GECC - Earnings call transcript Q2 2022

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Operator

Greetings and welcome to the Great Elm Capital Corp.

Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure the your company. my a Garrett now of representative is to host introduce Edson, It Thank you.

begin may You sir.

Garrett Edson

XXXX Good morning, Elm quarter Great joining us conference and thank you Capital everyone Corp.'s for for earnings call. second

Today's the Information, update can the required Elm that found forward-looking on website to Capital Corp.'s visit slide call will like call I securities. to be Great Capital our solicitation presentation constitutes SEC's please copies Chief Kaplan, Quarterly website. Also information. your Corp.'s unless not Elm Elm harbor note presentation this our the filings. turn sign to for by law. the is offer SEC an list Capital offers like Results. SEC you of also Corp's would Matt. you Elm accompanying www.greatelmcc.com. Matt or On under statements. safe To of purchase Slide includes Hosting Financial with these cause over statements, to Great e-mail alerts filings Corp. our visit Executive website website I'd Information, now or Great can we be call factors or obtain actual directly to from the forward-looking If important call statements investorrelations@greatelmcap.com ask SEC earnings I for filings under morning please to Capital you Financial you undertake to differ that, sell Officer. results to filings its can our note to our Great today's conference forward-looking website could attention find customary website regarding our that refer materially call. does and call posted SEC added on distribution on to that the you our release up nothing a to and statement can like today's would in

Matt Kaplan

quarter. I'll joining complete today's some make to after our walk to laid highlights continue quarter strategy liquidity. Kleinman, that supporting questions. of you Officer; March balance for Specialty Mike Great improve Davis, revamped NAV coverage today. our we open and on the our pleased were we join Good through then Thank over answer to for Keri us rights to our up Compliance of June, Keller, and strengthened Chief through Elm offering NII thank in progress and and call, second maximize President priorities a and you, challenging morning Adam out very we financials We our enhanced sheet, us our time us value. and the and CFO, On Overall, asset for Garrett. the Finance, the with us ratio a some rights In take increased We'll offering completed will provided Q&A shareholder will our quarter, environment.

platforms. the strategy While through taking we specialty are our a NAV finance measured grow our offering maintaining to navigating led rights to to volatility, dilution, while some market share approach per

our strategy of bet investments been and the have reduced below portfolio rights and GECC of of market in end, of of deploying to dipped We leaning liquidity. a flexible $XX we which million of are liquidity dislocations in $X average in We price dislocation July, market From end been thresholds. markets to and June further a securities deployed capital start XX.X%, specialty markets invested yield the of over secondary continued with July spreads market. the have are began that and the over into through Widening benefit our and in have our the in have in deploy spreads in credit been a a while in of proceeds the approximately taken surrogate. see secondary excluding in closing of as $XX opportunistically landscape seeing cash yield offering to advantage and we mix are allows rebounded the investment marks prudently to provider and being take of we different million through We July the current volatility. bit capital cash the in percentage the as total advantage To rights impacted from still XX% offering utilizing to August, XX June disciplined segments take and that of to weighted a signs to respect June yield poised some return on finance portfolio advantage maturity meet XX invest quarter. into at

capital, As finance corporate mix deployments dip should our credit will we specialty flow to expected into and raise be our temporarily. initially

the long platform we finance in of investments opportunity term, still over balanced expect tremendous build Over time. expanding see to our corporate and portfolio specialty and a

fees quarter, incentive For accrued the the reversal $X.X in excluding June March XXXX quarter. was previously quarter, NII NII of slightly the our million prior in the above of

NII second increased it the by into skewed, slightly over to back was cash over of purchases XX% with we quarter, liquidity. held secondary higher as was deployment our While the maintain impacted quarter. debt timing March our the decided of half from excess weighted balances quarter, average the Furthermore, our

the cash-generating for holdings. Considering note as will the and and of deploying made focus do our and GECC creation this we on in progress XX% third best short-term portfolio, attractive that would with investment through We further our quarter, present reshaping second the the cash for we experienced I to our comprise a thoughtfully potential value capital expect opportunities. are taking quarter dislocation market we into long-term like diversifying look our shareholders. investments in the continue deploying strategy third to income drag opportunities as patient quarter entering generation also to approach cash with

at down XX, As XX% from from XX% XXXX. at investments, June of end but finance-related year-end are assets cash-generating March, specialty up of of XXXX, still the our modestly XX%

distribution basis. is grow to income cover ahead our quarters on portfolio our investment regular the our in goal a and Our quarterly to

XX, our June helped offering push XXX.X% March up ratio our to of versus rights XXX.X% asset coverage quarter. for the As

remain volatility, by the in feel and to navigate we continue As of the we team in opportunities continue can I excited to on confident believe With us. the very second to performance. XXXX we prudently current the through put that, in I'd half during we over of quarter our place foundation the the Keri like first discuss XXXX. call hand build to to front

Keri Davis

you all presentation Matt. Thanks we SEC accompanying highlights, over of our release, detail. I'll review press go our but for financial filings greater and invite to

more we cash-generating platform. noted, our and yield profile Matt portfolio quarter, the company to assets features continue As second the specialty finance with stable that evolve during and

