Company Overview - Monroe Capital Corporation is a publicly-traded specialty finance company that primarily invests in senior, unitranche, and junior secured debt, as well as unsecured debt and equity investments in middle-market companies [3] - The investment objective of the company is to maximize total return to stockholders through current income and capital appreciation [3] - The investment activities are managed by Monroe Capital BDC Advisors, LLC, which is registered under the Investment Advisers Act of 1940 [3] Upcoming Financial Results - The company will report its first quarter financial results for the period ended March 31, 2025, on May 7, 2025, after the close of financial markets [1] - A webcast and conference call to discuss these results will be held on May 8, 2025, at 11:00 a.m. Eastern Time [2] Awards and Recognition - Monroe Capital LLC has received multiple awards, including Private Debt Investor's 2024 Lower Mid-Market Lender of the Year and 2023 Lower Mid-Market Lender of the Decade [5] - The firm has been recognized for its performance in private debt and direct lending across various categories [5] Investment Strategy - Monroe Capital LLC specializes in private credit markets with strategies including direct lending, technology finance, venture debt, and structured credit [4] - The firm aims to provide capital solutions to clients in the U.S. and Canada, focusing on generating high-quality "alpha" returns regardless of economic cycles [4]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q4 2024 was $6.2 million or $0.29 per share, a slight decrease from $6.6 million or $0.31 per share in the previous quarter [5][24] - NAV as of December 31, 2024, was $191.8 million or $8.85 per share, down from $198.9 million or $9.18 per share as of September 30, 2024, representing a 3.6% decline [6][26] - The weighted average effective yield on the portfolio's debt and preferred equity investments decreased to 10.2% from 11% in the prior quarter [25] Business Line Data and Key Metrics Changes - The investment portfolio totaled $457 million at year-end, a decrease of $17.3 million from $474.3 million at the end of the last quarter, consisting of debt and equity investments in 91 portfolio companies, down from 94 [17] - In 2024, the company invested $30.4 million in seven new portfolio companies and $57.6 million in existing portfolio companies, with $2.2 million in one new portfolio company and $14.2 million in existing companies during Q4 [21] Market Data and Key Metrics Changes - Middle market direct lending M&A volumes in Q4 2024 saw an 85% year-over-year increase, marking the strongest quarterly results since Q4 2021 [18] - Delayed draw term loan fundings were 2.4 times greater in 2024 than in 2023, indicating a new annual record [19] Company Strategy and Development Direction - The company plans to focus on growing the portfolio and addressing legacy portfolio issues, with expectations to step on the accelerator in 2025 [45] - The strategic partnership with Wendel Group involves a $1 billion commitment to support new and existing investment strategies, with no changes to the investment process or fee structure [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the favorable market outlook, citing lower interest rates and improved economic conditions as supportive of a sustainable deal environment in 2025 [12] - The company aims to leverage its in-house originations platform and rigorous underwriting standards to capitalize on private credit and middle market lending opportunities [12] Other Important Information - Total borrowings as of December 31, 2024, were $293.9 million, with leverage increasing slightly to 1.53 times debt to equity [23] - The company reported a net loss on the portfolio of $7.7 million for the quarter, primarily due to unrealized mark-to-market losses [34] Q&A Session Summary Question: Strategy to grow earnings and portfolio - Management acknowledged the need to clean up legacy portfolio issues and indicated plans to grow the portfolio in 2025 [45] Question: Resolution of non-accrual investments - Management confirmed active efforts to resolve non-accrual investments, including litigation matters, with expectations for progress in 2025 [48] Question: Consideration of swapping bank credit facilities - Management noted that there is significant interest from financial institutions in providing capital for diversified middle market portfolios, and they are always evaluating options for optimizing capital structure [51][55]

Monroe Capital is a $19.4 billion1 diversified private credit solutions provider. While protecting client capital against loss is at the heart of the Monroe ethos, it's been our ability to consistently attract high-quality deal flow that has enabled the Firm's nearly two decades of growth. Q4 2024 Monroe Capital at a Glance Experience | Security | Consistency Monroe Capital Corporation (NASDAQ: MRCC) Award Winning Firm1 2004 Year founded $46B Invested capital2 250+ Total employees1 10 Offices1 $19.4B AUM1 1 ...

