Great Elm Capital (GECC) 3 Aug 232023 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Great Elm Corp.

Second Quarter 2023 Financial Results. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

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

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

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

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

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

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

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

for you and [Peter] today. (ph). you, Thank morning, us thank Good joining

executed significant strategy. of operations second respect our progress our and proud continued portfolio we am of XXXX facets make quarter our overall performance with to to all I in as

come. year Our entire to successfully firmly best believe the team's the effort Great paying is past transforming yet towards and over off, is we Elm relentless

or secured quarter portfolio into namely Turning the on deploying cash gain to share. first and focus senior XX% our distribution per quarter, $X.XX of quarter floating a enabled reported NII $X.XX exceeding generate per us the and In easily XXXX of continued to rate $X.X generation share, construction, second Slide $X.XX million X. quarterly the from for investments, capital our of

NII Even important to cash shows want our than X, growth, highlight I more our Slide NII. which

the in income enough history, distribution. to our our time For first GECC's we cash generated cover from portfolio

move is driven amount X, by fact we As from income quarter, consecutive cash XX% approximately GECC's investment highest total representing was our to this the investment income. for history, that the the the of portfolio Slide third generated in

on cash paying Our portfolio the generate focus repositioning to income operationally off. is

testament first to in a reduced with In high the quality, period, our investments. addition, are we secured portfolio our our you yield. while will a overall yielding, portfolio, revamp and These see cash mix increased results equity of build and exposure lien presentation, improving later in attractive the still ability new debt to filled

and share, unrealized on realized quarter. excellent forward. on on remain improving performance, moving and X% see NAV our by the mark-to-market the net increased in recovering value gains you NAV quarter asset by Buoyed We can from benefited X. to per $XX.XX Slide our NII further our as in investments both focused

are like aware our we also to note of near-term various and would to that options I them. are maturities evaluating refinance actively

advantage markets refinance capital. of capital an attractive these constantly of in opportunistically to at financing have the maturities and take monitoring are We initiatives transactions potential place to cost

that both a potential term. the to may for on. noticed, up have on which in long and may capital sets A financing the put toolkit is to GECC focus which execute we you pads, file, of N-X success, key our an As of have place we structure adds near ours

to that you as of Thus, should efforts, constantly positioned in past you each strategy expect $X.XX given remainder see financials grow Before by composition, of done GECC structure success, in to our to many current highlight capital for That initiatives Keri to our our we believe as have expenses quarters. year. in share lay should cover to quarterly strategic per detail, our we foundation third we long-term two would over a including our the turning the rate the current not our portfolio our quarter. for result review expect call like to remain NII the the and the distribution the said, up overall at quarter well environment, I tick to

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

Thanks, Matt.

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

second $X.X million the in the from quarter, million, as $X.X first GECC growing During XXXX, of as from NII our of the $X.X well tripling quarter generated million in quarter. NII nearly XX% year-over-year prior-year

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

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

NII per up exceeding our share dividend was from quarter. in quarterly $X.XX the $X.XX, up and prior

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

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

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

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

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

back to over Matt. that, With the turn I'll call

Keri. Thanks,

approximately into of quarter, XX%. yields we assets higher-yielding investments, of $XX rates $XX approximately at to XX%. in investments taking average In rotate deploy the monetized in new Meanwhile, at we of rally into second million advantage the million continued quarter opportunistically approximately to yields the average of

at investment to year a XX% We prior the XX% double almost of of from rate up the increase quarter-end floating end debt, investments. floating ago. rate to exposure continue at the our from and our XX% consisted of quarter portfolio debt

overall our Most XX.X% at increased basis portfolio's of up have enhanced thus quality we points proportion credit that of quarter, also both validation notably, with profile, from first which improving XX The loans, of of year. yield consists past portfolio over stood lien at portfolio. the further our the is our the quarter-end, prior we the along portfolio and quality increase the in work yield accomplished

