Monroe Capital Corp (NASDAQ:MRCC) Q2 2022 Earnings Conference Call August 3, 2022 11:00 AM ET Company Participants Theodore Koenig - Chairman, President & CEO Lewis Solimene - CFO & CIO Conference Call Participants Kevin Fultz - JMP Securities Christopher Nolan - Ladenburg Thalmann & Co. Robert Dodd - Raymond James & Associates Operator Welcome to Monroe Capital Corporation's Second Quarter 2022 Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remarks ma ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-00866 MONROE CAPITAL CORPORATION (Exact Name of Registrant as Specified in its Charter) Maryland 27-4895840 (State or Other Jurisdiction of Inco ...

Financial Data and Key Metrics Changes - Adjusted net investment income for Q1 2022 was $5.4 million or $0.25 per share, unchanged from the previous quarter [18] - Net asset value (NAV) decreased to $244.9 million or $11.30 per share, down from $249.5 million or $11.51 per share as of December 31, 2021, primarily due to a one-time book loss and net unrealized losses [8][19] - Debt-to-equity leverage slightly decreased from 1.35 times to 1.30 times, driven by a reduction in portfolio size due to syndication and repayment activities [9] Business Line Data and Key Metrics Changes - The investment portfolio totaled $546 million, down from $561.7 million, consisting of debt and equity investments in 97 portfolio companies [14] - New investments included three new portfolio companies with loan funding of $5.6 million and revolver add-ons totaling $16 million [15] - Total investment income for Q1 was $12.5 million, down from $13 million in the previous quarter due to lower fee income and reduced pre-payment gains [22] Market Data and Key Metrics Changes - Non-accruals approximated 2.2% of the portfolio at fair value, down from 2.6% at the end of the previous quarter [23] - The effective yield on the debt and preferred equity portfolio remained at 8%, unchanged from the previous quarter [24] - LIBOR rates increased, with three-month LIBOR at approximately 95 basis points as of March 31, 2022, compared to 21 basis points at the end of the previous quarter [24] Company Strategy and Development Direction - The company aims to focus on making new investments with attractive risk-return dynamics while managing its portfolio proactively [10] - The strategic advantage lies in being affiliated with a leading middle market private credit asset management firm, managing approximately $13.5 billion in assets [12] - The company plans to continue its conservative underwriting model, funding less than 5% of all deals reviewed annually [31] Management's Comments on Operating Environment and Future Outlook - Management noted that the M&A and financing markets slowed in Q1 2022 due to increased risk premiums and volatility, influenced by inflation concerns and geopolitical unrest [5] - The company remains confident in its ability to deliver differentiated risk-adjusted returns despite market uncertainties [31] - Management expressed optimism about the investment portfolio and the potential for continued growth in adjusted net investment income [32] Other Important Information - The repayment of SBA debentures is expected to positively impact net investment income going forward [28] - The company has a strong pipeline of quality financing opportunities despite the uncertain market backdrop [7] Q&A Session Summary Question: Thoughts on capital structure and potential share repurchase - Management is considering all options to increase shareholder value, including fixed-rate notes and share repurchases [36] Question: Asset quality improvements and non-accruals - Management is focused on collecting underperforming assets and anticipates continued progress in reducing non-accruals [37][39] Question: Origination activity tracking in Q2 - Management noted a fair amount of demand but expects a slight drop-off in Q2 due to rising interest rates and market uncertainty [41] Question: Attractive industries for investment - Management highlighted a preference for recurring revenue models, particularly in data, iCloud, and subscription-based businesses [46] Question: Positioning in recurring revenue loans - The company focuses on the fragmented middle market for SaaS lending, underwriting smaller transactions compared to larger platforms [60]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the consolidated financial statements, including statements of assets and liabilities, operations, cash flows, and detailed notes, along with management's discussion and analysis and disclosures on market risk and controls [Item 1. Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Monroe Capital Corporation, including statements of assets and liabilities, operations, changes in net assets, cash flows, and detailed schedules of investments, along with comprehensive notes explaining significant accounting policies, fair value measurements, related party transactions, borrowings, and financial highlights for the period ended March 31, 2022 [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) The Company's total assets decreased by $25,616 thousand from December 31, 2021, to March 31, 2022, primarily due to a reduction in total investments at fair value and restricted cash Consolidated Assets and Liabilities Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------- | :------------ | | Total assets | $564,842 | $590,458 | -$25,616 | | Total investments, at fair value | $545,989 | $561,693 | -$15,704 | | Cash | $7,337 | $2,622 | +$4,715 | | Restricted cash | $0 | $15,459 | -$15,459 | | Total liabilities | $319,941 | $340,987 | -$21,046 | | Net assets | $244,901 | $249,471 | -$4,570 | | Net asset value per share | $11.30 | $11.51 | -$0.21 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2022, net investment income slightly increased, but significant net realized losses (including debt extinguishment) and a substantial net change in unrealized losses on investments and foreign currency contracts led to a sharp decrease in net assets from operations compared to the prior year Consolidated Statements of Operations Summary | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (YoY) | | :--------------------------------------------------- | :------------------ | :------------------ | :------------ | | Total investment income | $12,491 | $13,213 | -$722 | | Total expenses, net of waivers | $7,074 | $7,857 | -$783 | | Net investment income | $5,398 | $5,326 | +$72 | | Net realized gain (loss) | -$1,139 | -$3,018 | +$1,879 | | Net change in unrealized gain (loss) | -$3,412 | +$4,747 | -$8,159 | | Net increase (decrease) in net assets from operations | $847 | $7,055 | -$6,208 | | Net investment income per share | $0.25 | $0.25 | $0 | | Net increase (decrease) in net assets per share | $0.04 | $0.33 | -$0.29 | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets decreased from $249,471 thousand at December 31, 2021, to $244,901 thousand at March 31, 2022, primarily due to distributions to stockholders and net changes in unrealized losses, partially offset by net investment income Consolidated Statements of Changes in Net Assets Summary | Metric | Amount (in thousands) | | :------------------------------------ | :-------------------- | | Balances at December 31, 2021 | $249,471 | | Net investment income | $5,398 | | Net realized gain (loss) | -$1,139 | | Net change in unrealized gain (loss) | -$3,412 | | Distributions to stockholders | -$5,417 | | Balances at March 31, 2022 | $244,901 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2022, operating activities provided $14,162 thousand, a decrease from the prior year Consolidated Statements of Cash Flows Summary | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (YoY) | | :------------------------------------------ | :------------------ | :------------------ | :------------ | | Net cash provided by (used in) operating activities | $14,162 | $33,817 | -$19,655 | | Net cash provided by (used in) financing activities | -$24,916 | -$50,314 | +$25,398 | | Net increase (decrease) in Cash and Restricted cash | -$10,754 | -$16,497 | +$5,743 | | Cash and Restricted cash, end of period | $7,337 | $15,888 | -$8,551 | - Key operating cash flow adjustments for 2022 included purchases of investments of **-$21,567 thousand** and proceeds from principal payments, sales of investments and settlement of forward contracts of **+$36,218 thousand**[18](index=18&type=chunk) - Key financing cash flow activities included borrowings on revolving credit facility of **+$71,700 thousand**, repayments of revolving credit facility of **-$34,299 thousand**, repayment of SBA debentures of **-$56,900 thousand**, and stockholder distributions paid of **-$5,417 thousand**[18](index=18&type=chunk) [Consolidated Schedules of Investments](index=9&type=section&id=Consolidated%20Schedules%20of%20Investments) As of March 31, 2022, total investments at fair value decreased to $545,989 thousand, with senior secured loans constituting the largest portion (76.7%) Investment Portfolio Composition | Investment Type | March 31, 2022 | % of Total | December 31, 2021 | % of Total | | :-------------------------- | :------------- | :--------- | :---------------- | :--------- | | Senior secured loans | $418,798 | 76.7% | $423,700 | 75.4% | | Unitranche secured loans | $34,785 | 6.4% | $51,494 | 9.2% | | Junior secured loans | $19,521 | 3.6% | $14,364 | 2.6% | | LLC equity interest in SLF | $40,210 | 7.3% | $41,125 | 7.3% | | Equity securities | $32,675 | 6.0% | $31,010 | 