Earnings call transcript Q1 2023

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Operator

Greetings and welcome to the Great Elm Capital Corp.

First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Garrett Edson, ICR. Please go ahead.

Garrett Edson

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

to Investor or like you our website for you'd be our on to If distribution alerts can directly e-mail can Relations you greatelmcap.com www.greatelmcc.com. at sign up added list,

also our website, Information, can our like on be find I'd on our note you Quarterly call. SEC today's website slide the accompanying to Financial Results. found our On The can posted under and release presentation website slide earnings presentation filings.

Harbor attention constitutes I note information. regarding to purchase sell that call would of securities. please offer an like to your the Also, solicitation call customary Safe to or statement nothing to today's in offers forward-looking our

we not to Elm unless Corp. and ask filings statements. cause Capital Capital Great from website. statements, SEC forward-looking forward-looking under Great copies that Capital refer law. Corp's visit To actual materially Great factors includes Filings, statements call the by results conference website required with that the to Corp.'s Financial undertake SEC these Elm please for Elm SEC SEC's visit important obtain could differ you Information, to does of filings, Today's or update its

Specialty of the Officer Chief GECC; Hosting Elm Kleinman, and Davis, Keri morning Keller, will Finance. Kaplan, be by Compliance Capital Matt Mike Executive of Great this call is Corp.'s joined who Adam Elm Great Officer, GECC's Chief President CFO;

turn now the to CEO, will I over Kaplan. GECC's Matt call

Matt Kaplan

thank Great XXXX a for was morning, Thank Elm. you, today. Garrett, reboot and you for us and joining good year

on offense, that year be portfolio back shaping led strategy. goes is revamped XXXX Now, to Elm the up by our Great

a investments, of NII construction, generation and namely $X.XX reported quarter floating senior capital per XX% million or generate of XXXX. first-quarter gain Our from share, $X.XX to fourth for secured us the deploying focus the on enabled into $X.X portfolio cash rate

per of in exceeded new course share not cover covered On we call, quarter. we were to and first positioned we distribution that prior quarterly it of our XXXX, the mentioned $X.XX our only over distribution, I had our the

momentum in our and the believe we portfolio, distribution. remain NII quarter again grow cover Given growing well-positioned our in to quarterly our second we

quarter share declines by both In addition, X% prior realized seen in the the and net from value $XX.XX gains on investments per asset unrealized increased in in of the half covering We're to portfolio the mark-to-market our quarter. certain over quarter.

We are asset recovering further focused on in net the ahead. value months

a on strategically diversified noted investments. As our on constructing and portfolio cash-yielding are focused we we prior high-quality, on performing call, focused

amount generated was consecutive our second income the income. representing investment portfolio the quarter, the investment history, from over cash of For highest in XX% GECC's total

importantly, XX% from debt XX% XX%. at the quarter approximately of XX%. first of portfolio debt, of end million the XX% we rate at assets nine Meanwhile, Most at the average into were just end average XXXX up in above from investment at of monetized quarter, yields almost $XX double deployed in yields about quarter opportunistically our and ago. floating excess million consisted months just investments $XX new In of the

increased end also at from at quarter XX% around portfolio of to credit our over the on yield Average XX% XXXX. end

floating to our expect portfolio to stance. are noted have should platform. opposed But focus previously fixed that rate as committed that rate focus rising from policy we You our rates also finance we continue with reconstructing investments we we Along investments, to that scaling benefit on continue investments. the to will to specialty monitor on Fed's

credit recently vehicle that closed I'm Encina happy Finance. Today. finance our healthcare a with Lender announce line to

its for team and a robust quarter As million the manner deploying up a we disciplined second healthcare-related lending, Healthcare in Great $XXX result, the to expect in investments. that financing Finance now to begin toward Home has to access capital pipeline of of secured

to year. well. material continues we specialty contributions also through result, perform GECC to finance the to well-positioned as as business provide move believe And a platform factoring we is the Our

of Moving returns. permanent toward impairment cognizant limited increasingly macro that forward, measured risk with we to opportunities durable respect capital are challenging have and remain the of environment deploying capital and

are excited ability am for the attractive We Corp. our continue of I for team's to future efforts proud generate Great Elm shareholders. as Capital we our and returns risk-adjusted our grow ongoing to

like Davis Keri over first-quarter to performance. With to that, I'd XXXX discuss hand our call to the

Keri Davis

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

fourth well fee During the reversal. year from $X.X in quarter, of more $X.X XX% quarter, as quarter from the doubling first GECC generated XXXX, the year than million over $X.X the as million, million growing excluding of prior in NII year

net assets million XXXX, and of to at XX, $XX.X $XX.X XX, compared of XXXX. were million December as XX, Our March million as March $XX.X

