Great Elm Capital (GECC) 2 May 242024 Q1 Earnings call transcript

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

First Quarter 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, May 2, 2024. I would now like to turn the conference over to Garrett Edson, Representative of the company. Please go ahead.

morning. Good for Earnings Great Conference everyone, First Capital us XXXX Quarter Call. joining you, Elm for Corp.'s Thank

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

Thanks, February, only We position, into Great initiatives start investment and supported the well million of our XXXX, our strides In vehicle million for you of asset but at as financial have the earnings, $XX.X The We this pleased reflected Garrett. from the million strategic at a repositioning note investment notes also the is for quarter grow BBB $X BBB upgrade undertaken reach Egan our spread points enabling improvement empowering to all by This solid this significant structured the our offering financing to compared strong minus the flat XX offering. June were to of portfolio while making raises $XX a we equity rating in treasury August in improvement driven of raised robust fresh at asset further to us to capital August provided testament issue strengthened equity our further raise underwritten a by from Jones Elm us successfully today. was us our net more a nondilutive of to Good We efforts public our notes end, these Great an beginning completion capital also by in successful in value special a than investment execute to a not on to over to scale. Subsequent our completed years, by as since we past we basis greater thank strategy XXXX year, raise due offering. X template believe over rate as and equity morning, joining XXXX. base Group. X.X% pipeline increasing products. capital Elm opportunities. purpose expanding as and future had XX%

Our the us capital our over increasing these will additional offer for to week on for us returns XX was points basis notes compelling with million few attractive longer in higher hindsight, in business. after into the of nearly resulted investments that also The have our shareholders. In the efforts deploy risk-adjusted believe treasury which $XX timing offering raising benefit capital we provide X-year the past interest in aggregate, with in fresh prudent rate expectations, months.

venture focused successful entities related In we in efforts raising CLO a new capital our addition week, and warehouse on to formed facilities. last investing joint

of XXXX year we the the second to expect beyond. sizable in mid-teens from investments continuing our the beginning time, structure expect in investments, to CLO the these returns Over to structures. Given generate into and and JV of low half receive distributions we from XX%

We This on our joint XXXX. exposure and as venture year-end is further economic per share through are new diversifies strong in XX, management $XX.XX this Great Level declined from prior excited quarter NAV share portfolio back Now X investments to March by first ending historically Research as it quarter, vehicles companies, Holdings. that $XX.XX structured illiquid, the returns to down have in for per cycles. Shifting Elm performance. generated decline originated X in PFS concentrated at throughout of

NAV As X, share in from adversely quarter. walk the Slide by impact NAV approximately shown $X.XX these on inherited the the on affected positions per

in portfolio as on quarter of X% of fair end portfolio these to nonaccrual portfolio. the from as other continue our investments, the less these Total otherwise million investments well performing position monitor nonaccruals well than as $X.X one Away we quarter. value totaled is actively of overall. or placed We

investments. in inherited the discussed to NII the certain per the and quarter, due have share of Sequentially, as our first the flows NAV fact, the share declined share. In of issuance to dividend $X.XX of generated sequentially share. cash well drag inherited per from investment as from from per $XX.XX newly share from made related from we $X.XX In holding per February cash would quarter, to offering the the timing NII these base our equity impact exceeding investments the marks increased previously from costs additional otherwise prior

our successful expect overall dollar in and results capital month quarter relatively first in notes of expected the terms we second deploy up on from in drag while the the strategic that both NII executing our operations and be offering as cash issuance growth. our consistent additional last sustainable quarter capital, our a to seek structure to put With addition to we Overall, solid positioning performance. enhancing with long-term initiatives, for quarter us we

year, outpace to first distributions the raises in of half income expect from the JV expected the the with NII in back of XQ, coupled With the our half prudent we from the deployments the second half. capital from ramp-up and of XQ meaningfully the year in

again result, our to Board year-end. and I'd XXXX covering a we will positioned well first As a believe hand our we remain evaluate in to a like dividend the that, to special performance. over quarter distribution be continue to With discuss to call Davis expect around position Keri our