5.5% | | **Total** | **$545,989** | **100.0%** | **$561,693** | **100.0%** | Top Industry Concentrations | Industry | March 31, 2022 (in thousands) | % of Total | December 31, 2021 (in thousands) | % of Total | | :-------------------------------- | :------------------------------ | :--------- | :------------------------------- | :--------- | | FIRE: Real Estate | $76,656 | 14.0% | $76,698 | 13.6% | | Services: Business | $67,282 | 12.3% | $71,540 | 12.7% | | Healthcare & Pharmaceuticals | $56,383 | 10.3% | $53,179 | 9.5% | | High Tech Industries | $45,316 | 8.3% | $54,085 | 9.6% | | Investment Funds & Vehicles | $40,210 | 7.4% | $41,125 | 7.3% | - Unrealized gain on foreign currency forward contracts decreased from **$781 thousand** at December 31, 2021, to **$365 thousand** at March 31, 2022[33](index=33&type=chunk)[61](index=61&type=chunk) [Notes to Consolidated Financial Statements](index=32&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the Company's significant accounting policies, including its status as a BDC and RIC, fair value measurement practices, revenue recognition for investments (interest, PIK, dividends, fees), and tax treatment [Note 1. Organization and Principal Business](index=32&type=section&id=Note%201.%20Organization%20and%20Principal%20Business) Monroe Capital Corporation operates as an externally managed BDC and RIC, aiming to maximize stockholder return through debt and equity investments, and dissolved its SBIC subsidiary on March 31, 2022 - Monroe Capital Corporation (the "Company") is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940 and a regulated investment company ("RIC") under the Internal Revenue Code[83](index=83&type=chunk) - The Company's investment objective is to maximize total return to its stockholders in the form of current income and capital appreciation through investment in senior secured, junior secured and unitranche secured debt and, to a lesser extent, unsecured subordinated debt and equity co-investments[83](index=83&type=chunk) - The Company's wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP ("MRCC SBIC"), received approval from the Small Business Administration ("SBA") to surrender its SBIC license and was dissolved on **March 31, 2022**[84](index=84&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=32&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's accounting practices, including GAAP compliance for investment companies, consolidation policies, fair value measurement hierarchy, investment income recognition, non-accrual status for doubtful loans, and RIC tax treatment with excise tax accruals - The consolidated financial statements are prepared in accordance with GAAP for investment companies (ASC Topic 946)[85](index=85&type=chunk) - The Company consolidates wholly-owned subsidiaries (MRCC SBIC through its dissolution, and Taxable Subsidiaries) but does not consolidate non-controlling interests (e.g., MRCC Senior Loan Fund I, LLC)[87](index=87&type=chunk) - Fair value is applied to substantially all financial instruments in accordance with ASC Topic 820, categorizing them into a three-level hierarchy[88](index=88&type=chunk) Investment Income Components (Three months ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Interest income | $9,085 | $8,961 | | PIK interest income | $1,821 | $1,679 | | Dividend income | $1,009 | $1,262 | | Fee income | $0 | $477 | | Prepayment gain (loss) | $198 | $482 | | Accretion of discounts and amortization of premium | $378 | $352 | | **Total investment income** | **$12,491** | **$13,213** | - Loans or preferred equity securities are placed on non-accrual status when payments are materially past due or collection is doubtful[96](index=96&type=chunk) - The fair value of non-accrual investments totaled **$12,205 thousand** at March 31, 2022, down from **$14,693 thousand** at December 31, 2021[96](index=96&type=chunk) - The Company has elected to be treated as a RIC and intends to distribute at least **90%** of its investment company taxable income to avoid corporate-level federal income taxes[111](index=111&type=chunk) - It accrues a **4%** excise tax on estimated excess taxable income[111](index=111&type=chunk) [Note 3. Investments](index=36&type=section&id=Note%203.