Great Elm Capital (GECC) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, the net investment income (NII) was $2.3 million or$0.30 per share, more than doubling from $1.1 million or$0.14 per share in Q3 2022 [10][15][24] - The net asset value (NAV) per share decreased to $11.16 as of December 31, 2022, down from$12.56 at the end of Q3 2022 [8][19] - The asset coverage ratio was approximately 154.5% as of December 31, 2022, compared to 165.5% as of September 30, 2022 [10] Business Line Data and Key Metrics Changes - The company deployed approximately $38 million into new investments at average yields of about 12$20 million of assets at yields below 10% [7] - The average yield on the credit portfolio increased to 12.4% at year-end from 11.6% at September 30, 2022 [7] Market Data and Key Metrics Changes - The company noted a market difference in floating rate debt, which increased to 50% of the debt investment portfolio at year-end, up from 48% at the prior quarter-end [7] Company Strategy and Development Direction - The company aims to construct a high-quality diversified portfolio focused on cash-yielding investments, with a significant shift towards senior secured floating rate investments [5][15] - A strategic initiative includes scaling the specialty finance platform, with the formation of a healthcare finance platform in partnership with Berkadia [17][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about covering the new distribution level of $0.35 per share for Q1 2023, citing momentum and a growing portfolio [6][30] - The management highlighted a focus on finding investments with limited risk of permanent capital impairment and durable returns in the current market environment [23] Other Important Information - The Board of Directors authorized a cash distribution of$0.35 per share for the quarter ending March 31, 2023, equating to a 12.5% annualized dividend yield based on the December 31 NAV [25] Q&A Session Summary Question: What is the outlook for the dividend? - Management is optimistic about covering the $0.35 dividend in the upcoming quarter, indicating solid progress in transforming the company [30] Question: How is the specialty finance platform performing? - The specialty finance platform is making significant progress, with a robust pipeline of potential investments and ongoing negotiations with financing partners [21][29]