Great Elm Capital Corp (GECC) 2023 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Great Elm Corp., second-quarter 2023 financial results. (Operator Instructions) As a reminder, this conference is being recorded.

早上好，女士們、先生們，歡迎閱讀 Great Elm Corp. 2023 年第二季度財務業績。 （操作員指示）謹此提醒，本次會議正在錄製中。

I would now like to turn the conference over to your host, [Paul Scousa], the representative of the company. Please go ahead, sir.

現在我想把會議交給你們的東道主，[Paul Scousa]，公司代表。請繼續，先生。

Good morning, and thank you, everyone, for joining us for Great Elm Capital Corp.'s second-quarter 2023 earnings conference call. If you'd like to be added to our distribution list, you can email investorrelations@greatelmcap.com; or you could sign up for alerts directly on our website, www.greatelmcc.com.

早上好，謝謝大家參加 Great Elm Capital Corp. 的 2023 年第二季度收益電話會議。如果您想加入我們的通訊組列表，您可以發送電子郵件至investorrelations@greatelmcap.com；或者您可以直接在我們的網站 www.greatelmcc.com 上註冊提醒。

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

我想指出今天電話會議中發佈在我們網站上的幻燈片演示文稿。幻燈片演示文稿可以在我們的網站上的“財務信息”、“季度業績”下找到。在我們的網站上，您還可以找到我們的收益發布和 SEC 文件。

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

我想提請您注意有關前瞻性信息的慣例安全港聲明。另請注意，今天的電話會議中的任何內容均不構成出售要約或徵求購買我們證券的要約。

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

今天的電話會議包含前瞻性陳述，我們要求您參考 Great Elm Capital Corp. 向 SEC 提交的文件，了解可能導致實際結果與這些陳述存在重大差異的重要因素。除非法律要求，否則 Great Elm Capital Corp. 不承諾更新其前瞻性陳述。要獲取 SEC 文件的副本，請訪問 Great Elm Capital Corp. 網站的財務信息、SEC 文件，或訪問 SEC 網站。

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

今天上午的電話會議由 Great Elm Capital Corp. 首席執行官 Matt Kaplan 主持，首席財務官 Keri Davis 也將出席。首席合規官 Adam Kleinman；以及 Great Elm Specialty Finance 總裁 Mike Keller。

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

我現在將把電話轉給 GECC 首席執行官馬特·卡普蘭 (Matt Kaplan)。

Thank you, Peter. Good morning and thank you for joining us today. I am proud of our second-quarter 2023 performance as we executed in all facets of our operations and continued to make significant progress with respect to our overall portfolio strategy. Our entire team's relentless effort towards successfully transforming Great Elm over the past year is paying off and we firmly believe the best is yet to come.

謝謝你，彼得。早上好，感謝您今天加入我們。我對 2023 年第二季度的業績感到自豪，因為我們在運營的各個方面都得到了執行，並在整體投資組合戰略方面繼續取得了重大進展。我們整個團隊過去一年為成功改造 Great Elm 所做的不懈努力正在取得回報，我們堅信最好的尚未到來。

Turning to slide 6. In the quarter, our continued focus on cash generation and portfolio construction, namely deploying capital into senior secured floating rate investments enabled us to generate second quarter NII of $3.4 million or $0.44 per share, a 19% gain from the $0.37 reported for the first quarter of 2023 and easily exceeding our quarterly distribution of $0.35 per share.

轉向幻燈片6。本季度，我們繼續關注現金生成和投資組合建設，即將資本部署到高級擔保浮動利率投資中，使我們第二季度的NII 達到340 萬美元，即每股0.44 美元，比0.37 美元增長了19%。 2023 年第一季度的報告輕鬆超過了我們每股 0.35 美元的季度分配。

Even more important than our NII growth, I want to highlight slide 7, which shows our cash NII. For the first time in GECC's history, we generated enough cash income from our portfolio to cover our distribution.

比我們的 NII 增長更重要的是，我想強調幻燈片 7，它顯示了我們的現金 NII。在 GECC 歷史上，我們第一次從投資組合中產生了足夠的現金收入來支付我們的分配。

As we move to slide 8, this is driven by the fact that for the third consecutive quarter, the cash income generated from our investment portfolio was the highest amount in GECC's history, representing approximately 87% of total investment income. Our focus on repositioning the portfolio to generate cash income is operationally paying off.

當我們轉到幻燈片 8 時，這是因為我們的投資組合產生的現金收入連續第三個季度創下 GECC 歷史上的最高金額，約佔總投資收入的 87%。我們對重新定位投資組合以產生現金收入的關注在運營上得到了回報。

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

此外，您將在稍後的演示中看到，我們增加了第一留置權擔保債務的組合，並減少了我們在此期間的股票敞口，同時仍然提高了整體投資組合收益率。這些結果證明了我們有能力改造和建立一個新的投資組合，其中充滿了高質量、現金收益有吸引力的投資。

Buoyed by our excellent NII performance our net asset value increased by 3% in the quarter to $12.21 per share as you can see on slide 9. NAV benefited from both realized and unrealized to market gains on investments in the quarter. We remain focused on further recovering and improving our NAV moving forward.