%20Investments) This note details the Company's investment portfolio composition by type, geography, and industry, highlighting its co-investment in SLF and the associated dividend income and portfolio characteristics Investment Portfolio Composition (Amortized Cost vs. Fair Value, March 31, 2022) | Investment Type | Amortized Cost (in thousands) | Fair Value (in thousands) | % of Total (Fair Value) | | :-------------------------- | :---------------------------- | :------------------------ | :---------------------- | | Senior secured loans | $411,076 | $418,798 | 76.7% | | Unitranche secured loans | $56,943 | $34,785 | 6.4% | | Junior secured loans | $19,706 | $19,521 | 3.6% | | LLC equity interest in SLF | $42,150 | $40,210 | 7.3% | | Equity securities | $33,760 | $32,675 | 6.0% | | **Total** | **$563,635** | **$545,989** | **100.0%** | Geographic Composition (Fair Value, March 31, 2022) | Region | Fair Value (in thousands) | % of Total | | :------- | :------------------------ | :--------- | | Southeast | $156,956 | 28.7% | | Midwest | $133,364 | 24.4% | | Northeast | $108,769 | 19.9% | Industry Composition (Fair Value, March 31, 2022) | Industry | Fair Value (in thousands) | % of Total | | :------------------------- | :------------------------ | :--------- | | FIRE: Real Estate | $76,656 | 14.0% | | Services: Business | $67,282 | 12.3% | | Healthcare & Pharmaceuticals | $56,383 | 10.3% | - The Company co-invests with Life Insurance Company of the Southwest ("LSW") in senior secured loans through MRCC Senior Loan Fund I, LLC ("SLF"), an unconsolidated Delaware LLC[120](index=120&type=chunk)[121](index=121&type=chunk) - The Company and LSW each own **50.0%** of the LLC equity interests of SLF[120](index=120&type=chunk)[121](index=121&type=chunk) - As of March 31, 2022, the Company's funded LLC equity interest subscriptions to SLF totaled **$42,150 thousand**[122](index=122&type=chunk) - Dividend income from SLF for the three months ended March 31, 2022, was **$900 thousand**, down from **$1,200 thousand** in 2021[122](index=122&type=chunk) - SLF had total assets at fair value of **$202,062 thousand** as of March 31, 2022, and its portfolio included **61 investments** with a weighted average current interest rate on senior secured loans of **6.0%**[125](index=125&type=chunk)[126](index=126&type=chunk) [Note 4. Fair Value Measurements](index=47&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note describes the Company's fair value measurement process, including the multi-step valuation for illiquid investments, the use of income and market approaches for Level 3 assets, and details significant unobservable inputs for these valuations Fair Value Measurements (March 31, 2022) | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | Investments | $1,745 | $0 | $504,034 | $545,989 | | Foreign currency forward contracts asset (liability) | $0 | $365 | $0 | $365 | - The Board undertakes a multi-step valuation process quarterly for investments without readily available market quotations, involving investment professionals, independent valuation firms, and the audit committee[149](index=149&type=chunk) - Valuation techniques for Level 3 investments include the income approach (discounted cash flow models) and the market approach (enterprise value methodology, using multiples of EBITDA or revenue)[148](index=148&type=chunk)[150](index=150&type=chunk) Significant Unobservable Inputs for Level 3 Assets (March 31, 2022) | Asset Type | Valuation Technique | Unobservable Input | Weighted Average Mean | Range (Minimum-Maximum) | | :-------------------- | :------------------ | :------------------------- | :-------------------- | :---------------------- | | Senior secured loans | Discounted cash flow | EBITDA multiples | 9.5x | 4.5x-17.8x | | | | Market yields | 10.5% | 5.8%-20.0% | | Unitranche secured loans | Discounted cash flow | EBITDA multiples | 8.8x | 7.0x-11.8x | | | | Market yields | 8.1% | 7.5%-10.0% | | Equity securities | Enterprise value | EBITDA multiples | 7.5x | 4.3x-16.3x | | | | Revenue multiples | 4.2x | 0.6x-12.5x | [Note 5. Transactions with Affiliated Companies](index=53&type=section&id=Note%205.%20Transactions%20with%20Affiliated%20Companies) This note details the fair value and unrealized gains/losses of the Company's investments in non-controlled and controlled affiliate companies, including investment income generated from these affiliations - As of March 31, 2022, non-controlled affiliate company investments had a fair value of **$91,644 thousand**, and controlled affiliate company investments (MRCC Senior Loan Fund I, LLC) had a fair value of **$40,210 thousand**[167](index=167&type=chunk) - For the three months ended March 31, 2022, non-controlled affiliate investments experienced a net change in unrealized loss of **($389) thousand**, while the controlled affiliate experienced a net change in unrealized loss of **($915) thousand**[167](index=167&type=chunk) Investment Income from Affiliated Companies (Three months ended March 31, 2022) | Category | Interest Income (in thousands) | Dividend Income (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Non-controlled affiliate company investments | $2,170 | $45 | | Controlled affiliate company investments | $0 | $900 | [Note 6. Transactions with Related Parties](index=57&type=section&id=Note%206.