Monroe Capital Corporation BDC Announces Fourth Quarter and Full Year 2023 Results
- Positive: Monroe Capital Corporation reported Net Investment Income of $5.3 million for Q4 2023, with Adjusted Net Investment Income at $5.6 million. The company's portfolio consists mainly of first lien loans, contributing to a weighted average contractual and effective yield of 12.1% on debt investments.
- Positive: Monroe Capital Corporation's current annual cash dividend yield to shareholders stands at approximately 13.4%, showcasing a commitment to rewarding investors. The company's management highlighted the 15th consecutive quarter of covering dividends with Adjusted Net Investment Income.
- Negative: Monroe Capital Corporation experienced a decrease in NAV by $0.18 per share, primarily due to net unrealized losses on specific legacy portfolio companies affected by macroeconomic challenges. Additionally, the company's debt-to-equity leverage decreased from 1.60 times to 1.49 times, impacting financial stability.
- Negative: The net loss of ($3.7) million for Q4 2023 was driven by unrealized mark-to-market losses on specific legacy portfolio companies, indicating volatility and potential risks in the investment portfolio. The increase in income taxes and expenses poses challenges in maintaining profitability.
- Negative: Despite a slight increase in Adjusted Net Investment Income, Monroe Capital Corporation faced challenges in interest income due to a decrease in average invested assets. The company's total expenses remained consistent, but income taxes and excise taxes increased, impacting overall financial performance.
- None.
Insights
The financial results reported by Monroe Capital Corporation for Q4 and the full year of 2023 indicate a steady performance in terms of Net Investment Income (NII) and Adjusted Net Investment Income (ANI). The consistency in covering dividends for 15 consecutive quarters suggests a stable cash flow, which is critical for investors seeking regular income. However, the decrease in Net Asset Value (NAV) per share and the net unrealized losses on portfolio could be a concern, reflecting potential valuation adjustments in the underlying assets.
The debt-to-equity leverage reduction is a positive sign of risk management, potentially making the company's balance sheet more resilient to market volatility. The current annual cash dividend yield of approximately 13.4% is significantly higher than the average market yield, which could be attractive to income-focused investors but also raises questions about the sustainability of such high payouts in the long term.
The business development company (BDC) sector, where Monroe operates, is known for higher yields due to the risk profile of lending to middle-market companies. Monroe's focus on first lien loans (82.4% of the portfolio) is significant as it indicates a preference for secured lending, which could mitigate potential credit losses. The slight uptick in non-accruals from 1.2% to 1.5% is not alarming but should be monitored for trends indicating deteriorating credit quality.
The weighted average yield on debt and preferred equity investments has decreased slightly, which could reflect changes in interest rates or a shift in the composition of the portfolio. Investors should consider how Monroe's performance compares to peers in the BDC industry and whether the company's strategy aligns with broader market trends.
Monroe's use of Adjusted Net Investment Income, a non-GAAP measure, is common in the industry to provide additional insight into a company's operational performance. This measure excludes certain items like the net capital gains incentive fee and income taxes, which can fluctuate and obscure the core income-generating ability of the company. However, stakeholders should be aware that non-GAAP measures are supplementary and should be considered alongside GAAP measures. The reconciliation provided in the financial statements allows for transparency and comparability.
Additionally, the partnership with Life Insurance Company of the Southwest in the Senior Loan Fund joint venture diversifies Monroe's investment strategies and could spread risk. The legal structures of such joint ventures are designed to align interests and provide additional layers of governance, which can be beneficial for risk management.
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
NAV decreased by
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
Financial Review
Results of Operations: Fourth Quarter 2023
Net investment income for the quarter ended December 31, 2023 totaled
Net gain (loss) was (
Net increase (decrease) in net assets resulting from operations was
Results of Operations: Full Year 2023
Net investment income for the year ended December 31, 2023 totaled
Net gain (loss) was (
Net increase (decrease) in net assets resulting from operations was
Liquidity and Capital Resources
At December 31, 2023, the Company had
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
As of December 31, 2023, SLF had total assets of
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: | 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, | $ | 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 |
FAQ
What was Monroe Capital Corporation's Net Investment Income for Q4 2023?
What is the current annual cash dividend yield to shareholders for Monroe Capital Corporation?
Why did Monroe Capital Corporation experience a decrease in NAV for Q4 2023?
What factors contributed to the net loss of ($3.7) million for Monroe Capital Corporation in Q4 2023?
How did Monroe Capital Corporation's total expenses compare between Q4 2023 and Q3 2023?
