12.5%, respectively, as compared to the
weighted average contractual and effective yield of 12.2% and
12.2%, respectively, as of June 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 September
30, 2023, 1.2% of the Company’s total investments at fair value
were on non-accrual as compared to 1.3% as of June 30, 2023.
Financial Review
Net investment income for the quarter ended September 30, 2023
totaled $5.4 million, or $0.25 per share, compared to $5.9 million,
or $0.27 per share, for the quarter ended June 30, 2023. Adjusted
Net Investment Income was $5.5 million, or $0.25 per share, for the
quarter ended September 30, 2023, compared to $6.1 million, or
$0.28 per share, for the quarter ended June 30, 2023. Investment
income for the quarter ended September 30, 2023 totaled $15.6
million, compared to $16.3 million for the quarter ended June 30,
2023. Excluding the reversal of $1.0 million of previously accrued
fee income associated with the Company’s former loan investment in
IT Global Holding, LLC (“IT Global”), investment income increased
by $0.3 million, primarily as a result of an increase in portfolio
yield due to the rising interest rate environment, and our net
investment income would have been $0.29 per share. Total expenses
for the quarter ended September 30, 2023 totaled $10.2 million,
compared to $10.4 million for the quarter ended June 30, 2023. The
$0.2 million decrease in expenses during the quarter was driven by
a decrease in incentive fees from lower net investment income
primarily as a result of the IT Global fee income reversal and a
decrease in excise taxes. These decreases were partially offset by
an increase in interest and other debt financing expenses primarily
associated with rising interest rates.
Net gain (loss) was ($5.7) million for the quarter ended
September 30, 2023, compared to ($10.3) million for the quarter
ended June 30, 2023. Net realized and unrealized gains (losses) on
investments were ($5.7) million for the quarter. This net loss was
primarily attributable to unrealized mark-to-market losses of a few
specific portfolio companies and the Company’s investment in
SLF.
Net increase (decrease) in net assets resulting from operations
was ($0.2) million, or ($0.01) per share, for the quarter ended
September 30, 2023, compared to ($4.3) million, or ($0.20), for the
quarter ended June 30, 2023.
Liquidity and Capital Resources
At September 30, 2023, the Company had $5.3 million in cash,
$201.1 million of debt outstanding on its revolving credit facility
and $130.0 million of debt outstanding on its 2026 Notes. As of
September 30, 2023, the Company had approximately $53.9 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
September 30, 2023, the Company had made net capital contributions
of $42.7 million in SLF with a fair value of $33.3 million, as
compared to net capital contributions of $42.7 million in SLF with
a fair value of $34.5 million at June 30, 2023. During the quarter
ended September 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 June 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 portfolio decreased
in value by 2.1% during the quarter, from 91.5% of amortized cost
as of June 30, 2023, to 89.4% of amortized cost as of September 30,
2023.
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 $110.0
million secured revolving credit facility with Capital One, N.A.
(the “SLF Credit Facility”) of $92.1 million) and total members’
capital of $66.6 million. 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 SLF Credit Facility of $107.9 million) and total members’
capital of $69.1 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 |
|
September 30, 2023 |
|
June 30, 2023 |
|
Amount |
|
Per Share Amount |
|
Amount |
|
Per Share Amount |
|
(in thousands,
except per share data) |
|
|
|
|
|
|
|
|
Net investment income |
$ |
5,420 |
|
|
$ |
0.25 |
|
|
$ |
5,924 |
|
|
$ |
0.27 |
|
Net capital
gains incentive fee |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Income
taxes, including excise taxes |
|
95 |
|
|
|
0.00 |
|
|
|
167 |
|
|
|
0.01 |
|
Adjusted Net
Investment Income |
$ |
5,515 |
|
|
$ |
0.25 |
|
|
$ |
6,091 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
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.
Third Quarter 2023 Financial Results Conference
Call
The Company will host a webcast and conference call to discuss
these operating and financial results on Thursday, November 9, 2023
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 #
9477343.
