Monroe Capital Corp (MRCC) 2017 Q2 法說會逐字稿

Welcome to Monroe Capital Corporation's Second Quarter 2017 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, August 9, 2017, 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, the 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.

Hello, and thank you, everyone, who has joined us on our call today. I'm with Aaron Peck, our CFO and Chief Investment Officer. Last evening, we issued our second quarter 2017 earnings press release and filed our 10-Q with the SEC.

I will first provide an overview of the quarter before turning the call over to Aaron to go through the results in more detail. He will then turn the call back to me to provide some closing remarks. After that, we will take questions.

We are very pleased to have announced another strong quarter of financial results. For the quarter, we generated adjusted net investment income and net investment income of $0.35 per share, equal to our second quarter dividend of $0.35 per share. This represents the 13th consecutive quarter we have covered our dividend.

Our book value per share decreased to $14.05 per share as of June 30, primarily due to unrealized mark-to-market valuation declines during the quarter on one asset in our portfolio and dividends paid in excess of net investment income in the quarter as a result of the late second quarter timing of our most recent equity raise.

The largest impact came from an unrealized mark-to-market reduction in the fair value of our equity position in Rockdale Blackhawk. As a reminder, we received this equity in Rockdale for free as part of a senior secured debt financing, and therefore, we did not make any cash investment in the equity. This period's reduction in the fair value of the Rockdale equity of $6.8 million is the reduction of a previous unrealized gain on this equity position. The debt investment on Rockdale continues to be fair value marked at near par.

At quarter end, our highly diversified portfolio had a fair value of $445.6 million and was invested in 65 companies across 23 different industry classifications. Our largest position represented 4.2% of the portfolio and our 10 largest positions were 29% of the portfolio. Our portfolio is heavily concentrated in senior secured loans, in particular, first-lien secured loans. 96% of our portfolio consists of secured loans and approximately 87% is first-lien secured. We continue to believe that first-lien loans provide better risk-adjusted returns in the senior secured part of the market.

As we previously announced, we were pleased to price an equity offering on June 9. Including the exercise of the over-allotment option by the underwriters, we were able to raise gross proceeds of approximately $51.8 million. This raise was accretive to our book value. As with past offerings, we applied the proceeds to our credit facility and will redraw the capital over time to fund new portfolio growth.

Also, as we have discussed in the past, MRCC is very well positioned for future interest rate increases. Most all of our loan portfolio is invested in floating-rate debt with rate floors. Given the current LIBOR level, we have surpassed the level of LIBOR floors on almost all of our loans, and therefore, we believe MRCC is well situated to meaningfully benefit from any increase in short-term interest rates going forward.

In addition, we have $85.6 million outstanding in fixed-rate debt from our SBA debentures, which will allow us significant interest rate arbitrage on any increase in LIBOR in the future.

Middle-market companies and private equity firms continue to look at alternative lenders such as Monroe for their lending solutions instead of traditional regulated banks. As a result, we continue to see numerous origination opportunities across a variety of sectors.

Our external manager, Monroe Capital, maintains 8 origination offices throughout the U.S., including 1 in Canada, and reviewed over 2,000 unique investment opportunities last year. The lending market remains highly competitive, where new entrants as well as other BDC managers are being aggressive in an effort to put new assets on the books or to replace runoff. We continue to remain highly disciplined in our approach to business origination. While we pass on over 90% of the investment opportunities we identify, we still have a considerable number of high-quality and attractive opportunities in our pipeline. This is a luxury that comes from the Monroe Capital platform with about $4.5 billion today in current assets under management.

Our co-investment exemptive relief from the SEC enables us to co-invest alongside the numerous private institutional funds we manage in order to provide comprehensive financial solutions to our borrowers. Our disciplined underwriting and focus on credit quality has helped us deliver consistent income and dividends to our shareholders.

As we continue to ramp our SBIC subsidiary over the next couple of quarters, now that we have fully invested the equity portion, future investments are being funded with SBA debentures, and therefore, should positively impact our per-share net investment income, all other things being equal.

