MRCC - Earnings call transcript Q1 2024 | Monroe Capital Corporation

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Operator

Welcome to Monroe Capital Corporation's First Quarter 2021 Earnings Conference Call.

Before we begin, I would like to take a moment to remind our listeners that remarks made during this call today may contain certain forward-looking statements, including statements regarding our goals, strategies, beliefs, future potential, operating results and cash flows.

Although we believe these statements are reasonable based on management's estimates, assumptions and projections as of today, May 9, 2024, statements are not guarantees of future performance.

Further, time-sensitive information may no longer be accurate as of the time of any replay or listening. Actual results may differ materially as a result of risks, uncertainty or other factors, including, but not limited to, the risk factors described from time to time in the company's filings with the SEC. obligation or no statements. these takes Capital to revise update forward-looking Monroe

go will call of Executive Please conference turn Monroe to Corporation. I the Chief over now Ted Koenig, Capital ahead. Officer

Theodore Koenig

our to and everyone morning, our today. and Chief with call. Investment to Welcome Mick thank earnings Parmacek, Good first XXXX am who Officer; call quarter and Deputy our I joined us has Solimene, Portfolio on Manager. you here our Alex CFO

release our $X.XX begin conditions. Last some our quarter adjusted first first and evening, that investment press On I'll filed current I covered with earnings call, quarter share issued report our to by net income for SEC. the market per we pleased perspective on then XX-Q dividend. XXth XXXX the quarter, our our am results today's and addressing consecutive

MRCC price total XXXX trading yield of May on share nearly price. delivered our X, annualized our closing using a dividend XX%

consistent We per are or our was share slight our of per the track million shareholders. investment record proud from $X.X stable decrease of a $X.XX last quarter $X.XX XXXX, or net our dividends $X.X quarter. In income adjusted to share, first of million and delivering

to XX, $X.XX $X.XX was [ primarily per $XXX.X to X.X% reported portfolio NAV and concerns. of to that The ] certain decline share We companies credit of performance December March due NAV unrealized as X.XX or million XXXX, per share of have or attributable losses compared as million underlying XX, net XXXX.

debt-to-equity XXXX, XX, December to XX, increased X.Xx debt-to-equity March X.XXx XXXX. at MRCC's at leverage from

XX, equity in quarter, of an in we prior lower was portfolio which resulted December than XXXX, companies made XXXX. as later average the the MRCC's While quarter new the leverage XX, various to and debt into during compared quarter, in March increase investments leverage during

repayments attractive focus to our capital, investment managing redeploying into opportunities. new continue resulting selectively portfolio on investment and from We

likely an higher positioned environment, rate for and coverage. solid given and Our EBITDA interest longer the increasingly demonstrate weather portfolio continues to growth, sound interest is revenue to

volatile Portfolio management for macroeconomic remains our environment where primary focus our a costs elevated in borrowing portfolio companies. face and uncertain of the are

risk Our despite borrowing stable distribution a environment. has higher cost relatively portfolio interest rating been

While a nonaccrual in that our not primarily challenges indicative idiosyncratic faced believe companies recent the X.X%, see the nonaccrual we we by slight the are fundamental within or of increase portfolio. did on were issues broader

X Monroe playbook, time-tested established Over and improving decades, navigating of of the investments. a track course has turning around record underperforming

value can we maximize our that continue and deliver and shareholders. outcomes confident are We for to will

Through early Turning XXXX of M&A increase now, middle LSEG the and environment. the our but represent XXXX, have down market first LPC's part per XX% been activity of market and of loan fourth view year-over-year macro volumes a to on the quarter XXXX, analysis. quarter compared

lower positioning the While execute middle in low, have has market see the us investment activity levels steady our a been in to relatively to flow on. selectively of market allowed overall opportunities

middle market focus true with provide low risk flexible lower a our capital Our to has differentiator. be to borrowers execution proven to and ability solutions

private Further, accelerate of activity interest OP normalized. to activity. dry and We actively deploy throughout expect is powder inflation the which as rates investors factor equity transaction and will year steadily levels higher another are supporting that seeking Capital,

competition assets. rotate the an opportunities dynamics has tightening spreads legacy provide Currently, with This increasingly vintage markets. middle across resulted spectrum. the attractive M&A the out environment into us active newer have in driving and in we market favorable market will to assets heightened credit These of of seen

held have experienced loan-to-value attachment spreads compression, stable. relatively Although have points generally

loan on compelling such offer rate an remains XX% as portfolio. Monroe at base our high as yields the of yield middle continue attractive Capital, predominantly risk-adjusted attractive. market the of rate to direct secured senior dynamic gross This Given segment be MRCC's environment, to nearly returns in lenders effective continues a

activity Syndicated deal the direct volume. also and although bank still has on dominant executes deal of share lending accelerated, a