%20Transactions%20with%20Related%20Parties) This note outlines the Company's fee arrangements with MC Advisors, including base management and incentive fees, details voluntary fee waivers, and reports administrative expenses reimbursed to MC Management - The Company pays MC Advisors a base management fee (**1.75%** of average invested assets, reduced to **1.00%** for assets exceeding **200%** of average net assets) and a two-part incentive fee[172](index=172&type=chunk)[174](index=174&type=chunk) - For the three months ended March 31, 2022, MC Advisors voluntarily waived **$55 thousand** in base management fees and **$408 thousand** in part one incentive fees[173](index=173&type=chunk)[175](index=175&type=chunk) - The Company incurred **$829 thousand** in administrative expenses for the three months ended March 31, 2022, reimbursing MC Management for overhead and administrative services[176](index=176&type=chunk) [Note 7. Borrowings](index=58&type=section&id=Note%207.%20Borrowings) This note details the Company's borrowing structure, including its revolving credit facility and senior unsecured notes, highlights the asset coverage ratio, and reports the repayment and dissolution of SBA debentures along with associated interest expenses - The Company's asset coverage ratio was **177%** as of March 31, 2022, exceeding the **150%** requirement[179](index=179&type=chunk) - The Company has a **$255,000 thousand** revolving credit facility (with an accordion feature up to **$400,000 thousand**) with **$188,300 thousand** outstanding borrowings as of March 31, 2022, at a weighted average interest rate of **3.1%**[180](index=180&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk) - The Company has **$130,000 thousand** in **4.75%** senior unsecured notes outstanding, maturing on **February 15, 2026**[186](index=186&type=chunk) - On March 1, 2022, MRCC SBIC fully repaid its outstanding **$56,900 thousand** SBA debentures, resulting in a realized loss on debt extinguishment of **$1,039 thousand**, and was subsequently dissolved[187](index=187&type=chunk) Interest and Other Debt Financing Expenses (Three months ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Interest expense - revolving credit facility | $1,474 | $1,005 | | Interest expense - 2026 Notes | $1,555 | $1,132 | | Interest expense - SBA debentures | $292 | $878 | | Amortization of deferred financing costs | $601 | $601 | | **Total interest and other debt financing expenses** | **$3,922** | **$4,453** | [Note 8. Derivative Instruments](index=60&type=section&id=Note%208.%20Derivative%20Instruments) This note explains the Company's use of foreign currency forward contracts to manage exchange rate risk, detailing the net change in unrealized loss and realized gain, and the notional amounts of contracts outstanding - The Company uses foreign currency forward contracts to mitigate exposure to foreign exchange rate fluctuations, primarily for Australian dollars (AUD) and Great Britain pounds (£)[190](index=190&type=chunk) - For the three months ended March 31, 2022, the Company recognized a net change in unrealized loss of **($416) thousand** and a net realized gain of **$12 thousand** on foreign currency forward contracts[193](index=193&type=chunk) - As of March 31, 2022, the largest notional amounts for foreign currency forward contracts were **AUD 15,410 thousand** and **£79 thousand**[192](index=192&type=chunk) [Note 9. Distributions](index=61&type=section&id=Note%209.%20Distributions) This note provides details on distributions declared to stockholders, including the per share amount and total distribution, and clarifies the operation of the Company's opt-out dividend reinvestment plan Distributions Declared (Three months ended March 31) | Metric | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Amount Per Share | $0.25 | $0.25 | | Total Distribution (in thousands) | $5,417 | $5,326 | - The Company operates an "opt out" dividend reinvestment plan (DRIP)[99](index=99&type=chunk)[194](index=194&type=chunk) - For the reported periods, DRIP shares were satisfied through open market repurchases rather than new issuances[99](index=99&type=chunk)[194](index=194&type=chunk) [Note 10. Stock Issuances and Repurchases](index=61&type=section&id=Note%2010.