Currently, we continue to maintain $0.31 per share of undistributed net investment income, which in our view provides a significant cushion to our ability to maintain a consistent quarterly dividend payment to our shareholders without returning capital.

I am now going to turn the call over to Aaron, who is going to discuss the financial results in more detail.

Thank you, Ted. Our investment portfolio continued to grow in the quarter. And as of June 30, the portfolio was at $445.5 million at fair value, an increase of approximately $27.4 million since the prior quarter-end. During the quarter, we funded a total of $73.4 million, which was due to 8 new deals and several add-on and revolver fundings on existing deals. This growth was partially offset by complete prepayments on 6 deals and partial repayments on other portfolio assets, which aggregated $41.6 million during the quarter.

At June 30, we had total borrowings of $93.8 million under our revolving credit facility and SBA debentures payable of $85.6 million. The increase in SBA debentures are the result of portfolio growth, and the reduction in borrowings under the revolver are the result of the capital raise we completed in June. We applied the proceeds of that capital raise to the revolver, then began redrawing on the facility to fuel portfolio growth.

As of June 30, our net asset value was $284.3 million, which increased significantly from the $239.6 million in net asset value as of March 31, primarily as a result of our June equity offering.

Our NAV per share decreased from $14.34 at March 31 to $14.05 per share as of June 30. This was driven primarily by 2 discrete events. The first is due to a reduction in the equity valuation for Rockdale Blackhawk, as Rockdale has again reduced its projected EBITDA due to the reduction in reimbursement rates from certain payers and has had to address some liquidity strain due to nonpayment of certain accounts receivable with the same payer. As a reminder, we receive the equity in Rockdale for free in connection with a senior debt financing and made no cash outlay for the equity.

The second is related to the timing of our most recent equity offering. We completed our latest equity offering late in the second quarter. The new shares issued received a dividend of $0.35 per share at the end of the quarter despite the fact that we did not have any significant earnings associated with that capital in the second quarter. As a result of these factors, our NAV per share decreased from $14.34 at March 31 to $14.05 as of June 30. In our current view, neither of these items should be of a recurring nature and should not affect future periods.

Turning to our results for the quarter ended June 30. Adjusted net investment income, a non-GAAP measure, was $6.1 million or $0.35 per share, flat when compared to the prior quarter. At this level, per-share adjusted NII equaled our quarterly dividend of $0.35 per share. Due to the equity raised, we had a higher weighted average share count with no significant increase in earnings as a result, which diluted our per-share financial performance. As a result of these factors, management decided to waive a small portion of the incentive fee owed to the external manager in order to achieve per-share adjusted net investment income equal to the second quarter per-share dividend. In the second quarter, this waived amount was approximately $250,000.

Looking to our statement of operations. Total investment income for the quarter was $12.3 million compared to $12 million in the prior quarter. The small increase in investment income is primarily as a result of the growth in the size of the company's investment portfolio during the quarter.

Total expenses of $6.2 million included $2.2 million of interest and other debt financing expenses; $1.9 million in base management fees; $1.2 million in incentive fees after the $250,000 of incentive fees waived; and $883,000 in general, administrative and other expenses.

As for our liquidity, as of June 30, we had approximately $106.2 million of capacity under our revolving credit facility. We also had access to $29.4 million of additional SBA debentures at quarter-end.

I will now turn the call back to Ted for some closing remarks before we open the line for questions.

Thanks, Aaron. Since going public with our IPO in 2012, we have generated a 40% cash-on-cash return for our shareholders based on changes in NAV and dividends paid since our IPO, assuming no reinvestment of dividends. Based on the closing price of our shares on August 8, investors that purchased stock at our IPO in 2012 have received a 38.3% cash-on-cash return, again, assuming no reinvestment of dividends.

On an annualized basis, this represents approximately an 8.5% annual return for our stockholders since 2012. We believe that these returns compare very favorably to those achieved by our peers and puts MRCC in a very small and elite group of BDCs that have delivered this level of performance for shareholders over a consistent period of time.

