Monroe Capital Corporation

Thank you for standing by. Today's conference will begin in approximately one minute to allow as many participants as possible to join. We thank you for your patience. Welcome to Monroe Capital Corporation's first quarter 2023 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, and cash flows. Although we believe these statements are reasonable based on management's estimates, assumptions and projections as of today, May 11, 2023. 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 risks, uncertainty or other factors, including but not limited to the risk 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 call over to Ted Koenig, Chief Executive Officer of Monroe Capital Corporation. Please go ahead.

Good morning and thank you to everyone who has joined us on our earnings call today. Welcome to our first quarter 2023 earnings conference call. I am joined by Mick Salamini, our CFO and Chief Investment Officer, and Alex Parmasuk, our deputy portfolio manager. Last evening, we issued our first quarter 2023 earnings press release and filed our 10Q with the SEC. An uncertain macroeconomic backdrop and turmoil in the regional banking system led to increased market volatility and a decline in M&A transaction activity in the first quarter of 23. According to Refinitiv, middle market deal volume and the quarter fell 39% from the fourth quarter of last year to its lowest level since the height of the pandemic in the third quarter of 2020. Economic growth slipped amid still high inflation and rising interest rates, and the general expectation that the Fed will remain diligent in combating inflation towards its long-run trend of around 2%. These dynamics point to a more challenging economic environment for the remainder of 2023 and a general tightening of credit conditions, particularly among the regulated banking industry. Against this backdrop, Monroe's ability to offer a variety of underwritten solutions with a certainty of execution remains a distinct advantage for our clients. We remain mindful and cautious, however, that a slowing economy may create more stress within the portfolio and in the broader market. Yet as we discussed on previous calls, this period of market dislocation presents a unique and compelling opportunity for MRCC and private credit to thrive. Historically, Monroe has outperformed in similar periods of economic volatility. While there was a slowdown in transaction activity in the first quarter, direct lenders continue to dominate share of overall LBO volumes. Consistent with Refinitiv's first quarter 2023 private deals analysis, we continue to see leverage and loan-to-value levels in the lower middle market decline with a corresponding increase in spreads. Further, deal terms, pricing, structures, and documentation have shifted favorably to the lenders. These dynamics put Monroe in a strong position to utilize our rigorous underwriting platform and broad capabilities to add attractive assets in recession resilient sectors as older vintage assets repay. As we navigate this period of volatility, our focus will be twofold. We will be concentrated on maintaining portfolio quality, where we lean on our deep and experienced portfolio management team and our early intervention playbook to get ahead of potential challenges and develop strategies to maximize our outcomes. Concurrently, we will look to capitalize on the market share and pricing opportunities presented to private credit. Despite slowdown in the M&A markets, the number of deals we have assessed are in line with historical levels. Our focus will be on maintaining a disciplined, highly selective approach to our new deal originations as we look to redeploy capital and new assets that come with favorable structures and attractive yields. I will now transition to highlight our first quarter results. We are pleased to report adjusted net investment income of $6.9 million, or 32 cents per share, representing a 28% year-over-year increase to the first quarter of 2022 and a 23% increase from last quarter. This increase is primarily the result of increases in effective rates on the portfolio from the rising interest rate environment. We also reported NAV, of $223 million or $10.29 per share as of March 31, 2023 compared to $225 million or $10.39 per share as of December 31, 2022. The decline, the slight decline in NAV was primarily the result of net unrealized losses on the portfolio that were primarily attributable to a couple specific portfolio companies that saw declining financial performance resulting from macroeconomic factors. On a net basis, the valuations on the remainder of the portfolio remained relatively flat during the quarter. During the quarter, MRCC's debt to equity leverage was unchanged at 1.49 times debt to equity, slightly above our long-term target range of 1.3 times to 1.4 times. We continue to focus on managing our investment portfolio and selectively redeploying capital resulting from repayments. We believe that our purposefully defensive portfolio will be able to navigate the higher interest rate environment and increasingly challenging economic macro environment. The weighted average interest coverage remains generally sound across our existing portfolio and has cushioned to sustain further rate hikes. Further, the portfolio continues to maintain a modest weighted average loan to value, and we believe that this, coupled with the relationships we have developed with high-quality sponsors, with a track record of demonstrating strong support of their portfolio companies, provides us with meaningful downside protection on our portfolio. Our loan underwriting focus continues to be on those companies with defensible market positions, resilient business models, exceptional management teams, and strong sponsors or owners. By selectively redeploying capital from payoffs into new investments with attractive risk return dynamics, we will be able to recycle older vintage assets with new assets that benefit from lower risk profiles and higher yields, enhancing the quality of the overall portfolio. MRCC enjoys strong strategic advantage in being affiliated with the best-in-class middle market private credit asset management firm with approximately $16 billion in assets under management and approximately 200 employees as of March 31, 2023. We continue to focus on generating adjusted net investment income that meets or exceeds our dividend and positive long-term NAV performance despite anticipated macro market headwinds. At this point, I will turn the call over to Mick, who is going to walk you through the financial results in greater detail.

Thank you, Ted.