Great Elm Capital (GECC) 1 Aug 242024 Q2 Earnings call transcript

Greetings, and welcome to Great Elm Capital Corp.

Second Quarter 2024 Financial Results Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce you to Garrett Edson, a representative of the company. you. Thank

begin. may You

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

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

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

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

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

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

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

enhancement advance for long-term initiatives portfolio and activities all quarter had thank joining afternoon, demonstrated we solid Thanks, to you as date. financing notable by growth as our today. Good to completed us second Garrett. and a strategy, continue our We

Elm raised million value by the net in supported in the Prosper SPV Holdings Peak in Great was net million This value raise in February, the million [SPV]. Great $XX June, in asset ], investment supported a successfully $X at by structure In asset equity a from $X Group Group. equity established raised investment million Elm [ we $XX followed by which capital at also from

basis GECCI direct institutional $XX a additional of notes, debt in favorably at In July, compared since our registered more believe financing than of to which issued We we XXXX to rating $XX.X our flat this offering. an an million was offering. which and XX Jones Egan improvement to BBB financing on driven million during capital issued improvement our rate spread strong August point our treasury through offering notes X-year a as upgrade note by GECCI fresh tack to minus a we April, BBB to investor. equity were the from This was earnings, syndicated August supplemental offering

on pleased execution of liquidity of the raises platform The to our secured of debt investment execute greater fresh strength position, equity result over enduring and X over scale. these implemented non-dilutive this enabling year, the of our financial our us and as repositioning efforts we have Overall, successful to the strategic further the at issuances years. capital pipeline bolstering $XX past underscores our strengthening are million a

investment pursue returns risk-adjusted offer opportunities actively to our that shareholders. continue We attractive for

with distributions into to JV excited entity. its July. created we and the related in hold April, distribution receive investments previously outlined CLOs last about sizable the warehouse CLO call. from is expansion CLO In our first We JV are particularly in our a to beginning products, in earnings as Notably, investments

further source CLO portfolio a that expect will JV in forward. we income be of We as the moving increasing invest

have various exposure investment to our to the resilient ROEs instruments XX% from we to mid-teens a commitment we exemplifying demonstrated potential low economic By portfolio, diverse into our strong our investment returns ranging CLO historically and from structured across financial anticipate portfolio. building that incorporating Over time, portfolio. vehicles cycles, gained

We quarter the primarily with X Turning June to ended to XX. on due our reduction compared $XX.XX X investments March $XX.XX bulk the us the been portfolio share illiquid companies, NAV from performance. of portfolio per recapture to impacts in to which of The adversely NAV has these affected share XX nonaccrual was moving quarter. in approximately companies as $X.XX NAV on of believe second ahead. Level realized, to quarter by per We positioning NAV the

of current July, solid, believe received to of a we or fair at Nonaccruals debt, significant take-back $X.X we our Of million for portfolio nonaccruals $X.X million to now monitor portfolio majority secured a our attributable from to and of million pay company, continue end any recovery this investments in remains and our $X.X value. totaled at Otherwise, which incremental quarter was value. leaving and X% pro approximately we portfolio $X.X actively million, forma emerged stress. our fair bankruptcy

the the as as from NII second residual well to drag and the cash such from flows related quarter, declined as CLO offering June generated investments the In cash $X.XX offering share. per impact JV. per our April nonaccrual in NII timing certain we the our and of of to due equity Sequentially, share positions GECCI from the

first our focused strategic year we capital surpass income of to NII deployments, half from half. begin CLO our expect distributions to JV in the the from As with materialize, of that second combined the

believe dividend more portfolio. we remain continue our to than the cover and such, we As growing positioned well

our and strategic Overall, structure another capital advancing while and both efficiency initiatives, well results operational our enhancing delivered long-term quarter sustainable, for we growth. positioning solid of ourselves

refinance these to the to our detail, Keri address in we transactions to I Before initiatives in our various and capital maturity are like to would bonds. as actively financials advantage call of review markets evaluating potential have this in to Further, to place constantly over baby greater bond take XXXX we upcoming options turning refinance are the maturity. assessing

and cost focused of We end expect the capital. to our by these refinance bonds of XXXX optimizing on remain

