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Monroe Capital Corporation BDC Announces Strong First Quarter Results

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CHICAGO, May 08, 2018 (GLOBE NEWSWIRE) -- Monroe Capital Corporation (NASDAQ:MRCC) ("Monroe") today announced its financial results for the first quarter ended March 31, 2018. 

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

First Quarter 2018 Financial Highlights

  • Net investment income of $8.5 million, or $0.42 per share
  • Adjusted Net Investment Income (a non-GAAP measure described below) of $8.5 million, or $0.42 per share
  • Net increase in net assets resulting from operations of $1.4 million, or $0.07 per share
  • Net asset value ("NAV") of $273.0 million, or $13.49 per share
  • Paid quarterly dividend of $0.35 per share on March 30, 2018

Chief Executive Officer Theodore L. Koenig commented, "We are pleased to report strong earnings for the first quarter of 2018, with Adjusted Net Investment Income of $0.42 per share, representing the 16th straight quarter where per share Adjusted Net Investment Income met or exceeded our quarterly per share dividend. We have also made our 22nd consecutive quarterly dividend payment to our shareholders without any reduction in our distributions.  As of quarter end, our portfolio totaled $496.0 million in investments at fair value, which represented a slight increase in the portfolio since the end of the fourth quarter. Measured portfolio growth, as well as growth in our MRCC Senior Loan Fund joint venture, including the recent addition of a leverage facility for the joint venture, should continue to create long term value for our shareholders."

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)

  March 31, 2018   December 31, 2017
Consolidated Statements of Assets and Liabilities data: (unaudited)    
Investments, at fair value $   496,034     $   494,138  
Total assets $   512,704     $   507,432  
Net asset value  $   273,005     $   278,699  
Net asset value per share $   13.49     $   13.77  
       
  For the quarter ended
  March 31, 2018   December 31, 2017
Consolidated Statements of Operations data: (unaudited)
Net investment income $   8,465     $   6,995  
Adjusted net investment income (1) $   8,476     $   6,995  
Net gain (loss) on investments, secured borrowings and foreign currency borrowings $   (7,075 )   $   (4,754 )
Net increase in net assets resulting from operations $   1,390     $   2,241  
       
Per share data:      
Net investment income $   0.42     $   0.35  
Adjusted net investment income (1) $   0.42     $   0.35  
Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings $   (0.35 )   $   (0.24 )
Net increase in net assets resulting from operations $   0.07     $   0.11  

______

(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 $496.0 million, as of March 31, 2018 as compared to debt and equity investments in 72 portfolio companies, with a total fair value of $494.1 million, as of December 31, 2017. The Company's portfolio consists primarily of first lien loans, representing 85.9% of the portfolio as of March 31, 2018 and 86.7% of the portfolio as of December 31, 2017.  As of March 31, 2018, the weighted average contractual and effective yield on the Company's debt and preferred equity investments was 10.0% and 10.6%, respectively, as compared to the weighted average contractual and effective yield of 9.8% and 10.0%, respectively, as of December 31, 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

Net investment income for the quarter ended March 31, 2018 totaled $8.5 million, or $0.42 per share, compared to $7.0 million, or $0.35 per share, for the quarter ended December 31, 2017. Adjusted Net Investment Income was $8.5 million, or $0.42 per share, for the quarter ended March 31, 2018, compared to $7.0 million, or $0.35 per share, for the quarter ended December 31, 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 March 31, 2018 totaled $15.0 million, compared to $13.4 million for the quarter ended December 31, 2017.  The $1.6 million increase during the quarter was primarily the result of increases in the average size and effective yield of the portfolio, increases in fee income and an increase in net accretion of discounts on the portfolio assets during the quarter.  Total expenses for the quarter ended March 31, 2018 totaled $6.5 million, compared to $6.4 million (net of the incentive fee waiver of $58,000) for the quarter ended December 31, 2017. The $0.1 million increase during the quarter was primarily driven by a $0.5 million increase in interest expense as a result of higher average borrowings to support the growth of the portfolio and a $0.1 million increase in base management fees due to higher average portfolio size during the quarter, partially offset by a $0.5 million decrease in incentive fees.  Incentive fees were limited due to the total return requirement during both periods presented.  Please refer to the Company's Form 10-Q for additional information of the incentive fee calculation and associated limitation. 