Monroe Capital (MRCC) came out with quarterly earnings of $0.29 per share, beating the Zacks Consensus Estimate of $0.28 per share. This compares to earnings of $0.26 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.57%. A quarter ago, it was expected that this business development company would post earnings of $0.29 per share when it actually produced earnings of $0.31, delivering a surprise of 6.90%.Over the last four quar ...

Financial Performance - Net Investment Income (NII) for Q4 2024 was $6.0 million, or $0.28 per share, a decrease from $6.5 million, or $0.30 per share in Q3 2024[10]. - Adjusted Net Investment Income for Q4 2024 was $6.2 million, or $0.29 per share, down from $6.6 million, or $0.31 per share in Q3 2024[5]. - Total investment income for Q4 2024 was $14.0 million, compared to $15.7 million in Q3 2024, a decrease of $1.7 million[11]. - For the full year 2024, NII totaled $24.5 million, or $1.13 per share, compared to $23.2 million, or $1.07 per share in 2023[15]. - Adjusted Net Investment Income for the full year 2024 was $25.0 million, or $1.15 per share, compared to $24.1 million, or $1.11 per share in 2023[15]. - Total investment income for the full year 2024 was $60.5 million, down from $64.3 million in 2023, a decrease of $3.8 million[16]. - The Company reported a net investment income of $6,022,000 for Q4 2024, down from $6,481,000 in Q3 2024, a decline of 7.1%[36]. - Total investment income for the quarter ended December 31, 2024, was $14,023,000, a decrease of 10.7% from $15,695,000 for the previous quarter[39]. Asset and Liability Management - Net Asset Value (NAV) decreased by 3.6% to $191.8 million, or $8.85 per share, from $198.9 million, or $9.18 per share in Q3 2024[5]. - Total assets as of December 31, 2024, were $490,671,000, a decrease from $501,862,000 as of September 30, 2024, indicating a decline of 2.5%[33]. - Total liabilities decreased to $298,909,000 as of December 31, 2024, from $302,969,000 in the previous quarter, a reduction of 1.4%[33]. - The company's debt-to-equity leverage increased from 1.50 times to 1.53 times from Q3 2024 to Q4 2024[6]. Expense Management - Total expenses for Q4 2024 were $8.0 million, down from $9.2 million in Q3 2024, primarily due to lower interest and debt financing expenses[12]. - Operating expenses for the year ended December 31, 2024, totaled $35,543,000, down from $40,242,000 in 2023, a decrease of 11.7%[36]. - Total interest and other debt financing expenses for the year ended December 31, 2024, were $21,917,000, compared to $22,847,000 in 2023, indicating a decrease of 4.1%[39]. - Interest expense from the revolving credit facility for the quarter ended December 31, 2024, was $3,227,000, down from $3,630,000 in the previous quarter, a reduction of 11.1%[39]. Future Outlook and Strategy - The company aims to maximize total return to stockholders through current income and capital appreciation, focusing on middle-market companies[40]. - Forward-looking statements indicate that actual results may vary materially from projections, emphasizing the uncertainty in future performance[43]. Recognition and Management - Monroe Capital Corporation has been recognized with multiple awards, including the 2023 Lower Mid-Market Lender of the Decade, highlighting its strong market position[42]. - The company operates under the management of Monroe Capital BDC Advisors, LLC, which is registered under the Investment Advisers Act of 1940[40]. - Monroe Capital LLC specializes in private credit markets, providing capital solutions since 2004, with a focus on generating high-quality returns[41]. - The company maintains a diverse investment strategy, including direct lending and structured credit, to adapt to various economic cycles[41].