%20Stock%20Issuances%20and%20Repurchases) This note describes the Company's at-the-market (ATM) equity distribution program and confirms no stock issuances occurred through this program during the reported periods - The Company has an at-the-market ("ATM") equity distribution program allowing it to sell up to **$50,000 thousand** of common stock[195](index=195&type=chunk) - No stock issuances occurred through the ATM Program during the three months ended March 31, 2022 and 2021[195](index=195&type=chunk) [Note 11. Commitments and Contingencies](index=63&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) This note outlines the Company's outstanding commitments to fund investments, assures sufficient liquidity to cover these commitments, and states that no material legal proceedings are currently known - As of March 31, 2022, the Company had **$54,366 thousand** in outstanding commitments to fund investments (excluding SLF) and **$7,850 thousand** to SLF[196](index=196&type=chunk) - Management believes the Company's available cash balances and ability to draw on the revolving credit facility provide sufficient funds to cover its unfunded commitments[196](index=196&type=chunk) - The Company is subject to credit, counterparty, and market risks, but is not currently aware of any material legal proceedings[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) [Note 12. Financial Highlights](index=63&type=section&id=Note%2012.%20Financial%20Highlights) This note presents key financial performance metrics, including per share data, total return based on market value and net asset value, and annualized ratios for net investment income, total expenses, and portfolio turnover Per Share Data (Three months ended March 31) | Metric | 2022 | 2021 | | :--------------------------------------------------- | :----- | :----- | | Net asset value at beginning of period | $11.51 | $11.00 | | Net investment income | $0.25 | $0.25 | | Net gain (loss) | -$0.21 | $0.08 | | Net increase (decrease) in net assets from operations | $0.04 | $0.33 | | Stockholder distributions - income | -$0.25 | -$0.25 | | Net asset value at end of period | $11.30 | $11.08 | Total Return Metrics (Three months ended March 31) | Metric | 2022 | 2021 | | :------------------------------------ | :------- | :------- | | Total return based on market value | -1.64% | 28.09% | | Total return based on average net asset value | 0.34% | 3.00% | Annualized Ratios (Three months ended March 31) | Metric | 2022 | 2021 | | :------------------------------------------------------------------------------------------------ | :----- | :----- | | Ratio of net investment income to average net assets | 8.79% | 9.43% | | Ratio of total expenses, net of base management fee and incentive fee waivers, to average net assets | 11.71% | 13.34% | | Portfolio turnover | 3.89% | 8.19% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Monroe Capital Corporation's financial condition and operational results for the three months ended March 31, 2022 - The Company's investment objective is to maximize total return through current income and capital appreciation from senior secured, unitranche secured, and junior secured debt, and equity investments in middle-market companies[215](index=215&type=chunk) Portfolio Composition (Fair Value, March 31, 2022) | Investment Type | % of Total | | :-------------------------- | :--------- | | Senior secured loans | 76.7% | | Unitranche secured loans | 6.4% | | Junior secured loans | 3.6% | | Equity securities (including LLC equity interest in SLF) | 13.3% | - During the three months ended March 31, 2022, the Company invested **$5.6 million** in **3 new portfolio companies** and **$16.0 million** in **21 existing portfolio companies**[223](index=223&type=chunk) - Aggregate sales and principal repayments totaled **$36.2 million**, resulting in net sales and repayments of **$14.6 million**[223](index=223&type=chunk) Portfolio Yields (Weighted Average Annualized, March 31, 2022) | Investment Type | Contractual Yield | Effective Yield | | :-------------------------- | :---------------- | :-------------- | | Senior secured loans | 8.6% | 8.6% | | Unitranche secured loans | 4.1% | 4.4% | | Junior secured loans | 10.0% | 10.0% | | Total | 7.9% | 8.0% | Portfolio Asset Quality (March 31, 2022, Fair Value) | Investment Performance Risk Rating | Percentage of Total Investments | | :-------------------------------- | :------------------------------ | | Grade 1 (least risk) | 0.3% | | Grade 2 (acceptable risk) | 82.8% | | Grade 3 (below expectations, increased risk) | 14.0% | | Grade 4 (materially below expectations) | 2.8% | | Grade 5 (substantially below expectations, not anticipated to be repaid in full) | 0.1% | - As of March 31, 2022, **six borrowers** had loans or preferred equity securities on non-accrual status, totaling **$12.2 million** in fair value (**2.2%** of total investments)[235](index=235&type=chunk) Operating Results (Three months ended March 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (YoY) | | :--------------------------------------------------- | :------------------ | :------------------ | :------------ | | Total investment income | $12,491 | $13,213 | -$722 | | Total expenses, net