Based on our pipeline of both committed and anticipated deals, we expect to maintain our new investment momentum for the remainder of this quarter as well as into the third quarter. And as Aaron mentioned, based on the availability under our revolving credit facility and the additional SBA debentures, we feel we have solid liquidity for our upcoming -- to address our upcoming pipeline. With our stock trading at a dividend yield around 10% now, fully supported by adjusted net investment income and a best-in-class external manager, we believe that Monroe Capital Corporation provides a very attractive investment opportunity for our shareholders and other investors.

Thank you all for your time today. And with that, I'm going to ask the operator to open the call for questions now.

(Operator Instructions) Our first question is from Bob Napoli of William Blair.

The competitive environment, Ted, I mean, the -- you say it's very competitive, but is it incrementally more competitive? What are the yields on the loans here? I mean, obviously, you guys still have a very strong origination business and capability relative to others, but are they -- are these loans -- are you having to take at the margin more credit risk? And are you getting the same yields?

Good question. The market is no more competitive, Bob, than it was 3 months ago or 6 months ago. Today, banks -- the traditional banks continue to be out of the market for leverage lending, which is most of what we do. We see the same players. Everyone seems to have found a relative equilibrium in terms of pricing today because everyone has the same needs.

The public BDCs have to return -- generate return sufficient to pay dividends. The private funds have to return sufficient amounts to pay a market-competitive return to LPs. So the good news, I think the market has found some equilibrium in pricing in our space. When I say our space, I refer to the $30 million EBITDA-sized companies and below. So I think we'll -- I don't see anything on the horizon that will change that going forward for the rest of the year.

I'll just add one thing, Bob. One of the things we've been saying consistently in prior calls, which is happening in our portfolio, is we are seeing our weighted average yield come down a little bit. And that's really because we are able to participate in even lower-risk deals than our SBIC subsidiary due to the excess leverage.

So rather than putting higher-yielding, higher-risk deals and putting extra leverage on those, we're able to, we believe, take the risk down in the portfolio and slightly reduce our weighted average effective yield without impacting ROE, which is our strategy with regards to using the SBIC.

That's very helpful. And just one follow-up question. On Rockdale Blackhawk, is that -- overall, I guess, you have $6.5 million of equity left and the debt. I mean, are you -- is -- did you change the rating on the debt at all in the quarter? And how secure -- I mean, it seems like the business is going in the wrong direction a bit, if you would. What is your comfort level with the $6.5 million equity that you have marked and the debt?

Sure. Good question. So as of June 30, the risk rating has not changed on the debt for Rockdale. It remains at 2. We're very confident on the debt piece in terms of its -- because frankly, we believe it's asset coverage based on a large receivables balance. So that part of the story remains very strong for us, and we believe there's still a long-term equity story to be had here. The company was a little slow to morph its business strategy, but has now done that and is on track to improve its situation.

And so I don't know what will happen in terms of next quarter, but the long-term estimates for us continue to be strong in terms of an equity story here. So obviously, the fair value is what we believe the equity is worth at the end of June, and we really reached that conclusion in concert with a third-party valuation firm. And the future, we still believe remains bright for Rockdale for the equity.

What percentage of that company do you own?

To date, between Monroe, the BDC and another fund, we own 25%. The percentage that's owned by the BDC, I believe, is around 11% to 12%, I'd have to get back to you with specifics.

Our next question is from Leslie Vandegrift of Raymond James.

I have a quick question on the waiver this quarter. I know you discussed it in the prepared remarks of waiving to make the quarterly dividend on adjusted NII for the quarter and was curious for the outlook for that for the rest of the year, if you see that being used, if there's a specific calculation other than just making adjusted NII equal to the quarterly, if it's not.

Yes. Thanks, Leslie. Yes, we did that in Q2 because we felt it was the appropriate thing to do. We've got a strong alignment. Management has a strong alignment here with shareholders, and we continue to believe that's one of the things that separates our firm apart from others. I think that's really going to be a quarter-by-quarter call. This was, I think, the right thing to do in Q2, and we'll reexamine that in the future from time to time.