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 September 30, 2023 to
be filed with the SEC (www.sec.gov) on Wednesday, November 8,
2023.
MONROE
CAPITAL CORPORATION |
CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES |
(in
thousands, except per share data) |
|
|
|
|
|
September 30, 2023 |
|
June 30, 2023 |
|
(unaudited) |
ASSETS |
|
|
|
Investments,
at fair value: |
|
|
|
Non-controlled/non-affiliate company investments |
$ |
400,117 |
|
|
$ |
396,816 |
|
Non-controlled affiliate company investments |
|
84,898 |
|
|
|
84,046 |
|
Controlled affiliate company investments |
|
33,269 |
|
|
|
34,545 |
|
Total investments, at fair value (amortized cost of: $536,795 and
$528,235, respectively) |
|
518,284 |
|
|
|
515,407 |
|
Cash |
|
5,324 |
|
|
|
12,301 |
|
Interest and
dividend receivable |
|
18,627 |
|
|
|
17,616 |
|
Other
assets |
|
301 |
|
|
|
568 |
|
Total assets |
|
542,536 |
|
|
|
545,892 |
|
|
|
|
|
LIABILITIES |
|
|
|
Debt: |
|
|
|
Revolving credit facility |
|
201,100 |
|
|
|
197,400 |
|
2026 Notes |
|
130,000 |
|
|
|
130,000 |
|
Total debt |
|
331,100 |
|
|
|
327,400 |
|
Less: Unamortized deferred financing costs |
|
(3,566 |
) |
|
|
(3,896 |
) |
Total debt, less unamortized deferred financing costs |
|
327,534 |
|
|
|
323,504 |
|
Interest
payable |
|
1,621 |
|
|
|
3,090 |
|
Management
fees payable |
|
2,140 |
|
|
|
2,163 |
|
Incentive
fees payable |
|
1,355 |
|
|
|
1,481 |
|
Accounts
payable and accrued expenses |
|
2,293 |
|
|
|
2,446 |
|
Directors'
fees payable |
|
38 |
|
|
|
- |
|
Total liabilities |
|
334,981 |
|
|
|
332,684 |
|
Net assets |
$ |
207,555 |
|
|
$ |
213,208 |
|
|
|
|
|
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 |
|
(91,167 |
) |
|
|
(85,514 |
) |
Total net assets |
$ |
207,555 |
|
|
$ |
213,208 |
|
Net
asset value per share |
$ |
9.58 |
|
|
$ |
9.84 |
|
|
|
|
|
MONROE
CAPITAL CORPORATION |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
|
|
|
|
|
For the quarter ended |
|
September 30, 2023 |
June 30, 2023 |
|
(unaudited) |
Investment income: |
|
|
|
Non-controlled/non-affiliate company investments: |
|
|
|
Interest income |
$ |
11,858 |
|
|
$ |
11,214 |
|
Payment-in-kind interest income |
|
649 |
|
|
|
706 |
|
Dividend income |
|
65 |
|
|
|
106 |
|
Fee income |
|
(836 |
) |
|
|
170 |
|
Total investment income from non-controlled/non-affiliate company
investments |
|
11,736 |
|
|
|
12,196 |
|
Non-controlled affiliate company investments: |
|
|
|
Interest income |
|
1,174 |
|
|
|
1,415 |
|
Payment-in-kind interest income |
|
1,781 |
|
|
|
1,785 |
|
Dividend income |
|
52 |
|
|
|
51 |
|
Total investment income from non-controlled affiliate company
investments |
|
3,007 |
|
|
|
3,251 |
|
Controlled affiliate company investments: |
|
|
|
Dividend income |
|
900 |
|
|
|
900 |
|
Total investment income from controlled affiliate company
investments |
|
900 |
|
|
|
900 |
|
Total investment income |
|
15,643 |
|
|
|
16,347 |
|
|
|
|
|
Operating expenses: |
|
|
|
Interest and other debt financing expenses |