Core Viewpoint - Monroe Capital Corporation reported its financial results for Q4 and full year 2024, highlighting a commitment to prudent portfolio management and maintaining asset quality despite economic fluctuations [1][3]. Financial Highlights Fourth Quarter 2024 - Adjusted Net Investment Income (NII) was $6.2 million, or $0.29 per share, down from $6.6 million, or $0.31 per share in Q3 2024 [5][13]. - Net Asset Value (NAV) decreased by $0.33 per share, or 3.6%, to $191.8 million, or $8.85 per share as of December 31, 2024 [5][9]. - The company paid a quarterly dividend of $0.25 per share on December 30, 2024, resulting in an annualized dividend yield of approximately 11.4% [3][8]. Full Year 2024 - NII for the year totaled $24.5 million, or $1.13 per share, compared to $23.2 million, or $1.07 per share for 2023 [18]. - Adjusted NII for the year was $25.0 million, or $1.15 per share, up from $24.1 million, or $1.11 per share in 2023 [18]. - Total investment income for 2024 was $60.5 million, down from $64.3 million in 2023, primarily due to lower interest income and a decrease in average invested assets [19]. Portfolio and Investment Performance - The company's investments at fair value were $457.0 million as of December 31, 2024, down from $474.3 million at the end of Q3 2024 [7][12]. - The percentage of portfolio company investments on non-accrual status increased to 3.4% from 3.1% in the previous quarter [12]. - The weighted average contractual yield decreased to 10.2% from 11.0% in Q3 2024 [12]. Debt and Leverage - Debt-to-equity leverage increased from 1.50 times to 1.53 times during the quarter due to the timing of certain portfolio company paydowns [6]. - As of December 31, 2024, the company had $9.0 million in cash and cash equivalents and $163.9 million of debt outstanding on its revolving credit facility [23]. Management Commentary - The CEO emphasized the focus on maintaining portfolio quality and generating attractive risk-adjusted returns despite economic challenges [3].

Investment Portfolio - As of December 31, 2024, the largest industry concentrations of investments were in FIRE: Real Estate (18.2%), Healthcare & Pharmaceuticals (17.5%), and Services: Business (11.2%) [52] - The total fair value of investments in the FIRE: Real Estate industry is $83.0 million, accounting for 18.2% of total investments [71] - The company has invested approximately $2.0 million to $35.0 million in the securities of middle-market companies, with a total fair value of the ten largest portfolio company investments amounting to $161.8 million, representing 35.4% of total investments [70] - Monroe Capital's investment professionals have invested in over 2,200 loans and related investments totaling over $47.7 billion since its formation in 2004 [56] - The company reviewed more than 2,100 investment opportunities during 2024, allowing for selective loan commitments [58] - The total fair value of investments as of December 31, 2024, was $457,048 [82] - The total fair value of investments as of December 31, 2023, was $488,386, with Grade 2 investments at $405,888 (83.1%) and Grade 3 at $74,224 (15.2%) [82] Investment Risk Management - The expected average maturity for target directly originated senior and unitranche secured debt is between three to seven years, with interest rates ranging from 9% to 16% [52] - The investment strategy includes a focus on secured loans with a covenant package that provides for full or partial repayment upon asset sales and restructurings [54] - The company maintains a disciplined portfolio management approach, which includes ongoing credit monitoring and regular investment committee meetings [60] - The company aims to limit downside potential by selecting investments with a very low probability of loss and negotiating covenants that preserve capital while allowing flexibility for portfolio companies [67] - MC Advisors employs a structured process for credit evaluation, focusing on downside scenarios to minimize risks [76] - The monitoring process includes regular assessments of investment risk profiles and updates for the investment committee for higher-risk ratings [80] - The investment performance risk rating system includes five grades, with Grade 1 indicating the least risk and Grade 5 indicating substantial risk [80] Financial Performance and Fees - The base management fee is now set at an annual rate of 1.75% for average invested assets, reducing to 1.00% for assets exceeding 200% of average net assets [95] - The incentive fee consists of two parts: a quarterly fee based on pre-incentive fee net investment income and an annual capital gains incentive fee [97][105] - The pre-incentive fee net investment income must exceed a hurdle rate of 2% per quarter (8% annually) for any incentive fee to be payable [100][106] - The cumulative net increase in net assets resulting from operations over the current and preceding 11 quarters must exceed cumulative incentive fees accrued for an incentive fee to be payable [98][111] - The capital gains incentive fee is calculated as 20% of realized capital gains, adjusted for any previous fees paid [105][114] - In the case of a loss, an incentive fee may still be paid if pre-incentive fee net investment income exceeds the hurdle rate [99] - The management fee is calculated at 0.4375% and other expenses are estimated at 0.2% [108][111] - The "catch-up" provision allows for 20% of pre-incentive fee net investment income exceeding 2.5% to be paid as an incentive fee [106][112] - The total return requirement limits the incentive fee based on cumulative net increases in net assets [98][111] - The incentive