Refinitiv, lenders on banks nearly our our and continuing investment team volume to while Xx best-in-class to portfolio. risk originations this the within lower market lean of the syndicated landscape, deal lending source middle still increasingly account competitive new will opportunities the direct to we opportunities, Per markets. leverage incumbency In

of Our with enjoys flow ability execution. assets $XX to deal as product dedicated in deep XXX originations, market a professionals a advantage allowed under us approximately has assets our X, our investment deal affiliated strong supported consisting consistently highly-selective a employees, higher generate existing MRCC credit being manager with team of XXXX. a by including retain and while management, to billion best-in-class quality of April portfolio XXX middle to with approximately maintaining underwriting approach

income focus dividend to net investment our positive continue or and that long-term on generating NAV exceeds adjusted meets performance. achieving We

now in call through Mick, am detail. turn over going walk you I financial results greater is who to our to to the with going

Lewis Solimene

Thank you, Ted.

$XXX.X As XX, portfolio of December million million from March as $XXX.X XXXX, XX, of our $XX.X million, XXXX. decrease totaled a investment

of companies equity debt in portfolio compared XX consisted prior of Our to the portfolio quarter. and at companies portfolio XX investment the investments end

to portfolio at companies, and performance at to quarter, we existing This we effective to investment and million During was consisting of rate we was had delayed approximately payoff of million $X.X interest for $XX.X deal received debt of add-ons investments portfolio an funded our million was repaid X drop at and fully payoff X that X risk-weighted Grade XX.X% equity the million. revolver $XX scale, and million. the companies in new Further, this $X.X of previously investments. portfolio company par. a related fundings quarter, In $X.X full rated of

end, $XX.X Finally, capacity. during $XXX availability, under investments. XXXX, revolving to facility by Total $XXX.X normal notes. during revolving $XXX.X including had of total XX, portfolio of $XX.X million, the the course we and quarter borrowing our million X.XX% fund increased we facility borrowings existing as March quarter fixed million paydowns revolving utilize rate our outstanding base At At the to of million credit had XXXX partial of rate quarter. floating credit the million subject incurred $X.X and we outstanding borrowings credit facility new company million and

was the invested results. net share a was a adjusted income net the income, decrease by the income, or $X.X compared financial primarily $X.X driven The from measure, non-GAAP per average in turning in to million prior investment to in quarter during average reduction resulting in $X.XX share period. Adjusted a quarter. decrease total the our per investment this quarter slight investment and assets Now $X.XX over or primarily million

movement March our during investments effective effective by XX.X% the at the XXXX. X to This from December XX.X% XXXX, slightly Our yield of in quarter. decreased of during nonaccrual to yield primarily driven at the XX, reduction quarter XX, was

we all current that current and our the at dividend, on basis, percentage of cover share net run rate per the considering income our a interest levels, When our $X.XX leverage quarterly leverage being fixed investment will to rate equal. rate, fund other a adjusted environment continue things believe favorable

$XXX.X As XX, NAV of of XXXX, our XXXX. March December decreased NAV XX, million was of which million, as from $XXX.X

the these X or rating of partially by as were X, NAV losses gains scale. per result share. per a mark-to-market offset on The unrealized companies March XXXX, to our unrealized portfolio. $X.XX X XX, share that corresponding the quarter performance from net NAV of by $X.XX decreased net investment decline remainder attributable this losses to Our primarily on few share of grades had portfolio of in risk was $X.XX per the

over turn now first to will performance. our provide who details quarter I Alex, on will it operating more

Alex M. Parmacek

you, Thank Mick.

reversal quarter the investment our from fourth previously former the to of income during $XX.X Looking million quarter of in income the down company's operations, XXXX, slightly first fee in million of IT $XX.X fourth Results associated loan the of investment statement totaled the quarter Global. included accrued of XXXX with XXXX.

primarily to of the decreased the during the decrease by fee investment investment the $XXX,XXX, Excluding quarter. impact average due size in reversal, the of portfolio income income the

market In an the on placed of million. we with quarter, fair investments new value $X nonaccrual X first aggregate

have XX, XX, investments value, March of of portfolio as on nonaccrual from the the December of fair representing As status, market of X.X% of X.X% portfolio the XXXX. market fair X we increase modest value of a XXXX,

for quarter expenses XXXX. to Now decline decline quarter $X.X financing total due were debt MRCC's excise the interest expenses throughout to to the in taxes the income of million a resulted first average of million in shifting in quarter debt expense in Total $XX.X expenses the for XXXX reduced of base. the fourth over including taxes, the compared A and outstanding other reduction and expense side.

that The equity hold income decrease certain in decline the entities MRCC's primarily excise associated taxes, was income include taxes, the the of which locker tax with investments. expense of result in