of waivers | $7,074 | $7,857 | -$783 | | Net investment income | $5,398 | $5,326 | +$72 | | Net realized gain (loss) | -$1,139 | -$3,018 | +$1,879 | | Net change in unrealized gain (loss) | -$3,412 | +$4,747 | -$8,159 | | Net increase (decrease) in net assets from operations | $847 | $7,055 | -$6,208 | - The decrease in total investment income was primarily due to lower fee income and prepayment gains[238](index=238&type=chunk)[241](index=241&type=chunk) - The decrease in operating expenses was mainly due to lower interest expense (resulting from lower average debt and reduced interest rates) and a decline in management and incentive fees (net of waivers)[238](index=238&type=chunk)[241](index=241&type=chunk) - The full repayment of **$56.9 million** in SBA debentures on March 1, 2022, resulted in a **$1.0 million** net loss on extinguishment of debt[246](index=246&type=chunk)[249](index=249&type=chunk) - The net change in unrealized loss on investments for Q1 2022 was primarily attributable to specific credit performance of one underlying portfolio company[246](index=246&type=chunk)[249](index=249&type=chunk) - As of March 31, 2022, the Company had **$7.3 million** in cash, **$188.3 million** of total debt outstanding on its revolving credit facility, and **$130.0 million** in 2026 Notes[252](index=252&type=chunk) - **$66.7 million** was available for additional borrowings on the revolving credit facility[252](index=252&type=chunk) - MRCC SBIC was dissolved on **March 31, 2022**, following the full repayment of its SBA debentures[217](index=217&type=chunk)[265](index=265&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=90&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is exposed to financial market risks, including interest rate fluctuations and investment portfolio valuations, exacerbated by global economic uncertainties (COVID-19, Ukraine invasion) - The Company is subject to financial market risks, including changes in interest rates and the valuations of its investment portfolio, with uncertainty from the COVID-19 pandemic and the Russian invasion of Ukraine[321](index=321&type=chunk) - The majority of the Company's loans have floating interest rates (LIBOR-based) with re-set provisions and often include interest rate floors[321](index=321&type=chunk) - The revolving credit facility has a floating rate, while the 2026 Notes have fixed rates[321](index=321&type=chunk) Annualized Impact of Hypothetical Base Rate Changes (March 31, 2022) | Change in Interest Rates | Net increase (decrease) in net investment income (in thousands) | | :----------------------- | :------------------------------------------------------------ | | Down 25 basis points | -$58 | | Up 100 basis points | -$87 | | Up 200 basis points | $2,261 | | Up 300 basis points | $4,634 | - The Company has exposure to foreign currencies (Great Britain pound and Australian dollar) related to certain investments and may use foreign currency forward contracts or foreign currency borrowings to hedge this exposure[324](index=324&type=chunk) [Item 4. Controls and Procedures](index=90&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2022, the Company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely - The Company's disclosure controls and procedures were evaluated as effective as of **March 31, 2022**, providing reasonable assurance that required information is recorded, processed, summarized, and reported within specified time periods[325](index=325&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during the three months ended March 31, 2022[326](index=326&type=chunk) [PART II. OTHER INFORMATION](index=91&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information beyond the financial statements, covering legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=91&type=section&id=Item%201.%20Legal%20Proceedings) Neither Monroe Capital Corporation, its subsidiaries, nor its investment adviser are currently subject to any material legal proceedings - No material legal proceedings are currently affecting the Company, its subsidiaries, or its investment adviser[328](index=328&type=chunk) [Item 1A. Risk Factors](index=91&type=section&id=Item%201A.