Details be can XXXX for in Our XX, presentation. change March the March quarter-over-quarter $XX.XX of NAV December was per and NAV share $XX.XX slide found X as the versus investor as of of $XX.XX as XXXX. XX XX, on of

As GECC's XXXX. of of compared XX, XXX.X% XX, XXXX, March as to coverage XXX.X% ratio approximately was December asset

share share up quarterly and an compared $X.XX, prior the in a quarter exceeding prior had per loss net to the was $X.XX dividend in assets GECC net from increase the from $X.XX operations share in in of $X.XX our per quarter. NII quarter. of first per

outstanding outstanding credit. debt $XXX XX, including our was on million, line total $X million As million our of $XX March of approximately

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

for has $X.XX XXXX. authorized a Our the of ending Board distribution per quarter XX, June cash share Directors

the March XX, per XX, as second share. dividend The cash of June be yield XXXX. NAV XXXX on XX of distribution payable XX.X% on June to our quarter annualized will record an Annualized, equates of $XX.XX distribution stockholders to

to to that, turn the I'll the portfolio. call over back Matt with And review

Matt Kaplan

Thanks, Keri.

has to a our note Just how on quick portfolio construction evolve. continued

was and counterparty collapsed, call January not sold after relationship our Bank we're of Signature on early advantage significant monetize February in Valley and March, recovery in Silicon Bank As noted events. impacted that in our remain these to selectively investments. we by Suisse risks, to created on and volatility focused which prior the market. and took directly UBS, managing Shortly Credit We hastily and call, the

to expect continue pockets over the XXXX, of will markets develop opportunity course providing We orderly to of invest. this

continue time our addition, while as specialty club maintaining active direct direct well and secondary to as finance, to pipeline capital still In investments. an and deals we potential market of

deals more XXXX its was has proprietary distressed GECC of secondary increased team approximately focused stressed to we But cash-paying been and end, deployed the our strategy far and in sourcing the XX% performing Historically, on have so executing capital credits. has through To in on, been that focus direct transactions. trading.

the rates. private secured, return senior two to begins loans. number protection scenario floating where in contain which clubs profiles. of of deals, on these almost quarter, X% with all component a the investments Currently, provides working Federal are Around floors, Interestingly, the believe we closed rate added on a end both mid-teens we a deals, rate of Reserve both we SOFR cut floating

over that On turn initiatives. provide note, I would specialty Keller update to to our Michael of finance call like an the to

Michael Keller

Matt. Thanks,

into Healthcare As facility his in Elm healthcare-related with have Matt successfully from which deploy that capital $XXX a up we to to financing new noted remarks, closed million security investments. Great of are our platform to provides Finance excited on

new have to vehicle this build taken We care step-by-step. much

to Lender quarters and of but now and platform. the Great investment operational Finance We'll to right fund progress, continue you Finance pipeline. Elm an we our our keep months finance significant developing platform to the Healthcare And scale finding First, and apprised Encina in expect senior partner ahead.

seen have opportunity I not created healthcare have noted in our an and call, in that structural As XXXXs. early last since I macroeconomic factors the

are we can We major finance expect of across offer contributor that continuum business GEHF become will the business lending building small clients. a specialty the its to GECC

take a lenders uncertainty, to the losses, full market in Away see are we by as credit opportunities space, from we deposit pullback the shrinking the effect and of hold. healthcare economic rate in interest bases, ABL the beginning increases see

inbound Our by calls investment receiving more financial institutions and borrowers liquidity have shunned specific professionals assets. of well as from looking as pools for banks been

to be or credit asset lender overall platforms capital sales private various and In investment. pullback, may sold require addition

sell capital been loans. portfolios and/or have looking we to example, platforms lending seeking approached of by additional specific For

As noted opportunities. of current businesses, and specialty to and take us steps previously, our operations allow we finance bolster should have to market dynamics capabilities advantage of taken asset monitoring the which

the and platforms net volumes the banks had execute our first are income. Prestige, from is funding pipeline, team properly tremendous business. and of have on remain finance to invoice The expectations the beneficiaries and that generate momentum second direct We quarter. a first Prestige sustainable to from both confident of management's income. the the execute pullback positioned quarter, growth we specialty increasing One our its initiatives into continues beating our our on seen continue quarter on

Matt Kaplan

Thanks, Mike.

the by in head our exceeding evidenced NI our dividend. direction continue We as quarterly to right

$X.XX again quarter, second the grow through way are this dividend the positioned quarter. and believe of one-third the to NII well only While I we cover

I'll that, over Operator? turn call With questions. the the for to operator

Operator

Investor. Private Crockett], [Lee Instructions] [Operator

Unidentified Analyst

Good morning, could. Matt. questions of if couple A I

On slide -- the

Matt Kaplan

Good morning, Lee.

