Monroe Capital Corporation BDC Announces Second Quarter 2025 Results and Merger Transaction
CHICAGO, Aug. 11, 2025 (GLOBE NEWSWIRE) -- Monroe Capital Corporation (NASDAQ:MRCC) today announced its financial results for the second quarter ended June 30, 2025. In a separate joint release issued on August 7, 2025, MRCC and Horizon Technology Finance Corporation ("HRZN") announced that they have entered into a definitive merger agreement (the "Merger Agreement"), under which MRCC would merge with and into HRZN (the "Merger"), subject to the receipt of certain shareholder approvals and the satisfaction of certain closing conditions. Additionally, MRCC announced that it has entered into an asset purchase agreement to sell its investment assets at fair value to Monroe Capital Income Plus Corporation ("MCIP") immediately prior to the closing of the Merger (the "Asset Sale"), subject to the satisfaction or waiver of the closing conditions in the Merger Agreement and certain other closing conditions applicable to the Asset Sale, including the receipt of shareholder approval. For additional information, please refer to the Company's August 7, 2025 announcement and associated Form 8-K filings containing the definitive agreements associated with this transaction.
Except where the context suggests otherwise, the terms "Company," "we," "us," and "our" refer to Monroe Capital Corporation (together with its subsidiaries).
Second Quarter 2025 Financial Highlights
Net Investment Income ("NII") of $3.3 million, or $0.15 per share
Adjusted Net Investment Income (a non-GAAP measure described below) of $3.3 million, or $0.15 per share
Net increase (decrease) in net assets resulting from operations of $(1.9) million, or $(0.09) per share
Net Asset Value ("NAV") of $179.6 million, or $8.29 per share
Paid quarterly dividend of $0.25 per share on June 30, 2025
Current annual cash dividend yield to stockholders of approximately 14.6%(1)
Chief Executive Officer Theodore L. Koenig commented, "We are pleased to announce that we paid a $0.25 per share dividend during the second quarter, representing an approximate 14.6% annualized dividend yield. We continued to support the dividend through utilizing the spillover income we have accumulated from prior strong performance. We believe that MRCC's recently announced merger with HRZN, through its NAV for NAV structure, will unlock meaningful value for our shareholders and provide them with compelling long-term upside through participation in a larger, more scaled HRZN, which stands to benefit from meaningful synergies and operating leverage as it continues to grow."
Monroe Capital Corporation is a business development company affiliate of the award-winning private credit investment firm and lender, Monroe Capital LLC.___________________________(1) Based on an annualized dividend and closing share price as of August 8, 2025.
Management Commentary
Adjusted Net Investment Income totaled $3.3 million, or $0.15 per share for the quarter ended June 30, 2025, a decrease from $4.2 million, or $0.19 per share for the quarter ended March 31, 2025. NAV decreased to $179.6 million or $8.29 per share as of June 30, 2025, compared to $186.9 million or $8.63 per share as of March 31, 2025. The decrease in NAV this quarter was primarily the result of net unrealized losses associated with certain portfolio companies and the second quarter dividend being in excess of the Company's NII for the quarter. As of June 30, 2025, the Company has an estimated $0.42 per share in undistributed spillover income.
At quarter end, the Company's debt-to-equity leverage decreased from 1.45 times debt-to-equity at March 31, 2025 to 1.17 times debt-to-equity at June 30, 2025, as proceeds used from sales, payoffs and paydowns were used to reduce the outstanding balance on the revolving credit facility.
Selected Financial Highlights(in thousands, except per share data)
June 30, 2025
March 31, 2025
Consolidated Statements of Assets and Liabilities data:
(unaudited)
Investments, at fair value
$
367,700
$
430,571
Total assets
$
394,617
$
461,518
Net assets
$
179,592
$
186,877
Net asset value per share
$
8.29
$
8.63
For the Quarter Ended
June 30, 2025
March 31, 2025
Consolidated Statements of Operations data:
(unaudited)
Net investment income
$
3,298
$
4,086
Adjusted net investment income(2)
$
3,255
$
4,206
Net gain (loss)
$
(5,167
)
$
(3,554
)
Net increase (decrease) in net assets resulting from operations
$
(1,869
)
$
532
Per share data:
Net investment income
$
0.15
$
0.19
Adjusted net investment income(2)
$
0.15
$
0.19
Net gain (loss)
$
(0.24
)
$
(0.16
)
Net increase (decrease) in net assets resulting from operations
$
(0.09
)
$
0.03
___________________________(2) See Non-GAAP Financial Measure, Adjusted Net Investment Income below for a detailed description of this non-GAAP measure and a reconciliation from NII to Adjusted Net Investment Income. The Company uses this non-GAAP financial measure internally in analyzing financial results and believes that this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends for the Company.
Portfolio Summary
June 30, 2025
March 31, 2025
(unaudited)
Investments, at fair value
$
367,700
$
430,571
Number of portfolio company investments
80
85
Percentage portfolio company investments on non-accrual(3)
3.6
%
3.4
%
Weighted average contractual yield(4)
9.9
%
10.1
%
Weighted average effective yield(4)
8.8
%
9.2
%
Asset class percentage at fair value:
First lien loans
74.1
%
77.3
%
Junior secured loans
8.6
%
7.5
%
Equity investments
17.3
%
15.2
%
___________________________(3) Represents portfolio debt or preferred equity investments on non-accrual status as a percentage of total investments at fair value.(4) Portfolio yield is calculated only on the portion of the portfolio that has a contractual coupon and therefore does not account for dividends on equity investments (other than preferred equity investments).
