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Monroe Capital Corporation BDC Announces Fourth Quarter And Full Year 2017 Financial Results

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CHICAGO, March 14, 2018 (GLOBE NEWSWIRE) -- Monroe Capital Corporation (NASDAQ:MRCC) ("Monroe") today announced its financial results for the fourth quarter and full year ended December 31, 2017. 

Except where the context suggests otherwise, the terms "Monroe," "we," "us," "our," and "Company" refer to Monroe Capital Corporation.

Fourth Quarter 2017 Financial Highlights

  • Net investment income of $7.0 million, or $0.35 per share
  • Adjusted Net Investment Income (a non-GAAP measure described below) of $7.0 million, or $0.35 per share
  • Net increase in net assets resulting from operations of $2.2 million, or $0.11 per share
  • Net asset value ("NAV") of $278.7 million, or $13.77 per share
  • Paid quarterly dividend of $0.35 per share on December 29, 2017

Full Year 2017 Financial Highlights

  • Net investment income of $26.0 million, or $1.40 per share
  • Adjusted Net Investment Income (a non-GAAP measure described below) of $25.9 million, or $1.39 per share
  • Net increase in net assets resulting from operations of $12.2 million, or $0.65 per share as compared to $24.4 million

Chief Executive Officer Theodore L. Koenig commented, "We are pleased to report another quarter of consistent earnings for the fourth quarter of 2017, with Adjusted Net Investment Income of $0.35 per share, representing the 15th straight quarter where per share Adjusted Net Investment Income met or exceeded our quarterly per share dividend.  We have also made our 21st consecutive quarterly dividend payment to our shareholders without any reduction in our distributions.  As of quarter end, our portfolio totaled $494.1 million in investments at fair value, which represented a $63.0 million increase in the portfolio since the end of the third quarter. Continued measured portfolio growth as well as growth in our MRCC Senior Loan Fund joint venture, including the addition of a leverage facility for the joint venture, should positively contribute to our earnings in future quarters."

Monroe Capital Corporation is the business development company affiliate of the award winning private debt investment firm and lender, Monroe Capital LLC.

Selected Financial Highlights
(in thousands, except per share data)

  December 31, 2017   September 30, 2017
Consolidated Statements of Assets and Liabilities data:     (unaudited)
Investments, at fair value $   494,138     $   431,097  
Total assets $   507,432     $   445,262  
Net asset value  $   278,699     $   283,542  
Net asset value per share $   13.77     $   14.01  
       
  For the quarter ended
  December 31, 2017   September 30, 2017
Consolidated Statements of Operations data: (unaudited)
Net investment income $   6,995     $   6,887  
Adjusted net investment income (1) $   6,995     $   6,987  
Net gain (loss) on investments, secured borrowings and foreign currency borrowings $   (4,754 )   $   (569 )
Net increase in net assets resulting from operations $   2,241     $   6,318  
       
Per share data:      
Net investment income $   0.35     $   0.34  
Adjusted net investment income (1) $   0.35     $   0.35  
Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings $   (0.24 )   $   (0.03 )
Net increase in net assets resulting from operations $   0.11     $   0.31  

______

  1. 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 72 portfolio companies, with a total fair value of $494.1 million, as of December 31, 2017 as compared to debt and equity investments in 66 portfolio companies, with a total fair value of $431.1 million, as of September 30, 2017. The Company's portfolio consists primarily of first lien loans, representing 86.7% of the portfolio as of December 31, 2017 and 86.5% of the portfolio as of September 30, 2017.  As of December 31, 2017, the weighted average contractual and effective yield on the Company's investments was 9.8% and 10.0%, respectively, as compared to the weighted average contractual and effective yield of 9.8% and 9.9%, respectively, as of September 30, 2017. 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).  

Financial Review

Results of Operations:  Fourth Quarter 2017

Net investment income for the quarter ended December 31, 2017 totaled $7.0 million, or $0.35 per share, compared to $6.9 million, or $0.34 per share, for the quarter ended September 30, 2017. Adjusted Net Investment Income was $7.0 million, or $0.35 per share, for the quarter ended December 31, 2017, compared to $7.0 million, or $0.35 per share, for the quarter ended September 30, 2017.  The Company believes that Adjusted Net Investment Income is a consistent measure of the Company's earnings – see Non-GAAP Financial Measure – Adjusted Net Investment Income discussion below. Investment income for the quarter ended December 31, 2017 totaled $13.4 million, compared to $13.5 million for the quarter ended September 30, 2017.  The $0.1 million decrease during the quarter was primarily the result of a decline in fee income and prepayment gain (loss) during the quarter, partially offset by an increase in the size of the Company's average investment portfolio during the quarter and a slight increase in the effective portfolio yield. Total expenses for the quarter ended December 31, 2017 totaled $6.4 million (net of the incentive fee waiver of $58,000) compared to $6.6 million for the quarter ended September 30, 2017. The $0.2 million decline during the quarter was primarily driven by a $0.6 million decrease in incentive fees (net of incentive fee waiver).  During the fourth quarter incentive fees were limited due to the total return requirement.  Please refer to the Company's Form 10-K for additional information of the incentive fee calculation and associated limitation.  There was no incentive fee waiver or limitation for the quarter ended September 30, 2017.  This decline in incentive fees was partially offset by increases in interest and other debt financing expenses and base management fees which both increased as the size of the average portfolio increased during the quarter.

Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings was ($4.8) million for the quarter ended December 31, 2017, compared to ($0.6) million for the quarter ended September 30, 2017. The net loss on investments, secured borrowings and foreign currency borrowings during the quarter ended December 31, 2017 was primarily the result of net unrealized mark-to-market losses on investments in the portfolio during the quarter.  These net unrealized mark-to-market losses were primarily attributable to the Company's equity investment in Rockdale Blackhawk, LLC and debt investment in TPP Operating, Inc. 

Net increase in net assets resulting from operations was $2.2 million, or $0.11 per share, for the quarter ended December 31, 2017, compared to $6.3 million, or $0.31 per share, for the quarter ended September 30, 2017.  This decrease is primarily the result of net unrealized mark-to-market losses on investments during the quarter. The Company's NAV per share decreased to $13.77 per share at December 31, 2017 from $14.01 per share at September 30, 2017. 

Results of Operations:  Full Year 2017

Net investment income for the year ended December 31, 2017 totaled $26.0 million, or $1.40 per share, compared to $22.5 million, or $1.55 per share, for the year ended December 31, 2016. Adjusted Net Investment Income was $25.9 million, or $1.39 per share, for the year ended December 31, 2017, compared to $23.4 million, or $1.61 per share, for the year ended December 31, 2016. Total investment income increased by $6.1 million during the year, primarily driven by increases in interest income as a result of a larger average portfolio size and increased prepayment activity during 2017, partially offset by decreases in dividend income on the Company's LLC investments.  Total expenses, net of incentive fee waiver, increased by $3.5 million during the year.  This increase was primarily driven by a larger average investment portfolio, resulting in increases in interest expense, base management fees, and professional fees, partially offset by a decline in excise tax accrual as a result of lower undistributed taxable income. 

Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings was ($13.9) million for the year ended December 31, 2017, compared to $1.9 million for the year ended December 31, 2016. The net loss on investments, secured borrowings, foreign currency transactions and foreign currency borrowings during the year ended December 31, 2017 was primarily the result of net unrealized mark-to-market losses on investments in the portfolio during the year. 

Net increase in net assets resulting from operations was $12.2 million, or $0.65 per share, for the year ended December 31, 2017, compared to $24.4 million, or $1.68 per share, for the year ended December 31, 2016. This decrease is primarily the result of net unrealized mark-to-market losses on investments in the portfolio, partially offset by an increase in net investment income during the year.  The Company's NAV decreased to $13.77 per share at December 31, 2017 from $14.52 per share at December 31, 2016.

Liquidity and Capital Resources

At December 31, 2017, the Company had $4.3 million in cash, $2.9 million in restricted cash at Monroe Capital Corporation SBIC LP ("MRCC SBIC," the Company's wholly-owned SBIC subsidiary), $117.1 million of total debt outstanding on its revolving credit facility and $109.5 million in outstanding Small Business Administration ("SBA") debentures. As of December 31, 2017, the Company had $82.9 million available for additional borrowings on its revolving credit facility and $5.5 million in available SBA-guaranteed debentures. 

SBIC Subsidiary

As of December 2017, MRCC SBIC had $57.6 million in leverageable capital, $2.9 million in cash and $170.7 million in investments at fair value.  Additionally, MRCC SBIC had $109.5 million in SBA-guaranteed debentures outstanding. 

As of December 31, 2017, the Company has made all required leverageable capital contributions to MRCC SBIC in order to access the remaining $5.5 million in available SBA-guaranteed debentures.  The SBA-guaranteed debentures are long-term, fixed rate financing with the advantage of being excluded from the Company's 200% asset coverage test under the Investment Company Act of 1940.

MRCC Senior Loan Fund

On November 1, 2017, the Company announced the formation of a joint venture with NLV Financial Corporation ("NLV"), the parent of National Life Insurance Company ("National Life"), to create MRCC Senior Loan Fund I, LLC (the "SLF").  The SLF is expected to invest primarily in senior secured loans to middle market companies in the United States. The Company and NLV have each initially committed $50 million of capital to the joint venture.  In addition, the SLF intends to obtain third party financing during the first quarter of 2018 that is expected to allow the joint venture to access market levels of leverage. As of December 31, 2017, the Company has invested $9.5 million in the SLF with a fair value of $9.6 million. As of December 31, 2017, the SLF had called $19.0 million of total capital, had total investments at fair value of $29.1 million and total members' capital of $19.3 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 excise 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
     December  31, 2017          September 30, 2017   
  Amount   Per Share
Amount
  Amount   Per Share
Amount
  (in thousands, except per share data)
Net investment income $   6,995   $   0.35   $   6,887   $   0.34
Net capital gains incentive fee     -        -        -        - 
Excise taxes     -        -        100       0.01
Adjusted Net Investment Income $   6,995   $   0.35   $   6,987   $   0.35
               


  For the year ended
  December 31, 2017   December 31, 2016
  Amount   Per Share
Amount
  Amount   Per Share
Amount
 
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