%20Risk%20Factors) The Company highlights ongoing risks from the Russian invasion of Ukraine and the COVID-19 pandemic, which continue to cause global economic disruptions, potentially impacting portfolio companies' operations, liquidity, and valuations - The Russian invasion of Ukraine may have a material adverse impact on the Company and its portfolio companies due to political, social, and economic disruptions and sanctions[330](index=330&type=chunk) - The COVID-19 pandemic continues to cause severe disruptions, impacting portfolio companies' operations, liquidity (increased draws, amendment requests, potential defaults), and valuations[331](index=331&type=chunk)[332](index=332&type=chunk)[335](index=335&type=chunk) - The long-term impacts may not be fully reflected in current valuations[331](index=331&type=chunk)[332](index=332&type=chunk)[335](index=335&type=chunk) - The Company operates under a **150%** minimum asset coverage ratio, which magnifies the potential for loss on investments and increases the risk for common stockholders[339](index=339&type=chunk)[340](index=340&type=chunk)[344](index=344&type=chunk) - A hypothetical **-10%** portfolio return could lead to a **-28.81%** return for common stockholders[339](index=339&type=chunk)[340](index=340&type=chunk)[344](index=344&type=chunk) - The revolving credit facility imposes conditions that may limit distributions to stockholders and requires compliance with financial and operational covenants, such as maintaining asset coverage ratios and minimum net worth[347](index=347&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) - Declines in collateral value can reduce borrowing availability[347](index=347&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=95&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported[353](index=353&type=chunk) [Item 3. Defaults Upon Senior Securities](index=95&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[354](index=354&type=chunk) [Item 4. Mine Safety Disclosures](index=95&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report - No mine safety disclosures were reported[355](index=355&type=chunk) [Item 5. Other Information](index=95&type=section&id=Item%205.%20Other%20Information) No other information is reported in this section - No other information was reported in this section[356](index=356&type=chunk) [Item 6. Exhibits](index=96&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Articles of Incorporation, Bylaws, and various certifications (CEO, CFO, Sarbanes-Oxley Act) - Key exhibits include the Amended and Restated Articles of Incorporation (Exhibit 3.1), Bylaws (Exhibit 3.2), and Certifications of Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1)[358](index=358&type=chunk) [Signatures](index=97&type=section&id=Signatures) The report is duly signed on May 3, 2022, by Theodore L. Koenig, Chairman, Chief Executive Officer and Director, and Aaron D. Peck, Chief Financial Officer, Chief Investment Officer and Director, for Monroe Capital Corporation - The report was signed on **May 3, 2022**, by Theodore L. Koenig (Chairman, CEO, and Director) and Aaron D. Peck (CFO, CIO, and Director) for Monroe Capital Corporation[360](index=360&type=chunk)

Monroe Capital (NASDAQ:MRCC) Q4 2021 Earnings Conference Call March 3, 2022 11:00 AM ET Company Participants Ted Koenig - Chairman, President & CEO Aaron Peck ??? CIO & CFO Conference Call Participants Christopher Nolan - Ladenburg Thalmann Sarkis Sherbetchyan - B. Riley Securities Matt Tjaden - Raymond James Robert Dodd - Raymond James Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you na ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Maryland 27-4895840 (State or Other Jurisdiction of Incorporation or Organization) 311 South Wacker Drive, Suite 6400 Chicago, Illinois 60606 (Address of Principal Executive Office) (Zip Code) (I.R.S. Employer Identification No.) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF ...

Monroe Capital (NASDAQ:MRCC) Q3 2021 Earnings Conference Call November 3, 2021 11:00 AM ET Company Participants Theodore Koenig - Chairman, President & CEO Aaron Peck - CIO, CFO, Corporate Secretary Conference Call Participants Christopher Nolan - Ladenburg Thalmann Sarkis Sherbetchyan - B. Riley Securities Robert Dodd - Raymond James Operator Welcome to Monroe Capital Corporation's Third Quarter 2021 Earnings Conference Call. Before we begin, I would like to take a moment to remind our listeners that remar ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-00866 MONROE CAPITAL CORPORATION (Exact Name of Registrant as Specified in its Charter) 311 South Wacker Drive, Suite 6400 Chicago, Illinois 60606 (Address o ...

Monroe Capital Corp (NASDAQ:MRCC) Q2 2021 Results Earnings Conference Call August 4, 2021 11:00 AM ET Company Participants Theodore Koenig - Chairman, President & CEO Aaron Peck - CIO, CFO, Corporate Secretary Conference Call Participants Christopher Nolan - Ladenburg Thalmann Sarkis Sherbetchyan - B. Riley Securities Robert Dodd - Raymond James Operator Welcome to Monroe Capital Corporation's Second Quarter 2021 Earnings Conference Call. Before we begin, I would like to take a moment to remind our listener ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 814-00866 MONROE CAPITAL CORPORATION (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: | Title of Each ...