• Adjusted Net Investment Income: $6.2 million or $0.29 per share for Q4 2024, down from $6.6 million or $0.31 per share in the previous quarter.
• Net Asset Value (NAV): $191.8 million or $8.85 per share as of December 31, 2024, compared to $198.9 million or $9.18 per share as of September 30, 2024.
• Leverage: Increased to 1.53 times debt to equity as of December 31, 2024, from 1.50 times as of September 30, 2024.
• Investment Portfolio: Totaled $457 million, a decrease from $474.3 million at the end of the previous quarter.
• Investment Income: $14 million for Q4 2024, down from $15.7 million in Q3 2024.
• Total Expenses: $8 million for Q4 2024, compared to $9.2 million in Q3 2024.
• Net Loss on Portfolio: $7.7 million for Q4 2024, compared to a net loss of $1.5 million in the prior quarter.
• Weighted Average Effective Yield: 10.2% on the portfolio's debt and preferred equity investments, down from 11% in the previous quarter.
• Annualized Dividend Yield: 11.4% based on the February 28, 2025 closing share price.
• Total Borrowings: $293.9 million as of December 31, 2024.

• Warning! GuruFocus has detected 4 Warning Signs with MRCC.

Release Date: March 03, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Monroe Capital Corp (NASDAQ:MRCC) achieved an annualized dividend yield of 11.4%, indicating strong returns for shareholders.
• The company successfully covered its $0.25 per share dividend with adjusted net investment income.
• MRCC's portfolio companies demonstrated healthy revenue and EBITDA growth trends, benefiting from a positive economic backdrop.
• The strategic partnership with Wendell Group is expected to bring $1 billion of new seed capital, supporting new and existing investment strategies.
• MRCC's affiliation with Monroe Capital provides a competitive advantage, leveraging a platform with over $20 billion in assets under management.

Negative Points

• MRCC reported a 3.6% decline in NAV this quarter, primarily due to net unrealized losses from a specific portfolio company.
• The company's leverage increased slightly from 1.50 times to 1.53 times debt to equity, indicating higher financial risk.
• Investment income decreased by $1.7 million in the fourth quarter due to a declining interest rate environment.
• The portfolio's weighted average effective yield decreased from 11% to 10.2%, reflecting lower interest rates and a non-accrual investment.
• MRCC's net loss on the portfolio for the quarter was $7.7 million, primarily due to an unrealized mark-to-market loss.

Q & A Highlights

Q: What is Monroe Capital Corp's strategy to grow earnings and the portfolio, given the current market conditions and the portfolio's contraction over the past two years? A: Theodore Koenig, CEO, explained that the plan was to right-size the portfolio and address legacy issues. With the stock price close to NAV, Monroe is now positioned to play offense and accelerate growth. They are working on internal plans to grow the portfolio and expect to see efforts to expand and explore new opportunities in 2025.

Q: Can we expect resolutions on some of the long-standing non-accrual investments in the coming quarters? A: Mick Solimene, CFO, stated that they are actively working on resolving non-accruals, which include some legacy assets and litigation matters. The focus is on rotating these out of the portfolio and reinvesting in more accretive, newer vintage assets. Progress is expected during 2025.

Q: Given the reliance on bank credit facilities, is there consideration to swap these for baby bonds, especially in light of potential vulnerabilities in commercial real estate affecting regional banks? A: Theodore Koenig, CEO, acknowledged the consideration and noted that while commercial real estate is different from corporate lending, there is strong interest from financial institutions in providing capital for diversified middle market first lien loan portfolios. Monroe is always evaluating options, including unsecured debt, to optimize their capital structure.

Q: How does Monroe Capital Corp view the potential impact of a commercial real estate crisis on their credit facilities? A: Theodore Koenig, CEO, and Alex Parmacek, Deputy Portfolio Manager, emphasized that Monroe's credit facilities are well diversified and not heavily dependent on any single regional bank. They are focused on optimizing their capital structure and are aware of potential market impacts.

Q: What are the prospects for Monroe Capital Corp in 2025? A: Theodore Koenig, CEO, expressed excitement about the prospects for 2025, mentioning ongoing work on interesting initiatives. He encouraged stakeholders to reach out with any further questions and looks forward to the next earnings call.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.