Executive Summary

Q4 delivered Adjusted NII of $6.2m ($0.29/share), covering the $0.25 dividend; however, NAV fell 3.6% QoQ to $8.85/share on an unrealized mark tied to a single portfolio company, and investment income declined with lower base rates .
Portfolio yield and mix softened: weighted average effective yield fell to 10.2% (from 11.0% in Q3), non‑accruals ticked up to 3.4% of fair value (from 3.1%), and investments at fair value declined to $457.0m (from $474.3m) .
Management expects incentive fee limitations to continue next quarter (supportive of NII) and signaled intent to “play some offense” and pursue portfolio growth in 2025 as deal activity improves .
The Board declared a Q1 2025 distribution of $0.25/share; strategic partnership with Wendel received shareholder approval and is expected to close in Q1 2025, with no change to adviser fee terms—potential catalysts alongside resolution of legacy non‑accruals .
Wall Street consensus (S&P Global) estimates were unavailable at the time of analysis; beat/miss assessment vs. consensus could not be performed (see Estimates Context) [GetEstimates error].

What Went Well and What Went Wrong

What Went Well
- Dividend coverage sustained: “adjusted net investment income covered our $0.25 per share dividend for the quarter,” supporting an 11.4% annualized dividend yield at the Feb 28 price .
- Expense tailwinds and fee limits: total expenses fell QoQ; incentive fee limitation under the total return hurdle continued to support NII and is expected to persist into next quarter .
- Strategic positioning and pipeline: management sees improving sponsor M&A and a more active direct lending environment in 2025; plans to redeploy capital selectively and leverage incumbency advantages .
What Went Wrong
- NAV decline and unrealized losses: NAV/share fell 3.6% QoQ to $8.85 due to an unrealized mark on a specific portfolio company, partially offset by NII in excess of the dividend .
- Yield compression: weighted average effective yield fell to 10.2% (from 11.0% in Q3) on Fed cuts (~100 bps in H2) and prior spread compression; investment income declined by $1.7m QoQ .
- Non‑accruals edged up: investments on non‑accrual rose to 3.4% of fair value (from 3.1% in Q3); management continues working toward resolutions on legacy names .

Financial Results

Quarterly performance

Metric (USD, unless noted)	Q2 2024	Q3 2024	Q4 2024
Total Investment Income ($mm)	$15.627	$15.695	$14.023
Net Investment Income (NII) ($mm)	$6.559	$6.481	$6.022
Adjusted NII ($mm)	$6.694	$6.617	$6.185
NII per share ($)	$0.30	$0.30	$0.28
Adjusted NII per share ($)	$0.31	$0.31	$0.29
Net Gain (Loss) ($mm)	$(3.301)	$(1.515)	$(7.737)
Net Inc/(Dec) in Net Assets from Ops ($mm)	$3.258	$4.966	$(1.715)
NAV per share ($)	$9.20	$9.18	$8.85
Leverage (Debt/Equity, x)	1.54x	1.50x	1.53x
Weighted Avg Effective Yield (%)	11.9%	11.0%	10.2%
Non‑accrual (% of FV)	1.9%	3.1%	3.4%
Investments at Fair Value ($mm)	$485.804	$474.259	$457.048

Annual comparison

Metric	FY 2023	FY 2024
Total Investment Income ($mm)	$64.297	$60.527
NII ($mm)	$23.249	$24.532
Adjusted NII ($mm)	$24.055	$24.984
Net Gain (Loss) ($mm)	$(22.878)	$(14.828)
Net Inc/(Dec) in Net Assets from Ops ($mm)	$0.371	$9.704
Year‑end NAV per share ($)	$9.40	$8.85
Avg Portfolio Mark (% of amortized cost)	95.6%	92.2%

Portfolio mix and KPIs

KPI	Q3 2024	Q4 2024
First Lien Loans (% of FV)	80.0%	79.1%
Junior Secured Loans (% of FV)	6.4%	6.5%
Equity Securities (% of FV)	13.6%	14.4%
Portfolio Companies (count)	94	91
Avg Portfolio Mark (% of cost)	93.9%	92.2%
SLF Investments at FV ($mm)	$98.7	$98.0
SLF Borrowings ($mm)	$41.5	$38.2
SLF Dividend to MRCC ($mm)	$0.9	$0.9

Liquidity and capital

Metric	Q2 2024	Q3 2024	Q4 2024
Cash & Equivalents ($mm)	$3.876	$4.070	$9.044
Revolver Outstanding ($mm)	$177.8	$169.0	$163.9
2026 Notes Outstanding ($mm)	$130.0	$130.0	$130.0
Revolver Availability ($mm)	$77.2	$86.0	$91.1

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Q1 2025	$0.25 declared/paid in Q4 2024	$0.25 declared for Q1 2025	Maintained
Incentive Fee Limitation	Near term	Expected to persist “over the next 2 quarters” (Q3 call)	Expected to persist “throughout the next quarter” (Q4 call)	Narrowed to next quarter
Strategic partnership (Wendel)	Close timing	Expected to close in Q1 2025 (Q3 call)	Shareholders approved Feb 21; expected close later in Q1 2025	On track; progressed
Capital deployment posture	2025	Selective redeployment; incumbency focus	“Position to play some offense and step on the accelerator” in 2025	More constructive tone