Net gain (loss) on investments, secured borrowings, foreign currency transactions and foreign currency borrowings was ($7.1) million for the quarter ended March 31, 2018, compared to ($4.8) million for the quarter ended December 31, 2017. The net loss on investments, secured borrowings and foreign currency borrowings during the quarter ended March 31, 2018 was primarily the result of net unrealized mark-to-market losses on investments in the portfolio during the quarter.  The largest contributors to the net unrealized mark-to-market losses during the quarter were the Company's equity investment in Rockdale Blackhawk, LLC and the Company's debt investments in TPP Operating, Inc.  As a reminder, the Company received its common equity ownership in Rockdale Blackhawk, LLC as part of a senior secured debt financing for free, and therefore, did not make any cash investment in the equity.

Net increase in net assets resulting from operations was $1.4 million, or $0.07 per share, for the quarter ended March 31, 2018, compared to $2.2 million, or $0.11 per share, for the quarter ended December 31, 2017.  This increase is primarily the result of an increase in net investment income and a decrease in net unrealized mark-to-market losses on investments during the quarter. The Company's NAV per share decreased to $13.49 per share at March 31, 2018 from $13.77 per share at December 31, 2017. 

Liquidity and Capital Resources

At March 31, 2018, the Company had $3.1 million in cash, $7.1 million in restricted cash at Monroe Capital Corporation SBIC LP ("MRCC SBIC," the Company's wholly-owned SBIC subsidiary), $125.6 million of total debt outstanding on its revolving credit facility and $112.8 million in outstanding Small Business Administration ("SBA") debentures. As of March 31, 2018, the Company had $74.4 million available for additional borrowings on its revolving credit facility and $2.2 million in available SBA-guaranteed debentures. 

SBIC Subsidiary

As of March 31, 2018, MRCC SBIC had $57.6 million in leverageable capital, $7.1 million in cash and $167.7 million in investments at fair value.  Additionally, MRCC SBIC had $112.8 million in SBA-guaranteed debentures outstanding. 

As of March 31, 2018, the Company has made all required leverageable capital contributions to MRCC SBIC in order to access the remaining $2.2 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").  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 $50.0 million of capital to the joint venture.  During the quarter ended March 31, 2018, SLF entered into a $100.0 million secured revolving credit facility with Capital One, N.A. (the "SLF Credit Facility").  As of March 31, 2018, the Company had made net capital contributions of $15.8 million in SLF with a fair value of $16.3 million.  During the quarter ended March 31, 2018, the Company received an income distribution from SLF of $0.2 million. 

As of March 31, 2018, SLF had total assets of $60.5 million (including investments at fair value of $58.2 million), total liabilities of $27.8 million (including borrowings under the SLF Credit Facility of $20.3 million) and total members' capital of $32.7 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
  March 31, 2018   December  31, 2017
  Amount   Per Share
Amount
  Amount   Per Share
Amount
  (in thousands, except per share data)
Net investment income $   8,465   $   0.42   $   6,995   $   0.35
Net capital gains incentive fee     -        -        -        - 
Excise taxes     11       -        -        - 
Adjusted Net Investment Income $   8,476   $   0.42   $   6,995   $   0.35
               

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. 

First Quarter 2018 Financial Results Conference Call

The Company will host a webcast and conference call to discuss these operating and financial results on Wednesday, May 9, 2018 at 9:00 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 (877) 312-8807 approximately 10 minutes prior to the call. Please reference conference ID #6889257.

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 March 31, 2018 to be filed with the Securities and Exchange Commission (www.sec.gov) on May 8, 2018.

MONROE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share data)
         
    March 31, 2018   December 31, 2017
    (unaudited)    
ASSETS      
Investments, at fair value:      
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