Okay. And on the originations for the quarter, I know you discussed using the SBIC debentures to able to move down and -- or move up into the more secure first-lien investments on these that are paying some of the lower yields. One of the new ones, I believe, this quarter was Destination Media. That one specifically is paying LIBOR plus 650. And we've seen a couple of those before, although this one's on the larger side for that low of a yield. And just trying to see if that's an outlier on that low of a yield or if that's where we're moving with the debenture-funded (inaudible).

I think that was more of an outlier. That was a good deal. Our team liked it across the firm. Again, our goal is to generate the best risk-adjusted return we can. We treat the BDC as we treat each of our other funds. We have exemptive relief. We have (inaudible) investments in each deal. From time to time, we're going to identify deals that are less yieldy perhaps than some others.

I can tell you that we've got a pipeline of about $450 million right now in underwriting in the firm, and we're looking at probably close to an 8.5% to 9% yield across the board on those deals. And nothing's ever done until it's closed. But these are deals where we have term sheets signed, deposits in hand, and we're moving down the road in diligence and documentation. So don't view one transaction, I think, as a trend here.

I think that what you can view though is, as a firm, we have focused on the senior secured part of the market here. We have from a portfolio standpoint, as we said in our remarks earlier, over 90% of our portfolio is first-lien senior secured. And I think we have just taken the view, since we've been doing this now 14 years -- I started the firm in 2004, so we have a good perspective here kind of precrisis, during crisis, post-crisis and everything in between.

And I think the market is a -- it's fully formed right now. Multiples are high. There's lots of capital. And at this point in the cycles, as a firm, we like to be at the top of the capital stack. And I think you can expect us for the remainder of the year to stay at or near the very top of the capital stack with 90%-ish or more first-lien senior secured.

And just building on to what Ted said, I mean, we're managing a portfolio and you can't take any 1 asset and assume that that's the trajectory for the entire portfolio. And as we also said in our remarks, we have less than $30 million of SBIC debentures left today. So LIBOR plus 650 is not likely to be a long-term asset that we would hold outside our SBIC subsidiary. And so once we're done putting the SBIC assets to work and we're only then ramping in the BDC proper, then you won't see those types of yields for assets that are held on our balance sheet outside of the SBIC.

Okay. And then on that part, on the non-SBIC-backed investments there, how long do you guys expect to take to get back up to regulatory leverage? Previous target's about 70%. Because I know the focus on the SBA recently has kept you lower levered and then the equity deal this summer lowered that leverage again, but how long do you see that ramp taking?

Right. So what we've always told the market is when we go out and look to do an equity raise, our hope and expectation is that we can put those assets to work and get close to our targeted regulatory leverage within about 2 quarters. That's always our target. And so it's very much dependent on what we see on the prepayment side.

On the asset side, we certainly have enough assets that are appropriate to ramp the portfolio within that time frame and then it's just a matter of what comes back to us in terms of the net funding. But that would be our expectation, and what we're never going to do is meet that goal just to meet that goal. We don't see assets that make sense that we don't think are a good fit. We're not going to do something stupid to try to hit a goal of getting something done in 2 quarters. But sitting here today, my expectation is that we could meet that goal based on what I see in front of me.

For example, Leslie, a couple of years back, lots of our peers were rushing into this oil and gas space because it was easy to put deals to work there. We may have sacrificed some originations. We did 0 in that entire oil and gas exploration space 2 to 3 years ago, when a lot of our colleagues were playing there because that was an easy place to put assets to work. So we are very disciplined. We're going to run our business the same way we've been running it, and we're going to take our time and we're going to find the right assets to generate the right risk-adjusted returns.

Our next question is from Christopher Nolan of Ladenburg.

Rocket Dog, is the write-downs on that related to Amazon? Or any color you can give on that?

Rocket Dog's write-down, frankly, was more because the company has continued to need new fundings, and we have chosen not to participate in those fundings. So we've allowed some debt to come into the company, which has changed sort of the mark-to-market on our assets. The outlook's about the same on that company, it's a long and slow turnaround.

