Monroe Capital Corporation

Welcome to Monroe Capital Corporation's first quarter 2022 earnings conference call. Before we begin, I'd 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. particularly in light of the COVID-19 pandemic. Although we believe these statements are reasonable based on management's estimates, assumptions, and projections as of today, May 4, 2022, these statements are not guarantees of future performance. Furthermore, 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 risks, uncertainty, or other factors including but not limited to the risk factors described from time to time and 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. Sir, you may now begin.

Good morning and thank you to everyone who has joined us on our call today. Welcome to our first quarter 2022 earnings conference call. I am joined by Aaron Peck, our CFO and chief investment officer, and also Mick Salamini, our senior portfolio manager for MRCC. Last evening, we issued our first quarter 2022 earnings press release and filed our 10-Q with the SEC. After a very strong fourth quarter in 2021, Activity during the first quarter of 2022 slowed in the M&A and financing markets. In addition, both risk premiums and volatility increased across asset classes as concerns about the impact of inflation and global growth, a more aggressive Fed tone, ongoing supply chain issues, and geopolitical unrest in Russia and Ukraine moved investors to the sidelines, especially in the more liquid markets. In 2021, sponsored middle market loan volume grew by over 82% year over year, according to Refinitiv. And we expect the trend of direct lenders taking market share from traditional institutional lending sources will continue, especially during periods of market uncertainty, like today, when issuers are seeking certainty of execution. Monroe's ability to offer underwritten solutions is a real advantage for our clients during a variety of market environments. Our pipeline of quality, actionable financing opportunities at the platform level remains very strong in the face of today's more uncertain market backdrop. Turning now to the first quarter results, we are pleased to report adjusted net investment income of $5.4 million today. of 25 cents per share. We also reported NAV of $244.9 million or $11.30 per share as of March 31st, 2022, a decrease of 21 cents per share from NAV of 249.5 million or $11.51 per share as of December 31, 2021. The modest decline in NAV was primarily the result of a one-time book loss on the extinguishment of debt associated with the redemption of the remaining SBA debentures during the quarter and net unrealized losses on the portfolio. During the quarter, MRCC's debt to equity leverage decreased slightly from 1.35 times debt to equity to 1.30 times debt to equity. This modest decrease in leverage was primarily driven by a decrease in the size of the portfolio as a result of portfolio syndication and repayment activity near the end of the quarter. New origination activity at Monroe remains strong and we expect to modestly increase leverage to within our targeted leverage range of 1.3 to 1.4 times debt to equity. As we have discussed on prior calls, Our continued focus is on making new investments with attractive risk-return dynamics while proactively managing and constructing our portfolio. We believe that our existing portfolio companies will be able to navigate a higher interest rate environment, and they are generally well-positioned to manage the inflationary supply chain and geopolitical headwinds they are facing. Our loan underwriting focus continues to be on those companies with defendable market positions, resilient business models, exceptional management teams, and strong sponsors or owners. MRCC enjoys a strategic advantage in being affiliated with a best-in-class middle market private credit asset management firm with approximately $13.5 billion in assets under management and over 160 employees as of March 31, 2022. We will continue to focus on generating adjusted net investment income that meets or exceeds our dividend and positive long-term NAV performance. I am now going to turn the call over to Aaron, who is going to walk you through our financial results.

Thank you, Ted. As of March 31, 2022, our investment portfolio totaled $546 million, down $15.7 million from $561.7 million as of December 31, 2021. Our investment portfolio consisted of debt and equity investments in 97 portfolio companies at March 31, 2022, as compared to debt and equity investments in 96 portfolio companies at December 31st. During the quarter, we made investments in three new portfolio companies with loan fundings totaling $5.6 million. In addition, we had revolver add-on or delayed draw fundings to existing portfolio companies totaling $16 million. During the quarter, we received three full payoffs totaling $22.4 million and had loan sales and other ordinary course loan repayments aggregating $13.8 million. At March 31st, we had total borrowings of $318.3 million, including $188.3 million outstanding under our revolving credit facility and $130 million of our 2026 notes. Total borrowings outstanding decreased by $19.6 million, primarily as a result of portfolio repayments and syndications near the end of the quarter. We are well situated to continue to carefully grow our portfolio through participating in the substantial pipeline of opportunities generated at Monroe. The revolving credit facility had $66.7 million of availability as of March 31st, subject to borrowing base capacity. Turning to our results. For the quarter ended March 31st, 2022, adjusted net investment income, a non-GAAP measure, was $5.4 million or 25 cents per share compared to $5.4 million or 25 cents per share in the prior quarter. When considering our target leverage and current credit performance at MRCC, we believe that on a run rate basis, our adjusted NII can cover the 25 cents per share quarterly, all other things being equally. As of March 31st, our net asset value was $244.9 million, which decreased from the $249.5 million in net asset value as of December 31st. Our NAV per share decreased from $11.51 per share at December 31st to $11.30 per share as of March 31st. The $0.21 per share NAV decrease was substantially the result of a loss on the extinguishment of debt associated with the redemption of the remaining SBA debentures during the quarter, and net unrealized losses on the portfolio. I will now turn it over to Mick Salamini, who will provide some more details on our first quarter operating performance.