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

at During count of fifth cash is this, GECC $X.X we to drag Despite $X.X $X.XX million generated and increased consecutive quarter. of quarter share NII from share sequential largely base share $X.XX The the quarter, for the or fourth issuance the decline quarterly attributed NAV. million in exceeded per XXXX. to first February per or equity the our our as compared dividend

rose XXXX. $XX at of $XXX Our to million compared XX, December as March XXXX, to million net XX, assets

found in Our XX approximately the XX. NAV as quarter. X $XX.XX The NAV $XX.XX per investments, per in versus of Details the decline the as Slide $X.XX to presentation. was certain of the of share by change of inherited investor March share on attributable quarter-over-quarter be for December can impacted write-down NAV which

As for as the pay December to XXX.X% as down April of Pro the our approximately forma XXX.X%. coverage asset ratio coverage March approximately would bond GECC's issuance XX, to XX. of revolver, compared XXX% be asset of improved and

approximately million. was XX, subsequent approximately the the and our outstanding of revolver market total $X of Cash securities for million $X total which forma approximately outstanding includes debt million $XXX As bond million. $XX on March Pro balance, paydown money was April outstanding $XXX million, issuance debt our and revolver. totaled outstanding

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

cash equates of quarter over NAV yield of an the to stockholders call distribution $XX.XX The payable XX March distribution I'll June share. With per back our to to The of dividend on as XXXX, be second XX, record will annualized turn XX% XX. June Matt. on that,

investments Keri. million of we in yields and approximately at of approximately In longer new first advantage yields average continued XX%. $XX monetized the we investments, assets Thanks, quarter, the to quarter into opportunistically taking of at average of for Meanwhile, rotate $XX XX%. the into deploying million approximately higher higher-yielding environment ongoing,

was to strengthen third compared the in stood investment distributions first profile JV return begin debt continuing continued our which end end, Our the rate lien XX% are quarter capital in at our and impact at rotation credit debt the from investments investments, into quality our floating recent are excited quarter investments, deployed of along of composition our yield last floating into starting portfolio inherited and with overall the with the with comprised more XX.X% to pleased rate of of at quarter. portfolio. Despite the quarter. quarter investment Notably, of the the to portfolio we CLO portfolio receiving of XX% the majority profile,

both directing investments approach to volatility well that we toward in macro to the our elevated cycles. perform Given are the and environment the in rate through current environment, ongoing suited in disciplined capital, remain deploying it economic

further and on permanent credit we positioned for we limited to the with compelling about excited investments risk-adjusted Corp. would with Specialty update that, quality shareholders. over of this Mike deliver an grow turn to focused call By capital returns always, As provide future like Finance. risk to are Elm Great our Capital GECC. I of are and approach, Keller We well maintaining on remain And the to loss.

I'm are first far and Jason joined a seasoned significant robust Officer, our these new banking Schwartz, operations. uptick all Despite closing across adding sluggish executive, in remain for activity deal laser-focused on underwriting close. platform. the began we deal to in a to second a deals to to specialty the Chief and operations announce in XXXX Thanks, originations to Matt. support GESF The Credit streamlining experience GESF February of quarter, a platforms, In quarter initiatives, and finance positive as pleased experience in drew thus pipelines as finance start our

plus first position finance lenders financing our exited invoice at activity has quarter platform in companies. specialty simplifying seen Prestige we started February, with vertical. Touching in on par funding Further our in volumes, revolver pickup but accrued. in to Additionally, in lower a into the our and a March groundwork strong further assets coming has the deals way February close pipeline business to over Sterling, January in foundation earning in and the months. paved convert late April. place and At March, the the

Elm Healthcare Great at Finally, Finance.

refinements on strategic got of implementing While has deal on lagged while summary, management in success. In for excited we'll further platform the volume a position off year seek our are and projections, to slow the execute to to the over focused front coming pipeline the months. remains for we start, us, opportunities

GECC. up, past the Mike. over undertaken and Thanks, strengthen it a sum further few months commitment build of through it portfolio. good The our To our to strategic initiatives start and evidence platforms year was for are

we base believe that, quarterly our positioned remain Operator? over for operator ahead, we Looking well to the XXXX. With distribution cover to I'll to call the turn throughout questions. continue