fee calculations are adjusted for any share issuances or repurchases during the quarter [101][104] - The cumulative aggregate capital gains fee received by the investment advisor is $6.4 million, which is effectively greater than $5 million (20% of cumulative aggregate realized capital gains less net realized capital losses or net unrealized depreciation of $25 million) [1] Administrative and Governance Matters - For the years ended December 31, 2024, 2023, and 2022, the company incurred $2.9 million, $2.8 million, and $3.1 million in administrative expenses, respectively, with $1.0 million, $0.9 million, and $1.2 million related to MC Management overhead and salary allocation [123] - The Investment Advisory and Management Agreement will continue in effect from year to year if approved annually by the Board or by a majority of the holders of outstanding voting securities [119] - The Board concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided [128] - The Board reviewed the investment performance and determined that MC Advisors was delivering results consistent with the investment objective [131] - The Administration Agreement may be terminated by either party without penalty upon 60 days' written notice [122] Tax and Regulatory Compliance - The company has elected to be treated as a RIC under Subchapter M of the Code, which allows it to avoid corporate-level U.S. federal income taxes on distributed income [142] - The company must meet the Annual Distribution Requirement, which requires distributing at least 90% of its investment company taxable income to maintain RIC status [142] - The company may face challenges in meeting the Annual Distribution Requirement due to the nature of its income, which may include original issue discount that is recognized before cash is received [150] - The company is subject to financial covenants that could limit its ability to make distributions to stockholders, impacting its RIC qualification [155] - The company may need to liquidate investments to meet distribution requirements, which could result in gains or losses that affect shareholder distributions [158] - The company monitors its investment practices to mitigate potential adverse tax effects from complex U.S. federal income tax provisions [159] - The company intends to monitor its investments in equity securities treated as partnerships to prevent disqualification as a RIC [160] - If the company fails to qualify as a RIC, it would be subject to U.S. federal income tax on all taxable income at regular corporate rates, which could adversely affect stockholder distributions [163] Competitive Landscape - The company faces intensified competition in the middle-market investment sector, with competitors having greater financial and technical resources, which may affect investment opportunities [137] - The company utilizes the expertise of MC Advisors to assess investment risks and pricing for its loan portfolio, enhancing its competitive position in the market [138] Investment Flexibility and Structure - The company has received exemptive relief from the SEC, allowing it to exclude certain debts from the asset coverage test under the 1940 Act, providing increased investment flexibility [170] - The company may invest up to 100% of its assets in securities acquired directly from issuers in privately negotiated transactions [166] - The company must maintain at least 70% of its total assets in qualifying assets to comply with the 1940 Act [172] - The company has dissolved its subsidiary MRCC SBIC, which previously allowed it to obtain leverage through SBA debentures [168] - The company is permitted to issue multiple classes of indebtedness and one class of stock senior to its common stock if asset coverage is at least 150% immediately after issuance [179] - The company does not intend to enter into repurchase agreements with a single counterparty in excess of 25% of total assets to meet diversification tests [177] - The company provides significant managerial assistance to portfolio companies to ensure their securities qualify as qualifying assets [175] Risk Factors - The company is subject to financial market risks, including valuation risk, interest rate risk, currency risk, and inflation and supply chain risk [550] - The majority of the loans in the company's portfolio have floating interest rates, which are typically based on a floating SOFR [553] - A hypothetical 300 basis points increase in interest rates could lead to a net increase in investment income of $6,054,000 [554] - As of December 31, 2024, the company held no investments in foreign currencies or foreign currency forward contracts [556] - U.S. inflation rates remain well above historical levels, adversely affecting consumer spending and economic growth [557] - The company may hedge against interest rate fluctuations using standard hedging instruments, although this may limit benefits from lower interest rates [555] Compliance and Ethics - The company has adopted written policies to prevent violations of federal securities laws and reviews these policies annually [189] - The company restricts access to nonpublic personal information about stockholders to employees with a legitimate business need [193] - The company intends to make its Annual Report and other filings publicly available free of charge on its website [204] - The company has a non-exclusive, royalty-free license to use the name "Monroe Capital" as long as MC Advisors remains the investment advisor [125]