The answer to your question about Amazon, I mean, I don't know if it's Amazon. But clearly, online has become a much bigger part of the world, even for shoes. And Rocket Dog has tried and is being successful in participating in that online sales market. But certainly, they had a lot of exposure to a lot of brick-and-mortar retailers that have struggled, and that has definitely impacted the company's performance. It's been -- but that's not something that's specific to 1 quarter. That's been sort of the story for the last several quarters, or years even, as it applies to the Rocket Dog investment.

And then given that you only have about $30 million remaining in SBA capacity, any possibility you could increase the SBA capacity for the BDC?

If you could go to Washington and convince them to increase the family-of-funds limit again, then yes. But outside of that happening, unfortunately, with that additional debenture, we'll be at the family-of-funds limit under the new upsized family-of-funds limit. Now as you recall, once they upsized it, we allocated all of the additional capacity to the BDC. But unfortunately, that's all they'll allow us today. But Chris, go down there and knock on the door and tell Trump to start increasing the limit again, and then we can put some more in the BDC.

Sounds good. I'll tell him you sent me, Aaron. Final question, given the comments you had to the previous caller in terms of putting your capital to work, should we look for a ramp-up in the pace of portfolio growth over the next, let's say, 3 or 4 quarters, a material ramp-up?

You know, that's a good question, Chris. I think the best thing to do is for you to be conservative because that's the way we kind of view our business here. And you've seen us now over the last 5 years and you've seen us in the last 12 months. I think that, from your purpose, you should probably assume we're going to act in that consistent manner and then let the market determine whether there's more opportunities for us.

Our next question is from Chris Kotowski of Oppenheimer & Co.

You mentioned that you were through the LIBOR floors now in just about all the loans. And I'm wondering though, as we've had 4 rate hikes since late '15, has any of that been a benefit? Or has so far all the -- has all the rate hike just been to get through the floor? And then looking forward at the next for 4 potential rate hikes, how should we think about that in terms of your -- the benefit from that?

Yes, good question, Chris. So generally, I would tell you that going forward, increases from here in 1- and 3-month LIBOR should, by and large, accrue to the benefit of the portfolio. In that, we really only have a small number of assets and a small dollar number -- it's 6 assets, but it's a small dollar number of assets that are sort of not through their floors.

In terms of what's happened in the prior quarter, I haven't sat down to quantify it, but I would think that your gut is probably right in that we probably only benefited a small amount in prior quarters from increases in LIBOR because the majority of our LIBOR floors were around 1%. And so LIBOR's above 1% for a portion of the quarter, depending on 1-month and 3-month. So there's more, I think, benefit to come than what we've seen in prior quarters.

Yes, I mean, and so I guess, if I think about quantifying the impact of, say, 100 basis point rate impact, can I just take like -- assume your equity base and the SBA debentures are kind of fixed rate, and the -- it's like $370 million or thereabouts together. And if you had 100 basis points, your loans would already price up 100 basis points, so you'd get an extra $3.7 million in investment income?

Here's the good news, Chris. We've done the hard work for you on Page 48 of our 10-Q, where we shocked the portfolio for 100 and 200 and 300 basis point change in interest rates. So we've done that work for you, but you are looking at it the right way, which is we -- you could take the ING facility, the revolver, that's floating with no floor. SBA debentures are fixed. The assets are, by and large, 100% float there. I think they're 100% floating today. I don't think we have any fixed-rate assets anymore, maybe 1, small -- very small dollar number, and you could look through the SOI. So the way you're thinking about it is right, and we can give -- we give you all that sensitivity back on Page 48 of our most recent 10-Q.

Right, but the dynamic is right that your -- that you have the fixed funds there.

Yes, correct.

And then last for me is can you give us a sense in terms of the subsequent events? We're nearly halfway through the third quarter, paydowns versus new loans since quarter-end.

Unfortunately, that's not something we disclose. We are -- you could assume that we're continuing to look to ramp the portfolio and that we had positive momentum on the asset growth, but I can't quantify it any further for you at this time.

Our next question is from Christopher Testa of National Securities.