Unidentified Analyst

morning. Good your number slide NAV On bridge. X,

got of gains improved? just a gains a detail unrealized that there It market what's don't did And question… behind as it and know period. net the the Could is time that general? us specific numbers? give over couple what realized just Or credits overall those That's You've was in you of spreads? there Were it one. $X.XX. little question of I $X.XX the Was --

Matt Kaplan

Sure.

Unidentified Analyst

when one. I ahead, you. go other ask Okay, just that Matt. I'll get the Thank

Matt Kaplan

Yes.

rally realized February that gains, was out. and are was then there from was third two-thirds about were the I recovering no, And speaking about or which marks. that January in various monetized credits even refinanced in So from

in we end made was of and known that I an the think dig two One like two beginning were there Prestige. an highlight 'XX. at that entity in, to kind Florida other is I'd one contributors. in of investment XXXX of insurance And to the

strong good impacted here. $X.XX, and they was well quarter. a regional had year. the of Even them from actually start as Prestige momentum banks by will to they're $X.XX stress into carried about started, the And banking the before this quarter, to seeing quarter off a for from quarter about be you're that a -- benefit believe year. first NAV the to fourth the a very that second In we And Mike contraction credit they've NAV the but mentioned, current the throughout rest tailwind

in highlight I'm place, back. the positioned that And this lending seen they're robust credit when just Finance pull a the Great market, have to like healthcare Elm about we facility that well side finance asset-based this I'd to capitalize pipeline. believe banks as now disruption we And Healthcare talking developed specialty very we've on overall,

with accept a So and -- we along grow lending business XXXX, as be to they Great platform Elm Prestige our expect platforms. to over Finance Specialty this asset-based other contributor

Unidentified Analyst

I $X.XX. December they $X.XX Great. on was a -- $X.XX, and the In question And the quarter, dividend. they paid and

quarter this you $X.XX exceeded dividend. the did you Here, when

that to You this capacity and confident going level Is any little these get $X.XX comfortable with dividend feel level? bump. And -- generating committed did earnings your mention income forward that the you're thoughts Board -- can the a of going the to comfortable maybe forward you have to assets payout a the to you on about extent it? talking the you and bit

Matt Kaplan

Sure.

as our well growth other execute year. ramp But here in healthcare on again cover credit over we're initiatives So NII pipeline we our the and second the dividend XXXX, finance we're working and grow the -- grow rarely quarter and to the believe is positioned we're to NII linear. specialty over I seeing

think this regard I point to our out item cash I'd that with like One generation. to is

when wanted the income mentioned cash income But saw then went as I drafting originally when quarter call, state highest well. quarter our of that history. the on of highest I this And script, the in actually with cash is I highest fourth the quarter. XXXX and back cash quarter to income the BDC's As

But accretion $XX of income. like investment picked million was in something reported of GECC about total that But XX% income.

of So highest a in quarter little we XXXX million of cash-based income $X when fourth of kind GECC's history quarter north income. that had

did we of that's highest history, that million second over is $X.X of investment XX% cash-based, total now but income, $X in quarter, This cash-based. so GECC's over million

past is approach. fundamental a the change This from

I when CEO, and of new new or -- that joined on approach -- board in its kind a we on have new in members Board March back of when joined generation. stepped three now XXXX cash as focused focused are We of that cash

my year. that than So talk as that said, we're to emphasize to very the past, is when different dividend, I about the we to doing over dividend well-positioned, think cover I covering the like I'd the and approach

Operator

We are closing session. question-and-answer our

comments. closing Now to back like would turn Please for to floor the over I Kaplan ahead. go Matt

Matt Kaplan

again for us you joining Thank today.

have. any We in Thank you to you. transform solid follow-up our we to dialogue. efforts continue let that may questions progress look help us to with and continued GECC, make can forward know investor if Please we

Operator

This concludes today's conference call.

You for you may day. this great at disconnect and your time. a participation line Thank your have

Garrett Edson	Investor Relations ICR
Matt Kaplan	President and Chief Executive Officer
Keri Davis	Chief Financial Officer and Treasurer
Michael Keller	President, Great Elm Specialty Finance
Adam Kleinman	Chief Compliance Officer

Great Elm Capital (GECC) 4 May 232023 Q1 Earnings call transcript