will Looking hike cycle. to determine they to that the focus benefit investments rate closely see the officially conclude the rate monitoring when elevated on Fed ahead, from also environment while we continue to

finance of continued specialty quarter. We in up robust We loans noted a while pipeline and Healthcare for scale secured platform lending, that during it able investments. of new capital deploying $XXX our maintaining million potential into new Elm call was the our the on quarter, to healthcare-related financing access to Finance that to prior also Great began

and addition, another invoice we quarter. in the our sub business, lending In strong platform, investments In also debt had attractive early and Sterling, Prestige, asset-based Lenders of July, the closed couple financing Funding. deals; a exited equity

Keller is the we the specialty ways management finance which will decided Mike to discuss Finance Lenders believe there, part attractive of shortly. an While with piece team platform, we

is GECC to contributions continue material specialty well platform finance provide to quarters. to future We the in positioned believe

returns. with to well of durable for risk Great opportunities staying that Given respect have permanent deploying further generate capital the limited towards risk-adjusted ongoing measured, Corp. remain continue attractive Elm to macro impairment shareholders. will disciplined we environment, growing Capital positioned and By capital we are returns and

our navigate ability we the noted portfolio improving to both pleased through before, I quality of our composition. in environment the are with As of yield half overall and the first this year, our choppy

to a believe watchful environment. thoughtful selectively half back eye the while keeping continue the there in year on opportunities the We to investments will be make of rate

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

Matt. Thanks,

finance to see continued positive businesses. specialty momentum our with We

quarter, Healthcare During up Finance into investments. closed to a Elm deploy on that leverage to capital in from secured facility provides Great million the which financing $XXX second

business the operational healthcare both to in see and flow buoyant expanded standpoint. continue and We have from deal a platform our new group

will of but Healthcare keep expect Elm scale months in you we the our apprised We Finance to and ahead. to continue progress, Great quarters

and previous early I XXXXs. have structural the seen As macroeconomic in I since an healthcare created not have that on opportunity factors noted calls,

contributor lending. of expect We become specialty the to building continuum to continue major finance a to business GEHF the we across are

credit the This to healthcare lender and beginning opportunities, addition we being is uncertainty, and to shrinking In market. economic losses. see dislocation higher ABL rates are in interest by the deposit bases, fueled pullback

receiving a opportunities. purchase well our are specific as potential professionals as deals investment inbound calls As result, portfolio on

investment. we purchase of discussed, specialty finance us to the previously opportunities our capabilities and to of advantage operations bolster steps allow This portfolio both should new businesses. and asset-monitoring platform take taken As have

consistent Funding quarter the investments after shortly and fair the with exited equity values. X/XX Lenders noted, we Matt valuations in debt our As closed, sub at

continue decided the hold the and the ultimately attractive. to lender with we finance While facility, believe part in management, Lenders we is to market credit Funding senior we ways commitment

to scale Building under Elm exploring on this on the expect Elm more finance have we later year. lender say capabilities Great to own initiative the of rapidly, our which I Finance to servicing Specialty allowed Healthcare are have Sterling, opportunity Great to launch this Finance. platform

tremendous financing opportunities. income. followed expectations Finally, credit both is lender second strong attractive risk-adjusted management's Prestige The first team Prestige up from as and Prestige on execute Capital, net our business, exceeding quarter, generate a noted benefiting to our on a dislocation. with and pullback invoice and volumes last directly quarter, continues quarter

properly that finance initiatives and income. sustainable on We our remain generate are specialty positioned increasing platforms growth our execute confident to

Mike. Thanks,

evidenced on well quarter record basis. of generation. was it We dividend as our income up, to an covering it continue positioned and sum excellent To another dividend quarter Great remain NII ongoing by our cash for Elm exceeding another a quarterly

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

again you for us joining today. Thank

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

Thank you, Ladies joining that then concludes sir. for and you us. conference. today's Thank gentlemen,

lines. your disconnect now may You