Just with the 8 new deals you had mentioned during the quarter, just wondering if you could give me the volume of those deals rather than just the count. And if you could give some color on some uses of capital, whether they were dividend recap, acquisition, et cetera.

When you say volume, how much of the $73.4 million was the 8 new deals, is that what you're asking?

Yes, yes, that's correct.

Do you have that handy?

Yes. The new deals -- bear with me one second. I'll have to get back with you with the specifics, but it's low $60-ish million. So most of it is from new deals, about $60 million, $63 million is my -- off the top of my head, but I can follow up with specifics, but most of it is from new deals.

Okay, got it. And the use of capital for most of those, if you just have that off the top of your head, Aaron?

I'm sorry, the number was $62.5 million, and what was your question?

Just the use of capital, whether it was growth acquisitions, dividend recap, et cetera, just what you were seeing most with the new portfolio of companies.

Just let me see here, 1, 2 -- it looks like -- I believe most of it was acquisitions. One -- a couple of small refinances. One deal was a dividend -- or no, I'm sorry, it was a minority equity buyout. So I don't think any of it this quarter was dividend. I think all of it was either merger -- acquisitions or refinance, and most of it was acquisition.

Got it. And can you just provide us an update of what the sponsor and nonsponsor mix is of the portfolio and whether you're seeing more in the pipeline in terms of nonsponsor relative to sponsor for the next couple quarters?

Yes. Unfortunately, that's not something we've broken out or disclosed in terms of the portfolio mix of what's sponsored versus nonsponsored. Historically, we've ranged in a portfolio basis around 60% to 70% sponsored. We are seeing our pipeline fill with a lot of nonsponsored deals, and we've been closing a significant number of nonsponsored deals. So the mix continues to sort of be similar. It may start to move a little bit more towards nonsponsored. But we're really usually somewhere around 60% sponsored versus 40% nonsponsored, but I don't have -- and that's for the firm, for the platform. I unfortunately don't have a breakout of that for the BDC specifically, but I wouldn't think it would be materially different.

Okay, appreciate that. And just how much of your deal flow on -- just an estimate, is eligible for the SBIC?

That's a good question. I'd say, on a dollar basis, it's probably between 20% and 30% of our deal flow is SBIC eligible, which is buying for the -- at the platform level, which is actually very good for the BDC because the BDC's SBIC is one of the only portfolios that has capacity remaining. So the BDC benefits -- its SBIC benefits nicely from that, but it's probably 20% to 30% right now. And once it gets full, then -- we don't sort of really think about it in terms of going out and finding SBIC-eligible deals. It just so happens a significant portion of the deals we originate are SBIC eligible, which is good.

Okay. No, that's fair. I just asked because I know you had mentioned in your remarks earlier that you were putting some more lower yield in credits than would otherwise be in the portfolio within the SBIC. So I was just trying to get -- kind of get a feel for how long I should expect the remaining debt insurers to take to ramp.

Yes, it's a good question. I do think we'll be able to -- barring significant prepayment activity, I do think we should be able to ramp the SBIC more quickly than the 2 quarters we talked about as the target for the equity-raised capital.

Our next question is from Robert Brock of West Family Investments.

A good quarter, guys, but I have one question for you, or maybe it's just a suggestion. Your decision to issue shares a week before the ex date is clearly uneconomic to existing shareholders. And a lot of BDCs do it, and it kind of drives us nuts here. I'm just curious, can you talk about considering changing that policy and just not issuing shares a week before the ex date?

Robert, thanks for the questions. This is Ted. I'd like to tell you that we go through and we identify this on a day-by-day or an hour-by-hour basis, but we try to do what's in the best long-term interest of the company. And we don't manage this business, MRCC or any of the funds, on a quarter-to-quarter basis or a week-by-week basis. We're looking at what's in the best interest, long-term interest of our shareholders.