NII $X.X $X.X million $X.X was $X and of impacted waiver, Please million GECC a in waiver. quarter the generated $X.X first During excluding been would prior year NII positively in versus XXXX. million the million that quarter, quarter of the million the previously second first have incentive quarter by accrued fees the note and

of The million as million which at by $XX.X as net million, XX, was increase our XXXX of $XX.X from June assets Our proceeds. rights XX, million XXXX and XXXX. $XX.X in up added offering June June, were gross driven $XX.X March XX, in

Quarter can and the as the be in of million XX, for $XX.XX shares X as of per June. Details XX, by of impacted on issued end three in share XXXX. NAV as XX, versus $XX.XX rights the XXXX $XX.XX quarter-over-quarter share NAV June per found offering was approximate change presentation. investor NAV the March Slide XXXX June was of in Our

was compared prior As GECC's quarter, $X.XX on and March compared quarter, the in XXXX. the a approximately fee been second that weighted coverage effective the amounts to on of loss average shares to to share have $X.XX February the share which asset adjusted per ratio NII compared net waiver. $X.XX, based reported quarter. in XXX.X% of for in June the the per incentive of reverse XX, XXXX. $X.XX XX, All per net are of XXXX per was as share GECC share prior X-for-X impact split XXX.X% XX, loss included became a of

with outstanding. March As XX, XX, $XXX.X total of approximately outstanding debt June comparable the million, XXXX our was

fully million Our line of $XX remains credit undrawn.

June market XX, million. and As our of approximately XXXX totaled securities money cash $XX.X

share quarterly distribution. our two of ending Directors September We authorized announced has per quarter XX, of previously has distribution the Our Directors upcoming $X.XX cash XXXX. Board Board approved a cash that for

quarter XX, XXXX September on to XX, cash September will stockholders as record of XXXX. payable The of third be distribution

Our fourth granted the back approved payment the Board be per in equates share XXXX. The the Annualized XXXX Board a Directors distribution authority NAV by I'll Matt of share. to XX, are portfolio. December a ending also the $X.XX dividend call dates Directors. quarter set record the in has distribution review quarter of yield to of over per pursuant expected distribution to cash turn XX% to June for for to our XX, the $XX.XX our on

Matt Kaplan

Thanks, Keri.

speak to to the diving portfolio, distribution. Before like I'd into the

we While with we first had distribution of year. the further second with income building undistributed quarter did incentive the the did reversal in XXXX in cover for not the unusual fees, enter an NII and income from the distributable one-time benefit quarter,

the As quarter. the cash June earlier, quarter continue drag in through third will experienced likely mentioned the

to the we to a deploying by cover position new grow intend regular we seek forward, to NII into Going as cash basis. investments quarterly GECC on distribution

our of paying income-generating XX cash investments, dividends you or investments. show includes coupons excludes all presentation, which our carry Now cash to non-cash we portfolio. turn if and This investor Slide pay only

that diversified than the book yield investments evolve would profiles. into at XX% cash-paying we and As to start year a highlight the portfolio to ago. to I stable year income-generating. now XX% of XX% of the is our This noted, I like continue our portfolio of with performing compares less

XX from in XX position diversify GECC's sizes. through end income-generating average continues with year separate XX addition, to the up portfolio at investments, lower exposure In industries the across resulting of

which There yields Looking long-term monetization lower optically deployment items are is and or our certain not XX. to goal. yield our skew that higher, Slide medium

monetization higher down the that paid quarter. mandatory or yields elevated largely in repayments our example, are was on due coupon to redeemed For debt

on surrogates Our draws earn suppressed investments in to cash. post short-term rights cash higher and deployment than offering yields considering yields appear revolver

Moving on to Slide XX.

floating weighted current can note with average instruments approximately current yield with yield portfolio in weighted million $XXX that rate average our invested a You to are important of XX.X%. rate It's XX%. three has rate debt a maturity of see years. are XX% weighted of instruments debt of XX% fixed invested in investments Approximately average a of that fixed our

of to our relatively BDCs, allows duration rate rate while So than from fixed portfolio believe our rate rising GECC environment. mix may the the benefit be floating current other short lower we

that with We've the lending interest companies can equity offer risk-adjusted specialty we longer in to to existing subordinated solutions investment our and period credit finance half types, transactions. laid majority amount We via in our good portfolio and of we of a continuum and debt for developing are of multiple attractive across generate the any on discussed continuum clients. cycle. secured expect economic business year of groundwork a partnered of a the including different As re-grow time. GECC have in returns the a offering number small hold shop co-investments lending debt, participation one-stop we solutions By utilize to of customers first

we proprietarily sourced pipeline many is Our finance conducting deals corporate mid-teens that in credit on returns. growing, are specialty and attractive diligence and have

our three to our we and yielding of in the time; this one two approach in when not and cash over remain value. improve investments summary and and focus appropriate. is environment to on focus we NAV However, In shareholder disciplined back risk-reward NII only half specialty year will progress intend to: executing we on three-pronged in continue finance; the the maximize scenario particularly make

and headed are our the are execute call we in that the turn Operator? believe questions. to confident we the direction will in With to on operator our right to over for continue strategy. ability We

Matt Kaplan

you. am you thus know I today. far can help transform we for follow-up. us about to thank GECC. all dialogue. made excited progress Well with have you. continued let Thank Thank us the investor We any we look to Please forward if joining

Operator

this Thank gentlemen concludes conference. you very much sir. today's Ladies and

You your you time. this participation. at lines your disconnect may for Thank

Great Elm Capital (GECC) 5 Aug 222022 Q2 Earnings call transcript