得益於我們出色的NII 表現，我們的淨資產價值在本季度增長了3%，達到每股12.21 美元，如幻燈片9 所示。資產淨值受益於本季度投資的已實現和未實現的市場收益。我們仍然專注於進一步恢復和改善我們的資產淨值。

I would also like to note that we are aware of our near-term maturities and are actively evaluating various options to refinance them. We are constantly monitoring the capital markets and have initiatives in place to take advantage of potential financing transactions to opportunistically refinance these maturities at an attractive cost of capital.

我還想指出的是，我們意識到我們的近期到期情況，並正在積極評估各種再融資方案。我們不斷監控資本市場，並採取措施利用潛在的融資交易，以具有吸引力的資本成本為這些到期日提供再融資。

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

您可能已經註意到，我們有一個 [end-to-loan] 文件，該文件添加到我們的潛在融資平台工具包中，我們可以執行該文件。我們的重點是建立一個資本結構，使 GECC 能夠取得近期和長期的成功。

Before turning the call over to Keri to review our financials in detail, I would like to highlight that as a result of many strategic initiatives at GECC to lay that foundation for long-term success, including our capital structure efforts, you should expect our expenses to tick up in the third quarter. Thus, you should not expect to see our NII constantly grow by $0.07 per share each quarter as we have done in the past few quarters.

在致電 Keri 詳細審查我們的財務狀況之前，我想強調的是，由於 GECC 採取了許多戰略舉措，為長期成功奠定基礎，包括我們的資本結構努力，您應該預料到我們的費用第三季度有所回升。因此，您不應期望看到我們的 NII 每季度每股持續增長 0.07 美元，就像我們在過去幾個季度所做的那樣。

With that said, given our current portfolio composition, our overall strategy and the current rate environment, we believe we remain well positioned to cover quarterly distribution for the remainder of the year.

話雖如此，考慮到我們當前的投資組合構成、整體策略和當前的利率環境，我們相信我們仍然有能力覆蓋今年剩餘時間的季度分配。

With that, I'd like to hand the call over to Keri Davis to discuss our second-quarter 2023 performance.

說到這裡，我想將電話轉交給 Keri Davis，討論我們 2023 年第二季度的業績。

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

接下來，我將回顧一下我們的財務亮點。但我們邀請大家查看我們的新聞稿、隨附的演示文稿和 SEC 文件，以了解更多詳細信息。

During the second quarter, GECC generated NII of $3.4 million, growing 19% from $2.8 million in the first quarter of 2023, as well as nearly tripling our NII year over year from $1.2 million in the prior year quarter. Our net assets as of June 30, 2023, were $92.9 million compared to $90.3 million at March 31st and $97.6 million as of June 30, 2022.

第二季度，GECC 產生了 340 萬美元的 NII，比 2023 年第一季度的 280 萬美元增長了 19%，與去年同期的 120 萬美元相比，我們的 NII 同比增長了近兩倍。截至2023年6月30日，我們的淨資產為9290萬美元，而截至3月31日的淨資產為9030萬美元，截至2022年6月30日的淨資產為9760萬美元。

Our NAV per share was $12.21 as of June 30, 2023, versus $11.88 as of March 31st and $12.84 as of June 30, 2022. Details for the quarter-over-quarter change in NAV can be found on slide 9 of the investor presentation.

截至2023 年6 月30 日，我們的每股資產淨值為12.21 美元，而截至3 月31 日的每股資產淨值為11.88 美元，截至2022 年6 月30 日的每股資產淨值為12.84 美元。有關資產淨值季度環比變化的詳細信息，請參閱投資者演示文稿的幻燈片9。

NII per share was up $0.44, exceeding our quarterly dividend and up from $0.37 in the prior quarter. As of June 30, 2023, GECC's asset coverage ratio was approximately 161.5% compared to 159.8% as of March 31, 2023.

每股 NII 上漲 0.44 美元，超過了我們的季度股息，高於上一季度的 0.37 美元。截至2023年6月30日，GECC的資產覆蓋率約為161.5%，而截至2023年3月31日為159.8%。

As of June 30, our total debt outstanding was approximately $151 million, including $5 million outstanding on our $25 million line of credit. As of June 30th, our cash and money market securities totaled approximately $11.8 million.