Ladies Fowler Capital Instructions] Your question question-and-answer from now begin [Operator you. gentlemen, Thank and Jim Management. comes session. will we the Kingsbarn of first

the could eye to that that the those quarter, type made XX, deck. of caught Matt, characterize things in by of my were, quick just I category? XX -- a perusal Page On after I of couple the mean, the investments of investments were you just a wanted

half in them By over are debt. category, of lien first believe I secured

see which will is believe into lag known chunk. about cash you'll big going product million forward also of for pay in lot a Equity, arena, is then terms structured notes, part colloquially And of focus So CLO that in CLO There a dividends a which is our $XX.X us. subordinated flows. that's into as timing jumping of we

of in that. quarter a the the our of on expect year kind starting based third we of So ramp NII do

ask a initiative to if Got How exactly that is that specifically, might? you it. question. On wanted I structured,

joint the formed a we is that partner. venture It strategic

both XX%. the formation CLO XX%, they are are the we and warehouse as formation We are we to -- are well start XX%, called They as looking JV. invest in CLO sorry, securities facilities are to

it. Got

that A is Okay. Elm How accessing now in that's investment of been equity. Great class will some of capital significant asset that about given attractive go for engaged CLO opportunities capital the -- lot time? amount is targeting

So mix. this about I initial was is investment, for which $XX.X as pro said, million, our forma asset

April. round deal $XXX done numbers I think we in after after million the about bond have

sub warehouses that's attractive time, access get market This could is we and of distributions continue and to significant that identify for loan the way to We largely which loan to X%. opportunities first to ramp. So pending syndicated course, returns see sources us and an as attractive attractive grow on and secured is to with funding market, lien basis, of the access look-through ROEs a continue generate kind broadly pay these solid loans. entities over

That's XX% venture? role owner, partner, right. the And in is JV is the what your their what

involved the are in business us and grow developed relationship They a have CLO we continue with look time, and with to over them. forward strategic to

name will Q? the be that Got in it. Is disclosed that a

this investor, support [indiscernible] what then institutional as limited it's in point an At we we're time, say can to that.

junior specialty and finance, initiatives, in capital boxes? squeeze those white. that jump specialty -- it it. On move question, forward Are XX, real on continuing the you Page still finance, here. X in I Got estate boxes to great out with building if -- Last may

to bar this any with of continue have look continue and a of part time, that haven't box. We and point just the is many key in to teams them we all management deal opportunities and evaluate time. fit evaluate At that found high transactions partnering

Got it.

Other across seeing of at some of Or Are one that talked like these have you cetera, the going on have you are issues, do entity XX categories? operating level a these if categories. I'm finance. things are could. healthcare you Page across I What to et more seeing also reimbursement pressures lenders costs, labor I going to healthcare number okay? about see Okay. in direct area? some

or -- businesses. here. making for So Keller I just before these quick it's a very just discussion alongside these a turning not overall, And focused finance. Again, asset-based loans loans entity it to on the on be Mike value over primarily unsecured us. our enterprise And healthcare specialized partner are think receivables, loans at Barkadia we're of

over So Mike -- there's let turn of to little and a I'll it a bit nuance there, Mike.

the though right focusing you just of things, in even really now asset So that on receivable page, on lot those a of funds -- financing. use state backed you're

Yes, financing. backed asset

turmoil. deploy in focused That's health correct. lot we're judicious And space very of how Matt and side of But There been the a on the care capital. has the we're as equation. we asset-based mentioned,

we them and So we able literally our basis, are out we're of flows of don't aware over cash to skis. a keenly very on business, in daily and monitor so get out

really I a have taking quarter. the good appreciate and And question. Congrats Okay.

Thank Jim. you very much,

Matt There hand comments. I are further questions Please Kaplan, no closing at this time. CEO. for would over the call to proceed

for again us you Thank today, everyone. joining

with We any execute if you. Please look follow-up us strategy. we we you are of to quarter forward help that solid performance investor with pleased as have. Thank We know another let dialogue. our on growth may continue continued questions to can

conference now call. Ladies your concludes today's and you gentlemen, Thank may this and for you participation, disconnect.