Financial Review
The Company's NII for the quarter ended June 30, 2025 totaled $3.3 million, or $0.15 per share, compared to $4.1 million, or $0.19 per share, for the quarter ended March 31, 2025. Adjusted Net Investment Income was $3.3 million, or $0.15 per share, for the quarter ended June 30, 2025, compared to $4.2 million, or $0.19 per share, for the quarter ended March 31, 2025.
Total investment income for the quarter ended June 30, 2025 totaled $9.9 million, compared to $11.6 million for the quarter ended March 31, 2025. Total investment income decreased by $1.7 million, primarily due to lower average invested assets and lower effective rates. Additionally, a decline in other fee income of $0.2 million and a decline in dividend income from MRCC SLF of $0.2 million contributed to the decline in investment income for the quarter. The quarterly distribution from the Company's investment in MRCC Senior Loan Fund I, LLC ("SLF") decreased to $0.7 million for the quarter ended June 30, 2025, compared to $0.9 million for the quarter ended March 31, 2025.
Total expenses for the quarter ended June 30, 2025 were $6.6 million, compared to $7.6 million for the quarter ended March 31, 2025. Total expenses decreased by $1.0 million primarily due to lower average debt outstanding and reduced base management fees, reflecting a quarter-over-quarter decline in total assets.
Net gain (loss) was $(5.2) million for the quarter ended June 30, 2025, compared to $(3.6) million for the quarter ended March 31, 2025. For the quarter ended June 30, 2025, the net change in unrealized loss on investments was primarily driven by mark-to-market losses from certain portfolio companies that were still held as of June 30, 2025. Unrealized losses on the Company's equity investment in SLF also contributed to the overall decline. The Company's average portfolio mark decreased by 2.5%, from 91.1% of amortized cost as of March 31, 2025 to 88.6% of amortized cost as of June 30, 2025.
Net increase (decrease) in net assets resulting from operations was $(1.9) million, or $(0.09) per share, for the quarter ended June 30, 2025, compared to $0.5 million, or $0.03 per share, for the quarter ended March 31, 2025.
Liquidity and Capital Resources
As of June 30, 2025, the Company had $2.4 million in cash and cash equivalents, $80.3 million of debt outstanding on its revolving credit facility and $130.0 million of debt outstanding on its 2026 Notes. As of June 30, 2025, the Company had approximately $174.7 million available for additional borrowings on its revolving credit facility, subject to borrowing base availability.
MRCC Senior Loan Fund
SLF is a joint venture with Life Insurance Company of the Southwest ("LSW"), an affiliate of National Life Insurance Company. SLF invests primarily in senior secured loans to middle market companies in the United States. The Company and LSW have each committed $50.0 million of capital to the joint venture. As of June 30, 2025, the Company had made net capital contributions of $42.7 million to SLF, with a fair value of $30.2 million, compared to a fair value of $31.9 million as of March 31, 2025. For the quarter ended June 30, 2025, the Company received $0.7 million in dividend income from SLF, compared to $0.9 million in the prior quarter ended March 31, 2025. SLF's underlying investments are loans to middle-market borrowers that are generally larger than the rest of MRCC's portfolio, which is focused on lower middle-market companies. SLF's average mark on the underlying investment portfolio decreased during the quarter, from 82.8% of amortized cost as of March 31, 2025, to 77.4% of amortized cost as of June 30, 2025.
As of June 30, 2025, SLF had total assets of $75.9 million (including investments at fair value of $67.5 million), total liabilities of $15.6 million (including borrowings under the secured revolving credit facility with Capital One, N.A. (the "SLF Credit Facility") of $15.2 million) and total members' capital of $60.3 million. As of March 31, 2025, SLF had total assets of $86.0 million (including investments at fair value of $78.4 million), total liabilities of $22.2 million (including borrowings under the SLF Credit Facility of $21.8 million) and total members' capital of $63.8 million.
Non-GAAP Financial Measure, Adjusted Net Investment Income
On a supplemental basis, the Company discloses Adjusted Net Investment Income (including on a per share basis) which is a financial measure that is calculated and presented on a basis of methodology other than in accordance with generally accepted accounting principles of the United States of America ("non-GAAP"). Adjusted Net Investment Income represents NII, excluding the net capital gains incentive fee and income taxes. The Company uses this non-GAAP financial measure internally in analyzing financial results and believes that this non-GAAP financial measure is useful to investors as an additional tool to evaluate ongoing results and trends for the Company. The management agreement with the Company's advisor provides that a capital gains incentive fee is determined and paid annually with respect to realized capital gains (but not unrealized capital gains) to the extent such realized capital gains exceed realized and unrealized capital losses for such year. Management believes that Adjusted Net Investment Income is a useful indicator of operations exclusive of any net capital gains incentive fee as NII does not include gains associated with the capital gains incentive fee.
The following tables provide a reconciliation from NII (the most comparable GAAP measure) to Adjusted Net Investment Income for the periods presented (in thousands, except per share data):
For the Quarter Ended
June 30, 2025
March 31, 2025
Amount
Per Share Amount
Amount
Per Share Amount
(unaudited)
Net investment income
$
3,298
$
0.15
$
4,086
$
0.19
Net capital gains incentive fee
—
—
—
—
Income tax expense (benefit), including excise taxes
(43
)
0.00
120
0.00
Adjusted Net Investment Income
$
3,255
$
0.15
$
4,206