截至 6 月 30 日，我們的未償債務總額約為 1.51 億美元，其中 2500 萬美元信用額度中的 500 萬美元未償債務。截至 6 月 30 日，我們的現金和貨幣市場證券總額約為 1180 萬美元。

Our Board of Directors has authorized a $0.35 per share cash distribution for the quarter ending September 30, 2023. The first quarter cash distribution will be payable on September 29th to stockholders of record as of September 15, 2023. Annualized distribution to equates to an 11.5% annualized dividend yield on our June 30, 2023, NAV of $12.21 per share.

我們的董事會已授權在截至2023 年9 月30 日的季度進行每股0.35 美元的現金分配。第一季度現金分配將於9 月29 日支付給截至2023 年9 月15 日在冊的股東。年化分配相當於11.5截至 2023 年 6 月 30 日，年化股息收益率為每股 12.21 美元。

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

這樣，我會將電話轉回給馬特。

Thanks, Keri. In the second quarter, we continued to rotate into higher yielding investments, taking advantage of the [rallying] rates to deploy approximately $23 million into new investments at average yields of approximately 15%.

謝謝，凱里。第二季度，我們繼續轉向收益率更高的投資，利用利率[上漲]的機會，將約 2,300 萬美元投入新投資，平均收益率約為 15%。

Meanwhile, we opportunistically monetized $16 million of assets in the quarter at average yields of approximately 10%. We continue to increase our exposure to floating rate investments. 63% of our debt investment portfolio at quarter end consisted of floating rate debt, up from 58% at the end of the prior quarter and almost double the 33% from year ago.

與此同時，我們在本季度將 1600 萬美元的資產貨幣化，平均收益率約為 10%。我們繼續增加浮動利率投資的敞口。截至季度末，我們的債務投資組合中有 63% 由浮動利率債務組成，高於上一季度末的 58%，幾乎是去年同期 33% 的兩倍。

Most notably, along with our portfolio's enhanced yield profile which stood at 13.5% at quarter end, up 40 basis points from the prior quarter, we increased the proportion of our portfolio that consists of first lien loans, thus also improving the overall credit quality of our portfolio. The increase in both yield and portfolio quality is further validation of the work we have accomplished over the past year.

最值得注意的是，隨著我們投資組合的收益率狀況提高，季末收益率為13.5%，比上一季度上升40 個基點，我們增加了投資組合中第一留置權貸款的比例，從而也提高了投資組合的整體信用質量。我們的投資組合。收益率和投資組合質量的提高進一步驗證了我們過去一年所完成的工作。

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

展望未來，我們將繼續關注受益於加息環境的投資，同時密切關注美聯儲何時決定正式結束加息週期。

We also continued to scale our specialty finance platform during the quarter. We noted on our prior call that Great Elm Healthcare Finance was able to access up to $100 million of financing for healthcare-related secured lending. And in the quarter, it began deploying that capital into new loans while maintaining a robust pipeline of new potential investments.

本季度我們還繼續擴大我們的專業金融平台。我們在之前的電話會議中註意到，Great Elm Healthcare Finance 能夠為醫療保健相關的擔保貸款獲得高達 1 億美元的融資。在本季度，它開始將這些資本部署到新貸款中，同時保持強勁的新潛在投資渠道。

In addition, Sterling, the asset-based lending platform, also closed a couple of attractive deals and Prestige, the invoice financing business had another strong quarter. In early July, we exited our equity and sub-debt investments in lenders' funding. While we decided to part ways with the management team there, we believe lender finance is an attractive piece of the specialty finance platform, which Mike Keller will discuss shortly.

此外，資產借貸平台 Sterling 也完成了幾筆頗具吸引力的交易，發票融資業務 Prestige 也迎來了另一個強勁的季度。七月初，我們退出了貸款人融資中的股權和次級債務投資。雖然我們決定與那裡的管理團隊分道揚鑣，但我們相信貸方融資是專業融資平台中一個有吸引力的部分，邁克·凱勒將很快討論這一點。

We continue to believe the specialty finance platform is well positioned to provide material contributions to GECC in future quarters. Given the ongoing macro environment, we will remain disciplined with respect to deploying capital towards opportunities that have limited risk of permanent capital impairment and durable returns. By staying measured, we are well positioned to continue growing Great Elm Capital Corp., and generate further attractive risk-adjusted returns for shareholders.

我們仍然相信專業金融平台處於有利位置，可以在未來幾個季度為 GECC 提供實質性貢獻。鑑於當前的宏觀環境，我們將繼續遵守紀律，將資本配置到永久性資本減值風險有限和持久回報的機會上。通過保持謹慎，我們有能力繼續發展 Great Elm Capital Corp.，並為股東帶來更具吸引力的風險調整回報。

As I noted before, we are pleased with our ability to navigate through the choppy environment in the first half of this year, improving both our overall yield and the quality of our portfolio composition. We continue to believe there will be opportunities in the back half of the year to selectively make thoughtful investments while keeping a watchful eye on the rate environment.