Our $X.X loss of net million net million prior for was compared the the to quarter. $X.X a from loss quarter

our offset XX, of investment that XXXX, mark-to-market the unrealized were net losses X, gains unrealized by mark-to-market or to risk X on X were the in primarily of partially losses scale. on as rating These net grades portfolio. losses had March These the portfolio performance companies remainder of attributable

to Turning SLF. now

companies. As of the portfolio, investments XX March larger of SLF borrowers value. more market and sensitive had at are The middle SLF underlying loans lower are market rest investments fair the to different movements borrowers, to that aggregating which XX, generally middle $XXX.X XXXX, on in market spread than million is MRCC's focused

decreased as the distribution SLF prior XXXX. XXXX, with as costs MRCC income to the on of mark amortized X% of XX, received amortized by December quarter, March SLF portfolio XX.X% average of $XXX,XXX. of costs slightly of the XX.X% approximately XX, from In Consistent from quarter,

borrowings had SLF its credit with $XX availability. $XX under borrowing valuable facility XXXX, million, base capacity, XX, nonrecourse March of to million subject As of of

line this Ted remarks before the up call the I for will we closing some turn open questions. At for point, to back

Theodore Koenig

of in for Thank navigate its ability quality longer confident the you, the To conclude, environment. Alex. credit remain we portfolio the overall higher to and

management, each our steadfast to plans on continues optimize portfolio focus to executing recoveries more our remain Our and for and we investments. on of challenging be

XX.X%, portfolio predominantly risk to our to continues effective first shareholders. lien MRCC of stable yield consistent carries for our return deliver our investors. dividends compelling offering average an dynamics Further, and

rate exceeded where XXth consecutive dividend is our has at investment of XX% as or our This May quarter nearly X, marked XXXX. yield attractive our income dividend and met an net quarter of the

credit under best-in-class around Corporation, investment with provides management that to Monroe shareholders a opportunity in believe an external affiliated with very our investors. manager billion We $XX assets to Capital which attractive other is award-winning, and private

this I'm to going open ask for Thank prepared and time remarks. questions. our for operator the today, now the call you concludes your to all

Operator

Chris of comes Instructions] Nolan line the from The from question first Thalmann. Ladenburg [Operator

Christopher Nolan

you on everything think support would I waiver the want kudos the of fee as given management I And as dividend reinstitute going the same that, don't to it's forward, is long necessary, if going to base I on, for maintained dividend. so sustaining the On another BDC, know which you you have, complement you. guys -- to dividend?

Theodore Koenig

been question, we've aligned our that's with Historically, very So good Chris. a shareholders.

management company historical to XX at we've years the that, don't look future. you shareholders we've If And with taken that public. will last a actions standpoint, alignment the years, our change continues. XX reason practice From that in since any been ensure I near see over

Christopher Nolan

of Great. direction can idea get the leverage, an the And we seem in high? then leverage terms ratio of

Lewis Solimene

for this Chris, Thanks Mick. the is question.

been leverage -- We've of Chris, for kind So We targeting to X.X of we're portfolio. at range at outs of ins past quarter range. maintain end that some in handful the of quarters. range to the of to . the were the and just X.Xx some kind higher this the due of

tilted shape kind supports of first guided given with and this that comfortable And the of it. range the fact primarily leverage portfolio at remain as look decent range, current pipeline outs do the lien. is and kind ins direction we this of is we Our in in of

Christopher Nolan

Got you.

have more markdown what's invest larger lower just interesting. to asset to in seems a idea on The the But get with that? of trying quality an companies, ratio than recent XX.X% And SLF, little also more is from mature the in I'm two be expected. quick bit companies. have to the would value fair quarters Just which I questions. going over XX.X%

Lewis Solimene

and during upper It's attachment Chris. loan-to-value really refresher, of to and cautious XXXX middle points And market question, and XXXX, looser market is made the portfolio. around as loans good SLF because of the of most that leverage higher headwinds a end Yes. companies. the structures economic the upper comprised the early primarily been of in a We've

rate [ quarter Our from portfolio. on market Nonaccrual nonaccrual value at basis, X%. end. in up percentage the higher at TAT it, is a X.X% We're ] call a fair this most standing around

this about cautious we're So portfolio.

the that reinvesting attachment kind of of business. point of bunch terms many in We of cautious and the point a good considering in have We're in unexpected looser in given kinds and nature a assets. have paydowns kind these bit reentry did higher But a of quarter, in of we last way. structures a do little of of approach, more little just the that the market them

Operator

are the over concludes time. back would no at to questions Koenig turn remarks. to There for This further like Q&A our Ted this I brief Instructions] session. [Operator call closing

Theodore Koenig

today the everyone thank to call. want for I

out speaking with next please basis quarter. an if As to to on you interim we and always, feel free any forward to to have or questions, reach you you. Nick Thank look soon again Alex

Lewis Solimene

you, Thank everybody.

Operator

gentlemen, and conference today's concludes your you Ladies this participation. Thank call. for

disconnect. You may now

Monroe Capital (MRCC) 9 May 242024 Q1 Earnings call transcript