Core Viewpoint - Monroe Capital Corporation will file its Annual Report on Form 10-K for the year ended December 31, 2024, on February 28, 2025, after market close [1] - The company will announce its financial results for Q4 and full year 2024 on March 3, 2025, prior to market open, followed by a webcast and conference call [2] Company Overview - Monroe Capital Corporation is a publicly-traded specialty finance company that primarily invests in senior, unitranche, and junior secured debt, as well as unsecured debt and equity investments in middle-market companies [3] - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation [3] - Investment activities are managed by Monroe Capital BDC Advisors, LLC, an investment adviser registered under the Investment Advisers Act of 1940 [3] Asset Management Firm - Monroe Capital LLC specializes in private credit markets, offering various strategies including direct lending, technology finance, venture debt, and structured credit [4] - The firm has been providing capital solutions to clients in the U.S. and Canada since 2004 and focuses on generating high-quality "alpha" returns [4] - Monroe Capital is headquartered in Chicago and has eleven offices across the U.S., Asia, and Australia [4] Awards and Recognition - Monroe Capital has received multiple awards, including being named to Inc.'s 2024 Founder-Friendly Investors List and recognized as the 2023 Lower Mid-Market Lender of the Decade by Private Debt Investor [5] - The firm has also been acknowledged for its performance in various categories, including Best CLO Manager of the Year and Best Performance in Private Debt [5]

Company Analysis - Monroe Capital (MRCC) has experienced a growing non-accrual rate of investments within its portfolio and a shrinking distribution coverage over the last twelve months [1] - The company's price has been impacted by these factors, leading to a sell rating being issued previously [1] Investment Strategy - The analyst specializes in uncovering strategies to utilize various investment vehicles, including high-quality dividend stocks, Business Development Companies, REITs, and Closed End Funds [1] - A hybrid system between growth and income is created to capture a total return on par with the S&P, while boosting investment income [1] - The approach aims to inspire average individuals to achieve early retirement without compromising portfolio safety [1]

Financial Data and Key Metrics Changes - Adjusted net investment income for Q3 2024 was $6.6 million or $0.31 per share, a nominal decrease from $6.7 million last quarter, remaining stable on a per share basis [8][19] - NAV as of September 30, 2024, was $198.9 million or $9.18 per share, slightly down from $199.3 million or $9.20 per share as of June 30, 2024, primarily due to net unrealized losses [8][21] - Debt-to-equity leverage decreased from 1.54 times at June 30, 2024, to 1.50 times at September 30, 2024, driven by payoffs and investment sales [9] Business Line Data and Key Metrics Changes - Investment portfolio totaled $474.3 million, an $11.5 million decrease from $485.8 million at the end of the last quarter, consisting of debt and equity investments in 94 portfolio companies [14] - Incremental investments in existing portfolio companies accounted for nearly 60% of investment activity during the quarter [16] - Received three full payoffs aggregating to $11.4 million and incurred partial paydowns totaling $26 million [17] Market Data and Key Metrics Changes - Middle market loan volumes rose, with M&A volumes up 43% year-over-year and LBO lending volume up 52% compared to the last quarter [15] - Delayed draw term loan funded volumes increased by 62% compared to Q3 2023, indicating a more active deal environment [15] Company Strategy and Development Direction - The company announced a strategic partnership with the Wendel Group, which will purchase a majority ownership interest and commit $1 billion in new seed capital [12] - Focus on selectively redeploying capital from payoffs into accretive investment opportunities and incumbent portfolio companies [28] - The partnership is expected to enhance the company's investment strategies and diversify its offerings [12][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate market challenges and maximize outcomes for shareholders [24] - The company anticipates a more active deal environment in the middle market through 2024 and into 2025, supported by private equity managers benefiting from lower interest rates [16][30] - The strategic partnership with Wendel is expected to provide significant new investment opportunities and enhance the company's overall platform [30] Other Important Information - The weighted average effective yield on the portfolio's debt and preferred equity investments was 11%, down from 11.9% due to a decline in base rates and one investment moving to nonaccrual status [20] - Total expenses for Q3 2024 were $9.2 million, a slight increase from $9.1 million in the previous quarter, but decreased by $200,000 when excluding incentive fee limitations [25] Q&A Session Summary Question: Focus on expense control - A participant suggested that the company should focus on containing operating expenses to positively impact share price [32] Question: Wendel partnership and BDC impact - Inquiry about whether new strategies from the Wendel partnership would diversify the BDC's lending strategies [35] - Management confirmed that MRCC would benefit from additional strategies that are synergistic and would create diversification [36] Question: Manager support for MRCC - A question regarding the expectation of continued support from the manager in terms of fee waivers if necessary [37] - Management affirmed a history of being investor-friendly and supportive of MRCC [38]