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

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

decline or generated share to to to million compared and attributed particularly $X.X The count of our timing the GECC at share investments. increased equity During issuance $X.XX of in drag largely in our the June quarter as share positions, first the million certain per second cash sequential CLO the $X.X $X.XX per or XXXX. quarter, is from of addition distributions NAV, NII from

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

the primarily of XX, of Matt. be the Our $XX.XX NAV June Details per certain to once found quarter-over-quarter March for write-down in of of presentation. can Slide on investments attributable versus highlighted share was change the the XX $XX.XX as NAV with again decline as investor by X

June XXX% bond to for compared of issuance, as coverage March was would asset coverage XX. Pro As ratio asset XXX% be XX, forma XXX%. the GECC's ratio approximately of the July

was debt total million remains approximately our undrawn. $XXX million XX, revolver June and $XX of As outstanding

issuance Cash July was million. and securities approximately million. debt approximately money market totaled $XXX bond totaled for forma outstanding $X the Pro

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

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

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

Keri. Thanks,

to get and lien strong loan us secured as syndicated financing in gives CLO into capital a its look us to stronger with counterparts. we sources increasing Our through solid additional investment and focus these to market attractive investments our portfolio first investments. exposure institutional notably, end debt. provides and the deploying This continues To confidence that on broadly sourcing

loans first of Considered second lien last XX% and quarter year, loans our our XXXX, the consisted forward to CLO of up lien of make no and portfolio first XX% exposure. Fast portfolio. CLOs

expect we our to into As underlying quarters continues ahead. provide our joint additional in growing, the portfolio venture insight

CLO Notably, are yield pleased and the effects quarter at return newly with XX% initiated positions. investments, which further JV investments other receive from amongst we distributions strengthened portfolio's Despite profile over the as the at portfolio's our lingering nonaccrual profile, will stood steady we be from end. composition our

the the approach are cuts maintaining election disciplined volatility macro Given environment a of deployment. turbulent year, and uncertainty a capital the to with we surrounding rate ongoing timing in

directing primed our economic that We towards are cycles. across investments perform to are opportunities various

equipped investments minimal for loss. and adhering the for We future shareholders. excited Capital credit GECC. Corp risk of quality permanent prioritize well returns Elm and we of this our attractive continue Great always, to seek are remain to delivering As By strategy, risk-adjusted we with capital growing

that, on specialty with update provide turn to like finance. would I call And the an Keller to over Mike to

second Matt. operations. Despite quarter, new platforms, new finance Thanks, to sluggish pipelines quarter. XXXX and on saw in GESF X the to deal laser-focused be of streamlining for third start in our all platform a the the remain deals thus far Moreover, and in originations companies specialty closing performance its continue we X improved robust across

Touching our on companies. platform

quarter second financing in led increased first quarter the a While pickup Prestige with invoice income net the notable volumes, lower to started sequentially.

positive of earnings, deals first generated closed the in both improving Sterling, momentum company, for half At year year-over-year. sequentially the and the

Sterling's made excited as positioned are prospects coming for has progress into X over months. last to earning pipeline convert the further We assets its business months over the the the

has on deal strategic lag for remain Great we success. Finance Elm at implementing for the Healthcare reposition continued to although Lastly, to volume focused projections, refinements platform future

optimistic in year and off. the the will sequential and growth some efforts are to although began we quarter that Overall, profitability further experienced second drive improvement slowly, pay our

and so year our strong raising solid of In reflect half this our platforms expanding Mike. capital enhancing the commitment and had a year. Thanks, GECC second first and and strategic quarter implemented portfolio. to closing, The initiatives far

are Looking the believe to than and to the the positioned to questions. Operator? NII call I'd dividend turn With cover we like the remainder for ahead, operator for over of we well the that, grow more year.

questions the back closing would no Matt I are over at to comments. this time. turn Kaplan like There Instructions] [Operator for to floor

us Thank today. you all again joining for

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

This you. concludes teleconference. Thank today's

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