|
5,874 |
|
|
|
5,790 |
|
Base management fees |
|
2,140 |
|
|
|
2,163 |
|
Incentive fees |
|
1,355 |
|
|
|
1,481 |
|
Professional fees |
|
189 |
|
|
|
224 |
|
Administrative service fees |
|
228 |
|
|
|
224 |
|
General and administrative expenses |
|
304 |
|
|
|
334 |
|
Directors' fees |
|
38 |
|
|
|
40 |
|
Total operating expenses |
|
10,128 |
|
|
|
10,256 |
|
Net investment income before income taxes |
|
5,515 |
|
|
|
6,091 |
|
Income taxes, including excise taxes |
|
95 |
|
|
|
167 |
|
Net investment income |
|
5,420 |
|
|
|
5,924 |
|
|
|
|
|
Net
gain (loss): |
|
|
|
Net realized gain (loss): |
|
|
|
Non-controlled/non-affiliate company investments |
|
30 |
|
|
|
(39,790 |
) |
Foreign currency forward contracts |
|
- |
|
|
|
1,719 |
|
Foreign currency and other transactions |
|
(4 |
) |
|
|
(128 |
) |
Net realized gain (loss) |
|
26 |
|
|
|
(38,199 |
) |
|
|
|
|
Net change in unrealized gain (loss): |
|
|
|
Non-controlled/non-affiliate company investments |
|
(3,346 |
) |
|
|
31,354 |
|
Non-controlled affiliate company investments |
|
(1,061 |
) |
|
|
(509 |
) |
Controlled affiliate company investments |
|
(1,276 |
) |
|
|
(1,218 |
) |
Foreign currency forward contracts |
|
- |
|
|
|
(1,687 |
) |
Foreign currency and other transactions |
|
1 |
|
|
|
(1 |
) |
Net change in unrealized gain (loss) |
|
(5,682 |
) |
|
|
27,939 |
|
|
|
|
|
Net gain (loss) |
|
(5,656 |
) |
|
|
(10,260 |
) |
|
|
|
|
Net increase (decrease) in net assets resulting from
operations |
$ |
(236 |
) |
|
$ |
(4,336 |
) |
|
|
|
|
Per
common share data: |
|
|
|
Net
investment income per share - basic and diluted |
$ |
0.25 |
|
|
$ |
0.27 |
|
Net increase
(decrease) in net assets resulting from operations per share -
basic and diluted |
$ |
(0.01 |
) |
|
$ |
(0.20 |
) |
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 |
|
September 30, 2023 |
|
June 30, 2023 |
|
(unaudited) |
|
|
|
|
Interest income |
$ |
12,804 |
|
|
$ |
12,225 |
|
Payment-in-kind interest income |
|
2,430 |
|
|
|
2,491 |
|
Dividend
income |
|
1,017 |
|
|
|
1,057 |
|
Fee
income |
|
(836 |
) |
|
|
170 |
|
Prepayment
gain (loss) |
|
29 |
|
|
|
106 |
|
Accretion of
discounts and amortization of premiums |
|
199 |
|
|
|
298 |
|
Total investment income |
$ |
15,643 |
|
|
$ |
16,347 |
|
The composition of the Company’s interest expense and other debt
financing expenses was as follows (in thousands):
|
For the quarter ended |
|
September 30, 2023 |
|
June 30, 2023 |
|
(unaudited) |
|
|
|
|
Interest expense - revolving credit facility |
$ |
3,989 |
|
|
$ |
3,909 |
|
Interest
expense - 2026 Notes |
|
1,555 |
|
|
|
1,555 |
|
Amortization
of deferred financing costs |
|
330 |
|
|
|
326 |
|
Total interest and other debt financing expenses |
$ |
5,874 |
|
|
$ |
5,790 |
|
|
|
|
|
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, 2022 Lower Mid-Market Lender of
the Year, 2022 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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