No explicit quantitative guidance provided for revenue, margins, OpEx, OI&E, or tax rate.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024)	Previous Mentions (Q3 2024)	Current Period (Q4 2024)	Trend
Rates, spreads, yields	Spreads tightening; effective yield ~11.9%	Yield down to 11.0% on 50 bps base rate decline; spread compression	~100 bps Fed cuts in H2; modest spread widening; yield 10.2%	Yield pressure easing slightly as spreads stabilize
Portfolio growth vs. contraction	Portfolio size down; incumbency-led deployments	Portfolio decreased; focus on redeployment	Plans to “play some offense” and grow in 2025	Turning toward growth
Asset quality & non‑accruals	1.9% FV; idiosyncratic issues	3.1% FV; mark pressure on select names	3.4% FV; working through ~10 non‑accruals	Slight deterioration; active workouts
Incentive fee limitation	Expected to persist next 3 quarters	Expected to persist next 2 quarters	Expected to persist next quarter	Rolling persistence; near‑term support to NII
Wendel partnership	New partnership outlined	Close expected Q1 2025	Shareholder approval secured; close later in Q1 2025	Advancing toward close
Capital structure	—	—	Banks diversified; open to unsecured if attractive	Exploring optimization

Management Commentary

“Adjusted net investment income covered our $0.25 per share dividend for the quarter... annualized dividend yield at our trading price of 11.4%” — Theodore Koenig .
“We currently expect limitations on our incentive fees to persist throughout the next quarter.” — Lewis (Mick) Solimene .
“In the second half of 2024, the Fed cut amounted to nearly a 100 basis point decline in base rates... we saw spreads widen for the first time since the first quarter of 2023.” — Alex Parmacek .
“The decline in NAV this quarter was primarily the result of net unrealized losses attributable to a specific portfolio company.” — Lewis (Mick) Solimene .
“I’m hopeful that now we’re in a position to play some offense and step on the accelerator... to grow the portfolio [in 2025].” — Theodore Koenig .

Q&A Highlights

Growth strategy: management aims to shift from rightsizing toward portfolio growth in 2025, citing internal plans to “play some offense” as market activity improves .
Non‑accrual resolutions: ~10 names include legacy assets and litigation proceeds; dedicated workout team is pursuing resolutions and redeployment into higher‑return new vintages during 2025 .
Capital structure and bank facilities: management is monitoring bank market dynamics; facilities are diversified and unsecured options remain under consideration if arbitrage is attractive .

Estimates Context

S&P Global consensus for Q4 2024 EPS (NII/share) and revenue (Total Investment Income) was unavailable at the time of request due to data access limits; therefore, a beat/miss analysis vs. consensus could not be completed. We will update once S&P Global estimates are accessible [GetEstimates error].

Key Takeaways for Investors

Dividend coverage intact despite lower yields: Adjusted NII of $0.29/share covered the $0.25 dividend, aided by incentive fee limitations expected to persist into next quarter .
Watch the yield trajectory: portfolio effective yield fell to 10.2% as base rates declined; any stabilization or widening in spreads could help arrest NII pressure in 2025 .
NAV sensitivity to single‑name marks: Q4’s 3.6% NAV/share drop was driven by one portfolio company; resolution progress and recoveries could be a catalyst for NAV stabilization .
Asset quality remains key: non‑accruals nudged up to 3.4% of FV; workout outcomes on legacy positions are an important driver of both NAV and redeployment opportunities .
Funding remains flexible: diversified bank facilities and openness to unsecured debt provide optionality to support growth and optimize cost of capital .
Strategic platform tailwind: Wendel partnership approval and expected close in Q1 2025 brings capital and scale benefits to the adviser without changing fee terms, potentially enhancing origination flow .
Trading setup: near‑term sentiment hinges on yield stabilization and non‑accrual resolutions; medium‑term upside rests on redeployment into higher‑quality vintages and leveraging incumbency to grow NII .

Appendix: Additional Q4 2024 Details

Drivers of QoQ change: Total investment income fell $1.7m QoQ due to lower base rates, smaller average invested assets, and lower other income; expenses declined QoQ excluding incentive fee limitation .
SLF joint venture: FV of SLF assets ~$98.0m; borrowings $38.2m; MRCC received $0.9m dividend in Q4; SLF average mark ~86.8% of amortized cost .
Liquidity: $9.0m cash, $163.9m revolver debt outstanding, $130.0m notes; $91.1m revolver availability at year‑end (subject to borrowing base) .

Sources: Q4 2024 8‑K/press release and exhibits ; Q4 2024 earnings call transcript ; Q3 2024 8‑K/press release ; Q3 2024 call ; Q2 2024 8‑K/press release ; Q2 2024 call .

MONROE CAPITAL Corp (MRCC)·Q4 2024 Earnings Summary