So while, once in a while, we may have an equity issuance late in the quarter. I will tell you that just as likely there could be an equity issuance in the beginning of a quarter. And don't take that to mean that we're not focused on it. But at the end of the day, we're not trying here, and I don't manage this firm on a short-term quarter-to-quarter view. The nice thing is that you can be assured that I've got a long-term vision for the shareholders, as I am a significant shareholder, a very significant shareholder in this -- in MRCC just as others are. So thanks for the question though.

Our next question is from [Bill James] with [Mayer].

Ted, when you look across the $4 billion portfolio and the $450 million portfolio and you look at EBITDA growth, are -- is this -- just kind of on average, is it just kind of moving sideways at maybe 1% or 2%? Or are you seeing areas where there's real EBITDA growth? And then the second question is is when you look at investment CapEx, what kind of hurdle rates are you seeing, internal rates of return on the marginal EBIT -- or CapEx that's spent? Is it returns of 20%, 30%, 15%? Can you just give us some color on that? And I have one more question.

Okay, that's a really good question, Bill. We have in our portfolio about 240 companies, middle-market companies across the entire firm. That's about $5 billion of AUMs today. And we get lots and lots of requests by data sources to share our portfolio information and our portfolio intelligence because we have a pretty good window into the middle market.

So what I'm going to do is I'm going to share with you something we haven't shared in the market in general. And I will tell you that if you look at our current portfolio today and take a snapshot of it across the firm. Now this is not in the BDC, this is across the entire $5 billion of portfolio, 235 companies. I will tell you that average EBITDA of our portfolio today is around $17.5 million. That same statistic -- because I just gave this yesterday to an institutional investor in one of our funds, is up about $3 million from where it was about 2.5, 3 years ago.

So if you look at that as just a general trend, and now there's bias because these are companies that we have in our portfolio as opposed to the general market. There's bias in the fact that we've got a -- I think a higher-quality underwriting system in place than others do in our area. But generally, if you look at our portfolio with a snapshot, there's been an increase in EBITDA of about $3 million over the last few years in our portfolio. So that was your first question, I think.

And the second question was IRR on CapEx. I think it's hard to generalize on that. And the reason why it's hard to generalize is I think you have to really focus that more by industry because manufacturers have different CapEx hurdle, investment hurdles than distributors, than do technology companies, than do health care companies. Some industries are growing very, very quickly. For example, a lot of the behavioral health and the specialty finance areas that we're investing in. So there may be a lower threshold for CapEx in those industries that are growing so quickly than there may be in other industries.

So I just -- I don't want to give you any misleading information on the CapEx side of it. But as a general matter, I think that the IRR or the EBITDA growth, I think that is something that you can generalize across our entire portfolio.

At this time, there are no other questions in queue. I'll turn it over to Mr. Koenig for closing remarks.

Thank you very much, everyone, for joining us on our call today. We greatly appreciate the support and the work that the analysts do in this industry. It's very hard to distinguish platforms. It's hard to distinguish funds. I spend most of my time on the road throughout the world speaking to limited partners, and it's very, very hard for them to distinguish among different platforms. So I greatly understand and appreciate what you go through to try and distinguish firms.

I will tell you that we've been doing this for 14 years. We're going to do this for a long portion more than the next 14 years. We've got, I believe, a best-in-class group of people that work here, including Aaron and Karina and the rest that work on the BDC. We've continued to add to our best-in-class platform of people. That's kind of my job. We -- recently, we brought in a fellow named Cesar Gueikian, who was a founder of asset management firm in New York, to help us with the Special Situations platform. I think that will also greatly contribute to some of the BDC investment opportunities in the coming year.

So I will tell you that rest assured, that I am very, very focused on protecting shareholder value and increasing shareholder value by bringing best-in-class people to the platform and continuing to originate differentiated assets, loan assets that provide us with the best possible risk-adjusted return.

So with that, everyone enjoy the rest of the summer, what's left of it. And hopefully, you'll be able to take a week or two off in August to enjoy the weather. Thank you for the call, and we look forward to speaking to you again in the next quarterly call. And as always, to the extent any of you have questions or would like further detail, any information intra-quarter, we try to maintain a very transparent philosophy here. So don't hesitate to pick up the phone and call Aaron. Thanks everyone, and have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.