正如我之前指出的，我們對今年上半年動蕩的環境中的能力感到滿意，提高了我們的整體收益率和投資組合的質量。我們仍然相信，今年下半年將有機會有選擇地進行深思熟慮的投資，同時密切關注利率環境。

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

至此，我想將電話轉給邁克·凱勒，以提供我們專業財務計劃的最新信息。

Thanks, Matt. We continue to see positive momentum with our specialty finance businesses. During the second quarter, Great Elm Healthcare Finance closed on a leverage facility that provides up to $100 million in financing from which to deploy capital into secured investments.

謝謝，馬特。我們的專業金融業務繼續呈現積極勢頭。第二季度，Great Elm Healthcare Finance 完成了一項槓桿融資，提供高達 1 億美元的融資，用於將資金部署到有擔保的投資中。

We continue to see buoyant deal flow in our healthcare group and have expanded the platform from both new business and operational standpoint. We will continue to keep you apprised of our progress, but we expect Great Elm Healthcare Finance to scale in the months and quarters ahead.

我們的醫療保健集團繼續看到活躍的交易流，並從新業務和運營的角度擴展了該平台。我們將繼續向您通報我們的進展，但我們預計 Great Elm Healthcare Finance 將在未來幾個月和幾個季度擴大規模。

As I noted on previous calls, structural and macroeconomic factors have created an opportunity in healthcare that have not seen since the early 2000's. We continue to expect GEHF to become a major contributor to the specialty finance business we are building across continuing on lending.

正如我在之前的電話會議中指出的那樣，結構性和宏觀經濟因素為醫療保健領域創造了自 2000 年代初以來從未見過的機會。我們仍然期望 GEHF 成為我們正在繼續貸款的專業金融業務的主要貢獻者。

In addition to the healthcare opportunities, we are beginning to see dislocation in lender pullback in the ABL market. This is being fueled by economic uncertainty, shrinking deposit bases, higher interest rates, and credit losses. As a result, our investment professionals are receiving inbound calls on specific deals as well as potential portfolio purchase opportunities.

除了醫療保健機會之外，我們還開始看到 ABL 市場的貸方撤資造成混亂。經濟不確定性、存款基礎萎縮、利率上升和信貸損失加劇了這一現象。因此，我們的投資專業人士不斷收到有關特定交易以及潛在投資組合購買機會的來電。

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

如前所述，我們已採取措施增強專業金融業務的運營和資產監控能力。這將使我們能夠利用投資組合購買機會和新平台投資。

As Matt noted, shortly after the quarter close, we exited our equity and sub-debt investments in lenders' funding at valuations consistent with the 630 fair values. While we ultimately decided to part ways with management. We continue to hold that commitment in the lender's funding senior credit facility, and we believe the lender finance market is attractive.

正如馬特指出的那樣，季度結束後不久，我們以與 630 公允價值一致的估值退出了貸方融資的股權和次級債務投資。雖然我們最終決定與管理層分道揚鑣。我們繼續在貸方的高級信貸融資中恪守這一承諾，並且我們相信貸方融資市場具有吸引力。

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

Sterling 的服務能力使 Great Elm Healthcare Finance 能夠迅速擴大規模，我們正在探索機會在 Great Elm Specialty Finance 下推出我們自己的貸方融資平台。我預計今年晚些時候將就這一舉措發表更多言論。

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

最後，正如上季度所指出的，我們的發票融資業務 Prestige Capital 直接受益於貸方撤回和信貸錯位。 Prestige 繼第一季度表現強勁之後，第二季度也表現出色，銷量和淨利潤都超出了管理層的預期。 Prestige 團隊繼續創造並執行有吸引力的風險調整機會。

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

我們仍然相信，我們的專業金融平台處於適當的位置，可以執行我們的增長計劃並產生不斷增加的可持續收入。

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

謝謝，邁克。總而言之，這對 Great Elm 來說又是一個出色的季度，另一個季度的 NII 就證明了這一點，超過了我們的季度股息，並創造了創紀錄的現金收入。我們仍然處於有利地位，可以繼續持續支付股息。

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

這樣，我會將電話轉給接線員詢問問題。操作員？

(Operator Instructions) At this time, there are no questions. I will now hand back to Matt Kaplan for closing remarks. Please go ahead.

（操作員說明） 此時，沒有任何問題。現在我將請馬特·卡普蘭發表結束語。請繼續。

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

再次感謝您今天加入我們。我們在 GECC 轉型方面繼續取得紮實進展，我們期待繼續與投資者對話。如果我們可以幫助解決您可能遇到的任何後續問題，請告訴我們。謝謝。

Thank you, sir. Ladies and gentlemen, that does conclude today's conference. Thank you for joining us. You may now disconnect your lines.

謝謝你，先生。女士們、先生們，今天的會議到此結束。感謝您加入我們。您現在可以斷開線路。