Monroe Capital Corporation (NASDAQ:MRCC) Q3 2019 Earnings Conference Call - Final Transcript

Nov 07, 2019 • 11:00 am ET


Monroe Capital Corporation (NASDAQ:MRCC) Q3 2019 Earnings Conference Call - Final Transcript


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Welcome to Monroe Capital Corporation's Third Quarter 2019 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 or cash flows. Although we believe these statements are reasonable based on management's estimates, assumptions and projections as of today, November 7, 2019, these 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 risk, uncertainty or other factors, including, but not limited to, factors described from time to time in the Company's filings with the SEC. Monroe Capital takes no obligation to update or revise these forward-looking statements. I will now turn the conference over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. Please go ahead.

Ted Koenig

Good morning, and thank you to everyone who has joined us on our call today. I am joined by Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our third-quarter 2019 earnings press release and filed our 10-Q with the SEC. For the third quarter, we generated adjusted net investment income of $0.35 per share, in line with our quarterly dividend of $0.35 per share. This represents the 22nd consecutive year we have covered our dividend with adjusted net investment income. We have grown our investment portfolio in the last quarter by $28.9 million on a net basis. This growth was attributable to $49.5 million of new senior secured first lien investments, $900,000 of new equity investments and $7.1 million contributed to the equity in our Senior Loan Fund JV, as Aaron will describe in more detail later. Approximately $28.4 million of this new loan growth was attributable to existing portfolio company expansion.

Given the competitive market dynamics, our own loan portfolio has provided us with an ample opportunity to fund proprietary investments. Turning to the market, we continue to believe that overall business conditions remained solid in the lower part of the middle market, which we define as companies generating $35 million of EBITDA and below. Despite seeing some limited signs of market weakness, we tend to be more industry and sector specific, which -- I'm sorry, which tend to be more industry and sector specific, we remain aware that we are likely in the later innings of a long cycle of expansion in the US economy.

In addition, we have the added uncertainty of what will likely be a divisive 2020 presidential election campaign. As a defensive measure, over the past several quarters, we have continued to focus our origination efforts on industries and companies that we believe are less cyclical, and we have been careful not to follow the larger market in pushing average leverage up and structuring deals with either no covenants or extremely loose covenants. We've remained disciplined in our origination and underwriting